In late April. Microsoft reported its quarterly earnings and similar to many large tech companies, they are making a lot of money. According to a report by Reuters, Microsoft met analyst’s expectations and beat profit estimates. Revenue and adjusted earnings for the company was $41.7 billion and $1.95 a share.
If you have a computer which is not an Apple you are using Microsoft’s system which means most of the world’s computing is done on Microsoft. This means there will always be a steady stream of income to Microsoft which is good for investors.
All companies including Microsoft wish to grow and some actually achieve growth. One of the methods Microsoft is growing is through the cloud. The cloud is where the real growth is occurring and to understand the Cloud, various research must be done. One example of research is a You Tube Video by the biz doc or Tom Ellsworth who is based in Dallas, Texas. Mr. Ellsworth does case studies and there are very easily to follow and in video he examined Amazon and AWS.
Amazon through AWS is the market leader in the cloud and it accounts for 65% of the profits of the company. The person who headed AWS is taking over as President of the company. AWS has kept 33% or a third of the market for the past 5 years and it is important to note the cloud has been grown rapidly and is still growing. Microsoft was late to the market and its market share grew from 10% to 20 to be number 2; Google has grown from 5% to 10% to be number 3; IBM is in fourth and has not grown market share with less than 5% and all other companies who had market share are losing market share to the big three.
If you think about cloud services, the key is volume and the ability to large capital upfront costs to have the servers and infrastructure and security. The costs of equipment and security tends to mean the largest companies will have the greatest advantage and they do. Similar to most industries there are always alternatives.
Linking to dividend paying stocks, when you buy the companies you want them to have a steady stream of income and growth potential. The steady stream of income draws you and the potential and actual execution to achieve growth allows you to hold onto the stock. In the case of Microsoft, as a market leader in operating systems, it will always have sales, but how many extra computers will you buy? or the market is relatively stable. However when you know that cloud services is 65% of the profit of Amazon and Microsoft is gaining share, there are more reasons for owning the shares.
There are more questions than answers, till the next time – to raising questions.