How Should Investors Interpret Microsoft Corporation (MSFT)’s Transition Phase?

Microsoft Corporation (NASDAQ:MSFT) released its earnings for the second quarter on Monday, 26th January, 2015, and results were interpreted by many observers as reflecting the transition phase which the company is currently going through. CNBC discussed the decline from 78 cents in 2014 to 71 cents that emerged in 2015 report with Dan Morgan, an analyst with Synovus Trust. Following comment made by him clearly echoes the message which the earnings report has projected –

“It looks like they had good growth in terms of their cloud business. I think the area we’re really focusing on is that space, in terms of its growth and how much they cannibalize their core windows enterprise server business.”

While sales figures pertaining to the cloud division continued to record an awesome growth percentage, Windows and gaming console Xbox were division which lost a substantial chunk of revenue. This decline was attributed to the paradigm shift of the market from traditional Windows software packages to the more contemporary formats offered by Microsoft Corporation (NASDAQ:MSFT).

Microsoft (MSFT)

A significant breather for the global tech giant was revival of its consumer devices, like Lumia phones and tablets. Microsoft Corporation (NASDAQ:MSFT) had bought Lumia from Nokia in April, 2014, paying a little more than $7 billion with the intention of boosting its mobile phone division. Although the company is still bearing the burden of acquisition in terms of a blow to its earnings, what is significant is the contribution made by this division to the overall revenue, which comes to more than $2 billion in every quarter.

Latest on the tech giant’s agenda pertains to its most recent operating system Windows 10 wherein it is trying to think of strategies which would effectively augment sales not just in the corporate world but in the consumer segment too. To this effect, Microsoft Corporation (NASDAQ:MSFT) has accorded it the status of a Swiss Army Knife and from the investors’ perspective, the best way to figure out whether it clicks is to wait and watch.

This article has been written by Vinita Basu.

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