Positive Catalysts Galore For Microsoft Stock
cris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Microsoft (NASDAQ: MSFT) has made gains, as of late, in securing numerous contracts with respects to cloud services. Microsoft understands the need to continue building cloud services as consumers continue to move toward mobile devices and consumers the fact that consumers want access to all of their data, applications, and software that formerly may have just been on a computer. Cloud services have become an important growth strategy for companies like Microsoft, IBM (NYSE: IBM), Apple (NASDAQ: AAPL), Google (NASDAQ: GOOG), Hewlett-Packard, and Dell (NASDAQ: DELL). Currently Microsoft’s SkyDrive cloud service is third with 17 million active registered users behind Apple iCloud service with 125 million users and Google Drive with 35 million subscribers. Microsoft can offer consumers many options tied to SkyDrive to improve productivity and connectivity for consumers.
International Cloud Services Growing
Microsoft has been aggressive with signing new contracts with International clients to cloud services that should help build a solid base for future growth in revenue streams.
Recently, iLUKA, based in the United Kingdom, has included Microsoft Office 365 services available through cloud services to help with the increase of employees needed for the upcoming 2012 Olympics in London. By adding Microsoft Office 365 services iLUKA has solved an intricate part of their business needs. iLUKA has increased staffing from 116 to over 1,000 employees as they ramp up for the summer Olympics. iLUKA is pleased with adding Microsoft Office 365 because the cloud based service allows employees to access different productivity software like Microsoft Word, Microsoft Excel, Microsoft PowerPoint as well as email. Microsoft Office 365 allows a company iLUKA flexibility in licensing by only paying for services while the employee is employed. The cloud based service also allows for easy addition and deletion of employees into the system too.
Microsoft has been securing other service contracts with regards to Microsoft Office 365 cloud service. Catholic International Education Office has signed an agreement to offer Microsoft Office 365 cloud services. The contract begins with 4.5 million users but has the potential to scale to all 43 million users within the Catholic International Education Office in over 104 countries. The Catholic organization is excited about the change because this technology will bring more collaboration between students, faculty and administration.
Cablemas, the leading provider of cable in Mexico has also turned to Microsoft cloud services to help unify employee email accounts within the company. Cablemas currently uses Microsoft Exchange Server 2007for 2,000 employees at the company’s corporate office. This was problematic for Cablemas when communicating to field employees, who were using personal email accounts for business. Timely company notices and updates were not always received by field employees or by satellite offices. Cablemas analyzed the company’s current storage capabilities and determined that increasing internal storage caused difficulties with Cablemas’s technology infrastructure. Microsoft recommended using Microsoft Exchange Server 2007 cloud services through a kiosk version that allows “deskless” employees to access emails. This action has improved productivity at Cablemas and employees are more connected with supervisors and the corporate offices.
Opinion
I am a believer in Microsoft and think every investor should have Microsoft in their portfolio. I know Microsoft is not as thrilling of a growth story as Apple or Google but its earnings are solid year over year. Microsoft is expected to earn $2.72 in 2012 and $3.05 per share in 2013, which equates to a 13% growth in earnings per share. that is upfront and leading innovation further in the computing world. But Microsoft makes money and still has a decent growth rate slated for future years to come.
Microsoft has longevity and is increasing its dividend year over year. The dividend growth is very intriguing and it is expected to experience 11% increase year over year for the next 5 years. I think this is a good estimate based on previous dividend increases since 2009. Dividends have increased from $0.52 per share in 2009 to $0.68 per share in 2011 and an expected $0.78 per share in 2012. The dividend increase of 23% per share for the 2010-2011 is only one part of the equation of Microsoft’s future. Additionally, I find it hard not to notice the $60 billion in the bank and little or debt on the balance sheet.
Over the years Microsoft has been slow, at times, to implement newer technology but with new innovative cloud services expanding and is increasing licensing revenue and service contracts. Microsoft has enough cash in the bank to build out its cloud services with the ability for clients to spend money on servicing contracts and licensing fees. Sure, Apple leads way, as stated before, with iCloud in subscribers for cloud services but Microsoft is up for the challenge and introducing new innovative ideas like Microsoft Office 365, Microsoft Azure, and Microsoft Dynamics. The product line Microsoft can offer the consumer is impressive from basic accounting tools to large enterprise business systems that each user can collaborate with each other in the cloud.
Lastly, Microsoft is launching Windows 8 later in the year. This release will also have an affect on IBM, Dell and Hewlett-Packard in the future too. Windows 8 is considered to be a must for new tablets and laptops going forward. Windows 8 is one catalyst for this stock to jump in price as the release date nears but I don’t think a person needs to be relying on the release of Windows 8 to buy Microsoft. A person has many reasons like an attractive dividend, increasing International cloud services, a steady 10% growth rate and $60 billion in the bank. I think if you buy now at $29 there is little downside risk.
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