Morningstar | Microsoft Has Revitalized Itself After Satya Nadella Assumed the Helm
Microsoft has revitalized itself after Satya Nadella assumed the helm. In our opinion, it is increasingly a cloud leader, the business is more user-friendly, the company is willing to take risks in investing in nascent technology, and employees have implemented a growth mindset. We see Microsoft’s future as oriented around Office 365, Azure, and LinkedIn, while seeing broad-based contributions from smaller segments such as Xbox and gaming, Surface, and Dynamics.Azure, Microsoft’s public cloud service, has established itself as the number-two player behind Amazon Web Services. The company leverages Azure for cloud-deployed applications such as Office 365 and Dynamics 365. We think software as a service, platform as a service, and infrastructure as a service represent colossal opportunities for Microsoft, and we anticipate that the firm’s investments in cloud offerings will offset declines in legacy businesses like Windows Server. Increasingly, Azure benefits from economies of scale, and we have seen a shakeout as competitors have left the market, with share consolidating around four top players.Microsoft Office remains the paradigmatic productivity tool, and we expect revenue and margin uplift as cloud-based Office 365 takes root. Microsoft’s Windows 10 operating system remains its fastest-growth OS. Although we expect consumer and enterprise customers to continue adopting the newer OS, we expect revenue declines in Windows over our explicit forecast period as users migrate to other form factors (mobile and tablet). Despite missing the mobile phone boom, the company is competitively positioned for new trends, namely Internet of Things through Azure, augmented reality with HoloLens, and artificial intelligence. The data inherent in Windows, Office, and LinkedIn gives Microsoft an immense base for AI initiatives.Microsoft’s hardware businesses such as Xbox and Surface remain cyclical, but we believe they help reinforce the Windows ecosystem and expand consumer mindshare. Recent acquisitions such as LinkedIn and GitHub remain integral platforms for business and IT professionals, and we anticipate continued monetization efforts.Microsoft is a technology company. The company develops and supports software, services, devices, and solutions. The company provides an array of services, including cloud-based solutions as well as solution support and consulting services. The company also delivers relevant online advertising. The company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; and video games. The company also designs, manufactures, and sells devices, including personal computers, tablets, gaming and entertainment consoles, other devices, and related accessories.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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