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The world’s largest software maker Microsoft Corp. (MSFT - Analyst Report) announced that the telecommunications major, Telefonica, has chosen to deploy Microsoft’s Office 365 and Yammer, a social network service, in its offices globally.

The reason for deploying the Office software and Yammer is to equip Telefonica 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 130,000 strong workforce across 24 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.

Microsoft acquired privately-held Yammer last year for $1.2 billion. 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 in the market as it recently launched its online version focusing on touch devices. Further, it is being deployed at the stores of retailers such as J. C. Penney Company Inc. (JCP - Analyst Report) and U.K.-based Tesco as well as government departments such as the Texas Department of Information Resources, which chose the software for inter-departmental activities. The latest to jump on the bandwagon is the International Federation of Red Cross and Red Crescent Societies (IFRC), which also signed an MoU with Microsoft. Further, Microsoft’s software is gaining ground in the healthcare sector. The company continues to innovate, launching separate versions for businesses and student communities.

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 are 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.

Microsoft reported revenues excluding deferrals of $20.49 billion in the third quarter of fiscal 2013, which was down 4.5% sequentially but up 17.7% from last year, more or less in line with our estimates. All segments grew strongly from the year-ago quarter and declined only slightly from the seasonally strong December quarter. Microsoft’s Business Division grew both sequentially and year over year.

Microsoft has a Zacks Rank #3 (Hold).

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