Wall Street analysts are beginning to see the promising signs of a successful effort at Microsoft® to reorganize its business to better service emerging needs of its core customers (meaning larger organizations in the private, public and not for profit sectors) for a wider set of computing devices (including tablets and smart phones), and comparatively less expensive multi tenant public cloud SaaS offers.
As recently as Tuesday, October 1, 2013, Tiernan Ray wrote a short piece titled MSFT: UBS Cuts Target to $37, Says Look Past Higher Spending, where he quotes analysts from Citigroup and UBS as having “buy” ratings on the stock. The argument is Microsoft may end up spending significantly more money fueling the reorganization than investors would have expected earlier, but the payoff will be a good one.
So the analyst community is now much more sanguine on Microsoft’s chances than they were as recently as a mere couple of months back. I wouldn’t be surprised if some of this new found optimism about this mature ISV spills over into their opinions on Oracle, SAP and IBM. Bottom line, these mature ISVs will make a lot of money as they begin to successfully address the needs of their long standing core customers with better products and services.
Given the ever present noise about security issues with cloud computing (despite some claims published on the Wall Street Journal’s CIO blog, attributed to Verizon, that big customers are no less enthused about multi tenant cloud offers than they were before revelation of the NSA Surveillance program), I think the installed base of on premise software already owned and maintained by these mature ISVs for their customers will provide a very compelling reason for the same customers to look first to these vendors and only later to pure cloud SaaS offers.
Finally, with the very visible position the Nokia acquisition gives them as a prominent manufacturer of smart phones, and their dogged determination to get the Surface tablets “right” for the “right” market, I can’t see Microsoft losing. It may take a while, but they will win at this game, eventually.
© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved