Can you Teach an Old Dog New Tricks?
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The answer to that question seems to depend more on the dog type and which dog we are referring to. In this case, Microsoft (NASDAQ: MSFT) is the older one in the game. While Apple (NASDAQ: AAPL) has been around the same length of time, the company has positioned itself in new industries, and created or lifted others. For all intents and purposes, I am going to consider them new as their core business has shifted dramatically. Microsoft’s core business has always been the operating system and working with third party hardware providers.
Windows Phone 8
Technically speaking, Microsoft has always kept its mobile platform isolated from desktop versions of the same operating system. There at the time was solid reasoning for this practice; phones were limited, and vertical hardware integration was limited at best. That’s because the software maker produced every OS, even Windows 7, using Windows CE which is nearly 20 years old.
Just recently, the company has ceased all previous development of Windows mobile platforms, and will now switch completely to Windows Phone 8. The benefit is that the phone will use the same code, formatting, and drivers as the desktop version of Windows. The added benefit will be the platforms ability to port Windows desktop applications over to Windows phone, with minimal specialty coding.
Vertical Integration
In 2010, the iPhone & Android platforms captured 8 percent of the gaming market, with $800 million in revenue collected. An impressive figure, however, the Microsoft led PC game market captured $18.6 billion in revenues in 2011. A tight integration with Xbox and desktop platforms could reposition the company’s phones as a software powerhouse.
Let’s not forget while we wait for Apple’s new TV, Microsoft has a very successful entertainment system called the Xbox. With tight integration of Skype and desktop libraries, the company stands to benefit on the software front offering more competitive software than Google’s Android platform. Right now, as it stands, Android revenues represent 7 percent of Apple’s iOS apps.
Carrier Co-ops
Microsoft has also proven that it can play nicely with mobile carriers offering a percentage of revenues to mobile operators. With Groupon, a $12 billion company, the idea of phone banking on discounts was originally removed from Apple, and Google’s pay systems. Microsoft does not seek to gain much from this model and is happy to offer it to carriers, the same folks that provide phone subsidies.
Apple derives most of its market share from subsidies which are certain to stay. While this analysis is not completely sound, carriers like Sprint are happy to take a pay cut to make it happen for Apple. Microsoft is extending incentives to carriers to offer better subsidies in the hopes of achieving new revenues.
Nokia Screwed, Maybe Not
While investors were upset that Nokia (NYSE: NOK) took the plummet along with news that their newest phones would not receive upgrades to Windows Phone 8, there has been some hope for a return to normal. With partnerships still strong, Microsoft could use the lowered stock price to acquire the company. Either way, I and other analysts consider a 66 percent market drop off the stopping point for this stock symbol.
Analysis
Microsoft has not learned any new tricks in a while but the company is finally entering a second creative streak that might just prove fruitful. The company recently acquired Yammer - an online social media site for the enterprise market. No doubt, in my mind, the benefits are for the company to enter the enterprise market with its mobile phones. Already a previous favorite, the company was cast aside by Blackberry users and could now make a superior comeback.
The integration of Skype, Yammer, and Microsoft office offer a complete enterprise solution that can later be linked with other platforms the company already offers. While Apple has started to build its enterprise base, its strength is with consumers, and Microsoft could find a hold in this market.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple, Microsoft, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
