In what can be seen as the coming together of two behemoths, Amazon.com, Inc. (AMZN - Free Report) and Microsoft Corporation (MSFT - Free Report) has entered into a partnership that will help better integrate their personal assistant technologies.
Per the deal announced on Wednesday, Amazon and Microsoft’s respective digital voice assistants, Alexa and Cortana, can communicate with each other to access their individual features.
The investors seem to be happy with this partnership as stock price of both the companies rose. Amazon’s shares surged 1.42%, while Microsoft increased 1.31%.
Stock Performance Overview
Amazon has underperformed the industry it belongs to on a year-to-date basis. The company’s shares have gained only 29.0% compared with the industry’s growth of 47.0%.
The underperformance can be due to a spike in operating expenses as a result of buildout of fulfillment centers in preparation for the holiday season. The company’s increased spending on original TV shows and movies and offline retail has also been impacting its profits.
However, Amazon, which is always aiming for innovation, has rapidly diversified its offerings by entering into markets with significant growth potential. It is now a frontrunner in the growing personal assistant market. Also, its cloud business, Amazon Web Services, has been a key growth driver in recent times.
Per the deal, an Amazon user, who owns an Echo speaker, can ask Alexa to open Cortana and use its exclusive features like accessing work calendars, Office 365 integration and other important reminders.
Similarly, any user who has a Windows 10 device can ask Cortana to open Alexa toorder products from Amazon or control their smart home devices.
The deal is a win-win situation for both Amazon and Microsoft. It will allow both the companies to extend the abilities of their voice-controlled digital assistants by giving them access to new functions and helping them reach out to a wider customer base.
Amazon CEO and founder Jeff Bezos said, “Together, their strengths will complement each other and provide customers with a richer and even more helpful experience.”
How Fast are Amazon and Microsoft Voice Assistants Growing?
Amazon’s foray into homes was through Echo devices, launched in November 2014. It is a small speaker-like home-automation device that can do everything from streaming music to dimming lights or cranking up the heat on the compatible thermostat through voice commands. It is capable of interacting with smart home products, such as the Philips Hue smart light bulbs and smart thermostats from Alphabet-owned Nest.
According to a report from eMarketer, a market research firm, Amazon currently remains the leader in the personal digital assistant space. The company has sold millions of Echo devices, accounting for around 70% of sales for smart speakers.
Microsoft’s Cortana too has a similar story. Microsoft unveiled its voice assistant feature — Cortana — for Windows Phone in April 2014, to gain traction in a highly competitive smartphone market. The company has been making efforts to gain traction in this space and it can be said that the company too has been successful to quite an extent. Microsoft claims that there are 145 million active monthly users of Cortana through Windows 10.
As the personal assistant market is expected to have a booming future, the deal could be a big positive, expanding the sales of both cortana and Alexa based devices.
Importantly, the personal assistant space is at a very competitive stage right now. Therefore companies like Google (GOOGL - Free Report) , Apple (AAPL - Free Report) , Microsoft and Amazon, among others, are strong contenders in the new war of capturing consumers’ homes.
These companies are trying to grab a share of pie in this space. However, that the two rivals would get into a partnership so soon was quite unexpected, more so because it is quite unlikely for tech giants to collaborate on new and important technologies, as they prefer to stand out from the competition.
The deal is an indication of Amazon trying to consolidate the personal digital assistant space. However, it’s unclear how deep the integration between Alexa and Cortana will run in the long run.
Although Google and Apple have not commented on this, it would be interesting to see if Apple’s Siri and Alphabet’s Google Assistant collaborate in the future as well.
Currently, Amazon has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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