Like IBM Corp. (NYSE:IBM), Oracle (NYSE:ORCL), and SAP AG (NYSE:SAP), Microsoft (NASDAQ:MSFT)
is looking at a major shift in the way it does business as the industry
shifts away from discrete license-based software sales and toward the
subscription-based "X as a service" model. Making matters more
challenging for Microsoft is the company's heavy reliance on the PC
ecosystem, its so far unconvincing device strategy, and its relatively
poor history of adding value through acquisition.
The migration to
service-based software is going to change Microsoft's model, but the
company's cloud businesses (including Azure) seem to be on a good path
today. It's very uncommon for winners/leaders of one generation to
extend that leadership into the next generation, but even a lower level
of assumed performance seems to support a value argument for Microsoft.
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Cloud Will Change Microsoft, But The Valuation Looks Interesting
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