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Why Hardware is to Set to Boost Software-fueled Microsoft Stock

Until recently, it wasn’t too uncommon to hear technology pundits lament (or praise) the death of the PC. With Apple (NASDAQ:AAPL) pioneering the smart device concept, seemingly everyone pushed into the touchscreen platform. One notable exception was Microsoft (NASDAQ:MSFT). The house that Bill Gates built decided to marry PC and smart device tech, resulting in the Surface tablet/laptop hybrid.

Why Hardware is to Set to Boost Software-fueled Microsoft Stock
Source: gguy /

While investors who have bought into MSFT stock likely did so for Microsoft’s myriad relevant technologies, such as cloud computing and data centers, the company’s robust PC business still carried authority. Personally, I’m glad that the consumer tech firm didn’t heed the doom and gloom stories surrounding PCs. In this case, going contrarian was the right move for Microsoft stock investors.

Better yet, management is continuing to ramp up their PC exposure. At its product event on Wednesday, Microsoft unveiled seven new iterations of the Surface lineup. Primarily, the debut was important because it signaled to shareholders of MSFT stock the viability of the hardware market.

However, it’s also fair to point out that one product clearly stood out from the rest: the Surface Neo.

A radical departure from other PC hardware, the Surface Neo features two separate screens attached by a hinge. Moreover, this dual-screened computer is no gimmick as it’s incredibly modular. Want to use the Neo as a laptop? MSFT will include a detachable keyboard that will magnetically attach to one screen. Or, you can use one display similar to a tablet.

In my opinion, the Neo is elegant. Hopefully, everything works as advertised. If it does, the Neo could be another game changer for Microsoft stock.

MSFT is Making Hardware Sexy

CNBC contributor Todd Haselton sees the Neo as Microsoft’s “most important product in years.” One of the key reasons why has to do with the tech firm’s operating system dominance.

As Haselton noted, the Neo will run Windows 10X, a special version of the ubiquitous OS. It’s designed to accommodate the dual-screen structure. But the important factor here is that, using Haselton’s words, Windows is the “real moneymaker” for Microsoft stock. “Remember: Microsoft isn’t a hardware company. It sells hardware, but it wins when more people use Windows computers, no matter who builds them,” Haselton wrote.

Furthermore, the Neo’s dual screens allow Microsoft to compress more usability into a modular physical platform. Right now, the current Surface Pro is simply too big and unwieldy to use comfortably as a portable device. Thus, for those who place a premium on mobility, an Apple iPad is superior.

But with the Neo, the consumer has the ability to choose. If they prefer a powerful, standalone device with two screens, that’s the Neo’s primary purpose. Plus, users can easily fold their device for carry into one meeting after another.

Although Microsoft’s most technologically visible innovations, such as cloud, have more sex appeal, hardware is still relevant. This is one of the underappreciated tailwinds for the MSFT stock price. As ZDNet contributor Steve Ranger noted, 68% of businesses report that desktops are their primary computing device for employees.

What’s the business adoption rate for tablets? A whopping 1%.

If Microsoft can successfully deliver the Neo, it has the opportunity to shore up business adoption rates for laptops. Approximately 29% of companies procure laptops for their employees.

And going back to Haselton’s argument, these new (gorgeous) Surface products drive more demand for Windows.

It’s Also Making Hardware Functional

Although I haven’t always applauded AAPL shares, I’ve long been a fan of Apple products. Not only did they pioneer the smart device concept, but they also brought a cohesive, connected ecosystem.

But in recent years, I’ve questioned Apple’s business smarts. When the iPhone X came out, I was among the early adopters. But when one of the decisions that confuses me to this day is why Apple just didn’t include a headphone jack in their much-hyped flagship at the time.

Instead, Apple forces me to buy a dongle. This is basically a plastic-wrapped skin tag that you pay money to attach to your poor phone.

Thankfully, Microsoft has a much better approach. They’re going to keep the sleekness of their devices while adding more power and functionalities.

If they keep innovating their hardware like this, I might be tempted to switch over. I’m sure I’m not the only one thinking like this. Ultimately, this promises good things for MSFT stock longer term.

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

Article printed from InvestorPlace Media,

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