Microsoft Corporation: Is MSFT Heading Back to the Mobile World?

This week, Microsoft Corporation (NASDAQ:MSFT) claimed that Apple Inc.‘s (NASDAQ:AAPL) MacBook is “less useful like a hat for your cat.” A few years ago, it was nonsensical to compare any of Microsoft’s stuff to any iStuff because AAPL was the best when it comes to sleek designs. However, such comparisons are taking place now. And that’s good news for Microsoft stock.

Microsoft Stock: Is MSFT Heading Back to the Mobile World?

MSFT thinks its Surface Pro is sleeker and more useful than the MacBook Air — and rightly so. This could mean one (or both) of two things.

First, Apple has become less of a design master. Second, Microsoft stock has upped its design game.

Of course, an argument that Apple hasn’t done anything new in few years would be tenable. Still, though, it’s unarguable that Apple is still up there when it comes to design. Such comparison isn’t coming up because Apple has become less of a design master.

Indeed, the real reason such comparisons make sense these days is that Microsoft stock has upped its design game. We’re not going to be embroiled in the argument of whose gadget is sleeker and more useful right now.

Rather, I’d like to draw investors’ attention to how a lot has changed for Microsoft stock since its notorious failure to gain any relevance in the mobile market.

Can MSFT Become a Powerful Force the Mobile Market?

Investors need to start trusting MSFT when it comes to design. It has finally gotten a handle on designing products people love, without losing its productivity lure, which has always been its main selling point. The Surface Pro 4 is testament to that.

The good thing about MSFT’s design know-how is that it will help the company grow its mobile business, since having stellar designs help win customers in the mobile world.

From the look of things, the plan could be to compete aggressively in the high-end tablet market, as we can see with Surface Pro 4. If it eventually gains a respectable market share in this market, it will become more popular in the mobile world. Based on that popularity and its newfound design prowess, Microsoft stock could and should expand its mobile device offerings.

MSFT hinted at such development in an email to its mobile industry partners in the wake of its announcement to sell off its feature phone business. An insider said in the email that:

“I want to assure you that your investment in Windows phones is not at risk. The mobility of the Windows 10 experience remains core to our More Personal Computing ambition.”

The insider further said:

“We’ll continue to adapt Windows 10 for small screens. We’ll continue to invest in key areas — security, management, and Continuum capabilities — that we know are important to commercial accounts and to consumers who want greater productivity.”

So it’s safe to say investors should be expectant of new mobile devices, which could arrive in the form of Surface Phone — a smartphone that tech geeks predict could arrive as early as 2017.

Arguments will ensue that Microsoft is already late to the party. In fact, some would say it arrived when the party was already over, since a number of data point to how the smartphone market is already saturated and even declining — epitomized in Apple’s declining iPhone sales.

However, if Microsoft gets it right with mobile this time, it could start its own party. That makes sense because having a working mobile business would make Microsoft more vertically integrated than it already is.

Microsoft already has a lot of consumers who are invested in its Windows offerings. A smartphone that people actually want to own could lure consumers to buy a Surface Phone — or whatever it’d be called — because of the advantage of having all their stuff organized on a single platform.

Bottom Line for Microsoft Stock

I have to make it clear that MSFT hasn’t make any announcement regarding plans to launch new mobile devices. This is all an educated attempt at connecting dots in Microsoft’s mobile strategy.

However, even if Microsoft completely dumps its “One Windows” dream, Microsoft stock is still bound to perform, especially with its potential in the cloud space, which I discussed here. Moreover, MSFT stock remains favorably valued with a forward price-to-earnings ratio of 17.96, which signifies huge earnings upside potential vs. its current P/E ratio of 27.57. I consider MSFT a buy.

As of this writing, Chris Adeyanju did not hold a position in any of the aforementioned securities.

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