Microsoft Corporation (MSFT): This Tech Giant Is Still Building a Competitive Ecosystem

A little help from friends

A big part of the ecosystem that Microsoft is building is Windows Mobile. That will require phone companies to partner with the Windows giant. It paid struggling Nokia Corporation (ADR) (NYSE:NOK) to use Windows Mobile as the also-ran cell phone maker tried to relaunch its smartphone line with the Lumia. The phone has been well received for looks and functionality, which is good. However, it hasn’t sold particularly well.

That’s a bad thing for Nokia Corporation (ADR) (NYSE:NOK), where revenue has been falling since 2007. Worse, it has lost money in each of the last two years, and the first two quarters of this year haven’t reversed that trend. Moreover, as it focused on the Lumia launch, it let competitors gain ground in emerging markets — the one area in which it remained a leader. Investors should avoid the company.

For Microsoft, however, the Lumia has been a huge win. It allowed the company to showcase Windows Mobile at exactly the same time as Google has become more combative with its mobile partners via the soon to be launched Moto X phone. Samsung is trying to use its own OS, dubbed Tizen, to limit its reliance on Google’s Android, but other companies would probably rather partner with an existing mobile OS than build from scratch.

Not an easy turn

Microsoft Corporation (NASDAQ:MSFT) isn’t making an easy pivot. However, now is a good time to be making it. Although the mobile industry looks “mature,” it’s really still in its infancy. With a huge customer base and a still highly profitable business, Microsoft’s recent earnings induced price drop of over 10% looks like an overreaction. Investors should take a second look at the Windows ecosystem, looking at the Surface price drop not as a sign of weakness, but as a way to gain market share.

The article This Tech Giant Is Still Building a Competitive Ecosystem originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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