Microsoft Corporation (NASDAQ:MSFT): A New Focus On Hardware
Northern, WI 05/21/2014 (gdpwatch) – Microsoft Corporation (NASDAQ:MSFT) wants to go in a completely new direction under a new CEO. Even as its traditional business of creating and selling software for PCs is going through a steep decline along with the decline in the PC business, Microsoft wants to take a leaf from rivals Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL).
Apple and Google have had major successes in bundling hardware and software in the popular iPhones, iPads, Nexus devices and so on. Microsoft has acquired the handset business of Nokia even though Google’s purchase of Motorola Mobility did not appear to have gone as well as planned now that Google has sold it to Lenovo.
After launching Microsoft Office for the iPad, now Microsoft Corporation (NASDAQ:MSFT) has come up with spanking new Surface Pro 3 tablets.
Microsoft Surface is Hot
Microsoft considers the iPad to be mostly an entertainment-themed product and promotes the Surface tablet as a full-featured laptop-challenger. And the latest version, Surface Pro 3, which was launched yesterday, has some impressive stats.
This latest avatar of the Surface tablet has a 12-inch screen and comes with a range of Intel Core i3 to Core i7 processors. Clearly targeted at the likes of MacBook Air with their 11-inch screens, the Surface Pro betters the Air by being thinner and lighter.
The low end Surface Pro 3 with a Core i3 processor, 4GB RAM and 64GB of storage will cost $799 while the high end Surface Pro 3 will have a Core i7 processor, 8GB RAM and 512GB of storage will cost $1,949. The bill of materials for the low end Surface Pro (Core i3, 4GB RAM, 64GB storage) is likely to be around $320 while the bill of materials for the high end Surface Pro (Core i7, 8GB RAM, 512GB storage) is likely about $400 to $450. Hence, Microsoft is well placed to get margins upwards of 35 to 40% in Surface sells.
It remains to be seen if Microsoft can sell 3 to 4 million of these tablets in 2014 to add 3 to 4 billion dollars to its top line as well as $1 billion to its bottom line.
Microsoft Azure 2nd Largest in Cloud Services
Microsoft is beating the likes of Google and International Business Machines Corp. (NYSE:IBM) and lags behind only Amazon.com, Inc. (NASDAQ:AMZN) in the fast growing cloud services business. It had a 154% YoY growth compared to Amazon’s 67% growth rate for its Amazon Web Services. The fierce competition has led to price wars among these cloud service providers with Microsoft matching the price cuts made by Amazon.
Chinese Government Bans Windows 8
The Chinese Central Government’s Procurement Center has issued new guidelines under which new computers obtained by government organizations are not allowed to have Windows 8. This covers desktops, laptops and tablets procured from suppliers via a competitive bidding route. It’s not yet quite clear what the reason for the ban may be but it may have something to do with the heightened level of cyber warfare or accusations and counter-accusations about cyber warfare made by China and the U.S. China may also develop a Linux-based OS for use in its government computers.
Microsoft Corporation (NASDAQ:MSFT)’s Windows XP has however been a long-term success in China.
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