Microsoft Focuses on the Enterprise & Windows Phone Until Windows 8 Launch

It has been an exciting couple of weeks for Microsoft (NASDAQ:MSFT). Microsoft reported its earnings for Q1 FY12 last month, with a modest increase in revenues. Windows sales have slowed down quite a bit since it has been around 3 years since Microsoft launched Windows 7. Last quarter’s earnings were carried by the Office, Server and Xbox divisions. Since then, Microsoft has been in the news a lot. Its stock price has been wavering in the $26-$28 range, but was weighed down along with the broader market due to increasing speculation of an Italian default.

We have a revised $32 Trefis price estimate for Microsoft, which stands nearly 20% above its current stock price.

Check out our complete analysis for Microsoft

Here’s a quick look of developments in Microsoft which could affect its stock price going forward.

Windows

Microsoft is expected to launch Windows 8 next year. Since it will target the desktop and notebook market as well as the growing tablet market, we expect it to sell many more copies than Windows 7, which itself sold around 500 million licenses. Until then, Microsoft’s Windows sales are expected to continue to slow.

Many major hardware manufacturers like Dell, HP and Samsung have already announced that they will be launching Windows 8 notebooks, ultrabooks and tablets soon after the launch. This is another reason why we expect Windows 8 to be one of the biggest releases in Microsoft’s history.

Windows Phone & Xbox

Windows Phone still has a very low market share compared to Apple‘s (NASDAQ:AAPL) iOS or Google‘s (NASDAQ:GOOG) Android, but it is expected to become one of the top mobile operating systems in the coming year. It recently rolled out the Mango update for all device owners, and is working with component manufacturers to reduce the prices of Windows Phone devices.

Ironically, Android is making much more money for Microsoft than Windows Phone. Microsoft signed a couple more patent licensing deals with Android device manufacturers like Quanta, Compal and is in talks with Huawei. It is expected to generate more than a billion dollars in revenue from Android patent licensing in the next year.

Xbox, on the other hand, is doing quite well. It has been the highest selling console for months now and Microsoft has announced new social and video features for the Xbox 360. It is apparently also working on the next version – the Xbox 720 – which may be released next year.

Enterprise

Microsoft launched a new SQL Server 2012 database appliance with HP – the HP Enterprise Database Consolidation Appliance for SQL Server – which will compete with Oracle’s Exadata offering. It will launch SQL Server 2012 next year. It also announced that it will be adding support for the Hadoop framework to SQL Server 2012, targeting the rapidly growing market for big data.

It also added new social features like activity feeds and micro-blogging to the Dynamics CRM offering and announced plans to launch mobile compatible versions of its business intelligence products.

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