While the term “cloud computing” is thrown around as if its meaning was crystal clear and universally understood, it isn’t. Yes, investors understand that Amazon.com, Inc. (NASDAQ:AMZN) is a cloud leader and that Microsoft Corporation (NASDAQ:MSFT) offers access to its Office productivity suite via the cloud, but cloud computing in and of itself is an ever-evolving idea.
That reality prompts (or at least should) current and would-be owners of MSFT stock to ask how and where Microsoft fits in with the next big thing in cloud computing. That’s collaboration, by the way.
As it turns out, the old software giant has plenty of new tricks up its sleeve, and investors would be wise to familiarize themselves with 2018’s budding hot button.
Right Time, Right Product
Sometimes just getting a grip on the new terminology and looking for the new rhetoric is half the battle. So, as was already noted, add “collaboration” to your lexicon.
Group projects completed entirely online aren’t exactly new. Microsoft’s Office suite has allowed multiple users to edit and suggest edits, with each person’s contribution remaining stored as such within the document.
Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) has allowed groups to co-create and co-edit Google Docs and Google Sheets for a while now. Slack and GoToMeeting from LogMeIn Inc (NASDAQ:LOGM) were expressly created to facilitate pow-wows amongst people not all in the same place.
For all the work that’s been done to improve team-based tasking though, there’s not yet been a show-stopping seamless platform that does it all.
Microsoft is getting very close, however.
Microsoft Teams was unveiled in late 2016 with little fanfare. Some of that was by design, as the company knew it would remain a work in progress for some time. Some of that lack of fanfare, however, reflects that the bulk of its target market — businesses — weren’t quite sure what to make of it.
They’d seen things like it, but in that no platform had been as robust as the one Microsoft had planned, would-be users were skeptical.
On the surface, Teams is an integration of tools that allow for meetings, note-taking, a planner, and of course, live chat (complete with intelligent threading). Teams is more than that, however. It integrates Skype, as well as integrates Office 365. Most interesting of all is that Teams can be used on every major operating system, mobile or otherwise.
“They see the value, they see that collaborating in the context of a team space is a whole lot easier than trying to use email. It is much more intuitive [and] aligns with the needs of mobile workers…. The context of being able to converse within a space reserved for a specific topic, versus having to have everything sitting in your inbox, is just a much better way of working.”
It remains a work in progress to be sure, but in that Team aggregates many of the tools businesses are already using separately on Microsoft’s well-known operating system, it’s difficult to not say the company isn’t positioned to take the lead in this fast-growing arena.
And make no mistake collaboration is a fast-growing arena that Microsoft wants to lead. Here’s the part owners of MSFT stock will like: some estimates suggest the collaboration market could grow from 2016’s $26.7 billion to $49.5 billion by 2021.
That growth is already underway too. Lazar added “The conversations I am having with IT leaders is that they are starting to try and think a little bit more proactively and they want to plan for rolling out these applications in the next year or two.”
Looking Ahead for MSFT stock
I’ve been one of Microsoft’s biggest cheerleaders in the past, even when it didn’t look all that compelling. Truth be told though, I can’t say I encourage new purchases of MSFT stock at this time.
The 40% gain MSFT stock has mustered over the course of the past year has left shares at a frothy P/E of 31.0, and ripe for some profit-taking, especially now that the MSFT stock dividend yield has been pared down to just under 2%.
The advent of team-oriented cloud computing platforms as a stand-alone source of revenue, however, is bigger than near-term valuation concerns. This is the next era of the cloud, and could drive serious growth for the next couple of years as it matures.
In light of Microsoft’s readiness for the evolution, cloud-based collaboration tools could by themselves be a reason to step into MSFT stock on any decent dip.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.