When Microsoft Corporation (NASDAQ:MSFT) reports its fiscal third-quarter results Thursday after the bell, chances are high that the software giant will please investors again and keep MSFT stock heading higher in 2017.
Analysts expect the company will grow earnings by more than 40% this year. And even after its expensive LinkedIn acquisition for $26.2 billion, the cloud and software business is creating lots of positive cash flow.
But even if Microsoft manages to stumble in its Q3 report, it’s hard not to like what MSFT has to offer.
The Internet of Things
Microsoft announced a collaboration with Micron Technology, Inc. (NASDAQ:MU) this morning to address internet of things (IoT) security. While Wall Street and Main Street alike are excited about the prospects for interconnected everything — from computers and phones to refrigerators and toasters — security is an increasingly worrisome issue as more devices are plugged into the internet.
Per a press release out today, “The new solution utilizes a hardware ‘root of trust’ integrated into Micron’s flash memory in the IoT device along with the Microsoft Azure IoT cloud to establish a strong trusted link between that IoT device and the cloud.”
Speaking of the cloud …
Microsoft appears to have learned from the disadvantages of promoting closed systems. Late last year, the company embraced open standards. As a member of the Open Compute Project, Microsoft’s support for interoperability will accelerate data center hardware development. It also ensures that no matter what hardware supplier is involved — be it Intel Corporation (NASDAQ:INTC) or Advanced Micro Devices, Inc. (NASDAQ:AMD) for processors, the servers will all work together.
MSFT needs the prices for hardware that powers the cloud to fall as fast as possible. Amazon.com, Inc. (NASDAQ:AMZN) is the biggest player with AWS and has 40% of the market share. Microsoft, Alphabet Inc (NASDAQ:GOOGL) and International Business Machines Corp. (NYSE:IBM) have a combined share of around 20%.
Developments on LinkedIn
It’s all too often that people forget about LinkedIn when weighing the prospects for Microsoft stock.
Microsoft has plenty of time and resources to develop LinkedIn’s potential. The professional networking site has no real competition and is the “go-to” site for connecting headhunters with job seekers. LinkedIn is even borrowing an aspect of Stories, except its posts do not disappear.
Facebook Inc (NASDAQ:FB) added disappearing story functions to Instagram and WhatsApp. Snap Inc. (NYSE:SNAP) already offers disappearing stories in the Snapchat app. Conversely, LinkedIn is adding trending storylines to its feed and targeting appropriate readers.
LinkedIn wants its users to spend more time and to come back more often to the site. The newly added feature will also allow the company to more effectively target ads to the right audience.
Microsoft Dynamics Expands
Unable to compete on its own against Salesforce.com, inc. (NYSE:CRM) and Oracle Corporation (NYSE:ORCL), Microsoft partnered up with Adobe Systems Incorporated (NASDAQ:ADBE). By sharing sales and marketing data and the format, the two aim to have an improved CRM and marketing solution that customers will want.
Unfortunately, Salesforce.com’s CRM solution is too good a product to compete against lightly. If Adobe and MSFT mash up their strengths without really figuring out what features would beat Salesforce.com, the partnership will ultimately fail.