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The world’s largest software maker Microsoft Corp. (MSFT - Analyst Report) announced that power and automation technology major, ABB Ltd. (ABB - Analyst Report) chose to deploy its Office 365 and Yammer social network service in its offices globally.

The reason for deploying the Office software and Yammer is to equip ABB with advanced technologies involving the cloud, which is expected to improve the efficiency of its operations and improve resource allocation. It will also facilitate communication, productivity and collaboration among its 145,000 strong workforce across 100 countries.

Office 365 is sold as a service and therefore generates ongoing revenues for Microsoft instead of a one-time licensing fee. Launched in 2011, the new Office comes with the traditional word processing, spreadsheets and email programs.

In 2012, Microsoft acquired privately held Yammer for $1.2 billion. The deal was completed on Jul 19, 2012. Yammer specializes in creating private social networks so employees within the same company can form groups for free interaction.

Microsoft’s Office 365 is gaining traction. This SaaS offering is being deployed by retailers such as J. C. Penney Company Inc. and U.K.-based Tesco, which chose the software for inter-departmental activities.

Microsoft’s software has also expanded into the healthcare sector. It also launched separate versions for businesses and student communities.

Microsoft is also seeing strong demand in government and education sectors as it won several new customers including the Texas Department of Information Resources, the City of Kansas City, Mo; and the City of Seattle; among others.

The latest to jump on the bandwagon is the International Federation of Red Cross and Red Crescent Societies (IFRC), which has signed a MoU with Microsoft.

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 is cannibalizing PC market sales, further deteriorating the scenario. Whether it can come out of the slump on the back of its new software and OS is a wait and-see game.

According to research conducted by IDC, cloud-based services may grow into a $100.0 billion market by 2016, representing a compound annual growth rate (CAGR) of 26.0%. Cloud services are expected to drive growth in IT going forward, generating 41.0% of overall growth in IT by 2016. Thus, the strengthening of Microsoft’s position in the segment is encouraging as the PC market is showing no signs of recovery in the near future.

Microsoft reported revenues excluding deferrals of $21.46 billion in the second quarter of fiscal 2013, which was 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. Entertainment & Devices were down year over year.

Microsoft has a Zacks Rank #3 (Hold).

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