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Microsoft Collaborates with Kenya

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The world’s largest software maker Microsoft Corp. (MSFT - Free Report) is collaborating with the government of Kenya’s Ministry of Information and Communications and Indigo Telecom Ltd. to launch a pilot project, which has the potential to deliver cheaper wireless broadband access to the remote areas of the country.

The project is intended to decide the commercial viability of using TV white space for the delivery of broadband services. TV white spaces are gaps in the wireless spectrums generally used for transmission of television signals. It has been seen that RF signals through these bands are stronger, with the ability to travel longer distances and penetrate through more obstacles. Therefore, if commercially viable, they could be used for delivering broadband services.

Of course, Microsoft has an interest in technology developments in this under-penetrated region. If this initiative is successful, it will create new opportunities in commerce, education, healthcare, as well as the delivery of government services. Microsoft’s status as a technology provider is already known. With better and more widespread Internet access in Africa, the company would be able to offer both client and cloud platforms.          

This pilot project is in fact a part of the Microsoft 4Afrika Initiative. The initiative is aimed at expanding the reach of smart devices among the African youth, bringing small and medium sized enterprises (SMEs) on the web, upgrading the skills of 100,000 members of the current workforce and helping 100,000 graduates to hone their employability skills so it can place 75% of them (low-cost labor for Microsoft).

Following the collaboration, Indigo Telecom will use Microsoft’s Window 8 tablets, applications and Microsoft Office 365 in schools, provide computer labs and instruction, and work with community leaders and local companies. This exercise will help the company and Microsoft to identify the most suitable service and application for each sector.

According to market research firm Ovum, mobile broadband is forecasted to grow at a compound annual growth rate (CAGR) of 19.2% from 2013 to 2016 globally.

Africa is changing its outlook and is trying to compete with other developed nations so that it can attract investments, which will benefit its overall development. The fact that 7.0% of Africans are using the Internet and 5.3% of the population is using social networking sites such as Facebook (FB - Free Report) indicates that the country is still significantly under-penetrated and therefore presents significant opportunities.

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 - Free Report) and Google has been 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 revenue, 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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