A few weeks have passed since Microsoft Corporation (NASDAQ:MSFT) delivered solid third-quarter earnings. They weren’t spectacular by any means, but they were enough for Microsoft stock to hit a 52-week and all-time high of $69.71.
MSFT appears to be running on all cylinders at the moment, but if Microsoft stock is to keep climbing, it has got to deliver the unexpected to justify a higher valuation from investors.
One key area of weakness for the company is its Surface line of portable computers which haven’t had a refresh in some time. As a result, Surface revenues dropped 26% in the third quarter to $831 million.
The Fix Is In for MSFT Stock
However, even in the areas where it’s not doing well, Microsoft seems to have the solutions to fix these problems. Take the Surface. It’s a perfect example. According to InvestorPlace contributor Brad Moon, Microsoft unveiled the Surface Laptop running Windows 10 S May 2 in New York.
“[Windows 10 S] is what MSFT describes as a ‘streamlined’ version of Windows,” says Moon. “It can only run apps downloaded through the Windows Store, integrates with OneDrive for cloud storage and supports Office 365 — with the full Office suite coming to the Microsoft Store. Microsoft Edge is the default browser. It’s secure [and] runs on low-end hardware.”
The Windows 10 S operating system is part of Microsoft’s solution to reverse sliding sales on both its Surface portable computers and its Windows and Office software. Windows 10 S will run on OEM machines priced as low as $189, which will enable its hardware partners to go up against Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Chromebooks line.
The new Surface, says Moon, will retail at $999 and goes on sale in June. The price is too high for the educational market, but it will allow it go after Apple Inc.’s (NASDAQ:AAPL) MacBook Pro line of portable computers.
CEO Satya Nadella’s taking the fight to Apple. It will be interesting to see if it can retake some market share forfeited to Tim Cook and the rest of the team in Cupertino.
Microsoft Moving Faster
Microsoft is definitely a different company than we’re used to. It’s moving faster these days and investors appear willing to pay up for the privilege of owning Microsoft stock.
I recently discussed artificial intelligence and the part it was playing in pushing Microsoft stock higher. The company is so fixated by AI that it just named Eric Horvitz Microsoft’s head of research. Horvitz got a Ph.D. in artificial intelligence at Stanford; he has spent the past 25 years using that knowledge to change the way we interact with machines.