Microsoft Corporation (NASDAQ:MSFT) isn’t a cool company. It went through a long stage of trying to fit in with the crowd, but that didn’t work out. Now Microsoft seems to be realizing that it should stick to what it knows best.
Microsoft and Best Buy form an alliance
Microsoft Corporation (NASDAQ:MSFT) might be the brunt of many jokes, but you can’t argue with the company’s track record. Despite often being late to innovative trends in technology, Microsoft always finds ways to boost its revenue. Recently, the tech giant has made several deals that will increase its exposure to consumers.
For one thing, the company will create Windows Stores in 600 Best Buy Co., Inc. (NYSE:BBY) locations across the United States and Canada (500 in U.S.). Microsoft products being sold in these stores will include personal computers (PCs), tablets, Windows Phones, Xboxes, and accessories.
Windows Phones haven’t performed as well as Microsoft Corporation (NASDAQ:MSFT) would have hoped. Below is a quick list for mobile phone operating system market share in the first quarter:
Google Inc (NASDAQ:GOOG)’s Android OS: 75%
Apple Inc. (NASDAQ:AAPL)’s iOS: 17.3%
Windows OS: 3.2%
BlackBerry OS: 3.2%
The Best Buy Windows Stores will be more than 1,500 square feet, and as large as 2,200 square feet in some cases. It’s not likely that you will miss it when you walk into a Best Buy.
If you’re wondering what’s in this deal for Best Buy Co., Inc. (NYSE:BBY), it improves product diversification and has the potential to increase foot traffic. For Best Buy, it’s not just about selling Microsoft products, but selling other products in the store to consumers once they arrive.
Other deals
In another attempt at increasing exposure through a partnership, Microsoft Corporation (NASDAQ:MSFT) will also offer an Office app on Apple Inc. (NASDAQ:AAPL) iOS, which will be available on the iPhone, but not on the iPad. While basic documents will be available, there won’t be any chart or animation features, which will likely be a dealbreaker for many people. Also, in order to use this app, you will need Microsoft Office 365. If you don’t have it, a subscription it will set you back $100 per year. This move has potential as a solid revenue stream for Microsoft, but real traction is a longshot.
In other Microsoft Office 365 news, an online version that’s easy to use on touchscreen devices is now available. It’s being used by several retailers and charity groups, and it looks like strong momentum throughout the healthcare sector is likely. It will improve patient care and reduce operational costs for health organizations.
Microsoft vs. peers
Microsoft isn’t nearly as popular as Google Inc (NASDAQ:GOOG) and Apple, but has it shown in the stock price? The chart below looks at the performance of Microsoft, Google, and Apple over the past 10 years:
If you’re wondering why Microsoft Corporation (NASDAQ:MSFT) hasn’t been able to keep up with Google and Apple over this time frame, consider some of the products that these two companies have brought to the market. Google has delivered Chrome, Android, Google Maps, YouTube (acquired), and more. Apple has provided consumers with the iPod, iPad, iTunes, the iPhone, and more.
Microsoft has its own recent successes, but it hasn’t delivered a product or service that blew away the market and caught on like wildfire. And one of its best successes, the Xbox gaming system, is seeing weakening sales.
In May, Xbox sales declined 23% year over year and 14% compared to April. Microsoft has a dilemma because the new Xbox One and the rival PS4 gaming system made by Sony have similar features, yet the Xbox One sells for $499 and the PS4 sells for $399.
Conclusion
Contrary to popular belief, Microsoft Corporation (NASDAQ:MSFT) isn’t a company that relies on its reputation. It’s constantly looking to grow through innovation and partnerships, which has been the case for decades. Unfortunately, Microsoft still doesn’t have a standout product that has the potential to spread like wildfire. In a bull market, it wouldn’t matter. The stock would continue to appreciate based on the company’s strong fundamentals. But the market is now on shaky ground, which limits the stock’s upside potential and increases its downside risks.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Trouble Ahead for Microsoft? originally appeared on Fool.com and is written by Dan Moskowitz.
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