Is Buying Microsoft Corporation (MSFT) a Smart Healthcare Play?

With health care comprising close to one-fifth of U.S. GDP, the industry’s tentacles spread far and wide. Just as many companies that weren’t considered technology companies in the past have essentially become technology companies, I think quite a few organizations that wouldn’t typically be called health care companies qualify at least in part these days. Microsoft Corporation (NASDAQ:MSFT), for example, falls in that group. But would buying Microsoft Corporation (NASDAQ:MSFT) stock as a health care investment be smart? Let’s take a look.

Window dressing?
Read through Microsoft Corporation (NASDAQ:MSFT)’s latest 10-K and 10-Q reports filed with the SEC. You’ll find the same number of references to health care as you’ll find animated paper clips in the company’s products these days. (That would be zero, by the way.)

Microsoft’s HealthVault is alive and kicking, unlike Google’s abandoned personal health record offering. However, it seems likely that revenue generated from HealthVault amounts to nothing more than a rounding error for Microsoft’s accountants.

If you check out Microsoft Corporation (NASDAQ:MSFT)’s website, you can find plenty of information about its products for health care. However, those products look strikingly similar to the company’s products for the other 18 industry groups listed. That’s because they are the same products used for those other industries.

On that same site, Microsoft Corporation (NASDAQ:MSFT) uses the first person “we” in talking about the “health industry.” The company presents itself as being part of health care, but is that just window dressing? Actually, I don’t think so.

First, while the company doesn’t report how much of its revenue stems from health care customers, my hunch is that it’s a significant amount. Hospitals, physician clinics, skilled nursing providers, pharmaceutical companies, medical device makers, and many other health care organizations across the world use Microsoft’s operating system, productivity applications, business intelligence software, database servers, and network servers.

I also suspect the revenue from health care is growing solidly. Microsoft Corporation (NASDAQ:MSFT) general manager Craig Hodges stated earlier this year that no other industry is positioned to be as big in “big data” as health care. And that’s big business that Microsoft is eyeing.

Blue chips ahoy
Perhaps one of the most telling signs of the importance to health care for Microsoft is that it has gotten out of health care — sort of. Last year, the company joined forces with General Electric Company (NYSE:GE)‘s health care business unit in a 50-50 joint venture named Caradigm. Former Microsoft Health platform founder and current Avado.com CEO Dave Chase speculated that this move stemmed from Microsoft’s desire to avoid upsetting large health care customers who could feel threatened by products developed by Microsoft.