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The world’s largest software maker Microsoft Corp. (MSFT - Analyst Report) acquired cloud-monitoring startup MetricsHub for an undisclosed sum.

Bellevue, Wash-based MetricsHub was part of Microsoft’s Accelerator program for Windows Azure, through which Microsoft funded 10 startups.

MetricsHub offers cloud-based tracking and monitoring systems, which reduce cloud hosting bills, the time spent on server administration and also improves business operations. Users can also keep track of storage capacity, uptime, response times, the number of requests and projected costs among others.

Microsoft is already offering MetricsHub’s expertise free to its Windows Azure customers through the Windows Azure Store.

Customers are drawn toward cloud-based services as it is cost efficient, comes with unlimited storage, and backup and automatic software updates.  Also, data recovery is easier than in traditional methods of data storage as the information can be easily accessed. However, sometimes customers fail to manage their applications efficiently, which leads to operational bottlenecks. MetricsHub helps solve the problem by sending alerts to customers to scale up or manage their applications better. Thus, this automated monitoring system is likely to benefit Microsoft in the long run. Inc(AMZN - Analyst Report) was one of the major pioneers of cloud computing. It modernized its own data centers and launched a cloud-computing business for external customers called Amazon Web Service (AWS) in 2006.

Microsoft’s aggressive acquisition strategy has proved beneficial in the past and is largely responsible for the company’s market position. In fiscal 2012, the company closed the Skype acquisition and picked up an enterprise social networking company Yammer for $1.2 billion in cash. Further, it acquired cloud-based storage business StorSimple for an undisclosed amount. 

Currently, just like other PC makers, Microsoft is also battling the slump in the PC market caused by the sluggish economy. In addition, the popularity of smartphones and tablets from Apple (AAPL - Analyst Report) and Google has been cannibalizing its core PC market. Thus, it makes sense for Microsoft to venture into new businesses like cloud services.

IDC predicts that the cloud market may witness 130% jump and reach $43.0 billion in 2016. Further, Gartner predicts that around $677.0 billion may be spent on cloud services within 2013–2016. Thus, Microsoft should be able to tap this opportunity, which may boost its top-line going forward.

Microsoft remains one of the best positioned software vendors, given its wide range of products, emerging markets strength, continued technology deployment at data centers and growth in cloud computing. We believe that Microsoft’s current investments are supported by its strong balance sheet and expect these to drive the next growth phase, improving prospects of market share gains.

Microsoft reported revenues, excluding deferrals, of $21.46 billion in the second quarter of fiscal 2013, up 34.0% sequentially and 2.7% from last year, in line with our estimates. All except the Entertainment & Devices segment grew both sequentially and from the year-ago quarter.

Microsoft has a Zacks Rank #3 (Hold).

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