Can Microsoft Corporation (MSFT) Ever Matter in the Cloud?

Can the enterprise stay strong?
The recent 9% growth in the server and tools segment suggests that the company is holding its own against the likes of International Business Machines Corp. (NYSE:IBM) and Oracle. Likewise, Microsoft’s SQL business still produces solid results, and the company’s Hyper-V product, which rivals VMware‘s vSphere, is also gaining meaningful share. And if Microsoft can bring Azure up to standard, to the extent that Azure can be within a discussion that includes AWS, this will strengthen Microsoft’s enterprise leverage.

The question, though, is how long these businesses can hold down the fort. Unlike Oracle, which has been on an acquisition spree to build its one-stop-shop model, Microsoft hasn’t been as active. Plus, it has to address the way virtualization and Big Data are changing the functions of back-office enterprise IT. VMware and EMC Corporation (NYSE:EMC) are becoming leaders in this area, and so far there’s been no response from Microsoft Corporation (NASDAQ:MSFT).

While Microsoft’s backend products are arguably better, customers are willing to sacrifice extra features to save on costs. And some of these alternatives are tough to resist because businesses can save on support costs since web services such as Gmail don’t require an onsite Exchange administrator. What’s more, the increase of freeware and products such as Google Apps and Open Office isn’t going away.

That said, the company’s never really been affected. The question, though, has always been with management and whether it has the capacity to lead Microsoft Corporation (NASDAQ:MSFT) to what’s next. And although bears will argue that Microsoft’s no longer first in anything, it doesn’t have to be. Hopefully Microsoft’s new cloud strategy can be the beginning.

What of the stock?
Grab a Snickers bar. In time, fair value can reach $35 per share, or 20% higher. But in the meantime, Microsoft Corporation (NASDAQ:MSFT) will pay for your patience as it offers one of the best yields on the market at 3.30%. As has been the case for a while now, value is not the problem. But Microsoft has more work to do to change sentiment. Hopefully, its future gets a bit more cloudy.

The article Can Microsoft Ever Matter in the Cloud? originally appeared on Fool.com and is written by Richard Saintvilus.

Fool contributor Richard Saintvilus owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, Google, Salesforce.com, and VMware. It owns shares of Amazon.com, Apple, EMC, Google, IBM, Microsoft, Oracle, and VMware.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.