Microsoft Wins on Enterprise Earnings

When people think about Microsoft and what the company does, the first thing that comes to mind is typically their consumer side of the business and a lot of the recent failures. They look at the ineffective launch of Windows 8 and the failure of the Surface tablet compared to the iPad and they believe that Microsoft is a dying company and a poor investment. In addition, the previous quarter's results from Microsoft were very poor so the market was not expecting much from Thursday's after market report. Instead, Microsoft provided a huge earnings surprise on revenue and earnings growth from the enterprise side, with the stock trading up over 7% after hours. On the enterprise side of the business, switching costs for Microsoft's enterprise solutions and hardware are extremely high, so the company is able to raise costs and increase profitability with relative ease. Even as enterprise consumers look to move to the cloud, Microsoft is poised to gain as they build out their Azure service and other cloud computing solutions. Immediately after the earnings release Jeffries increased their price target to $42 and many other outlooks improved. The company is poised to gain from the transition to cloud in addition to the release of the new XBox One console. Though the company has had problems on the consumer side lately, Microsoft is not going anywhere any time soon.

-Varun Sawhney