presented by: samantha brown. areas of disscusion: current performance present strategy performance...
TRANSCRIPT
MICROSOFTGLOBALIZATION OF THE INDUSTRY
Staying Competitive in a Highly Evolving Industry
PRESENTED BY:Samantha Brown
Summary
AREAS OF DISSCUSION:
Current Performance
Present Strategy
Performance Targets
Financial / Strategic Performance
This presentation will discuss the present state of business affairs of Microsoft Corporation in comparison with its it closest competitors as well as provide a set of considerations and recommendation in each targeted area
that will aid the company in it quest to remain relevant.
(Cartoon Courtesy of DenverPost.com)
StrengthsBrand Loyalty
Brand ReputationSoftware
Acquisition of Skype WeaknessesSlow to innovationMature PC Market
Product Security FlawsPoor Investments
OpportunitiesExpansion into GamingCloud Based Services
Expansion into Mobile DevicesGrowth via Acquisitions
ThreatsConsumer needs &
Preferences ChangesLawsuits (anti trust /
developer)Competition in
SoftwareSale in Substitute
Products
SWOT
SWOT Analysis for MS
(Microsoft, 2013)
Present Strategy
Past Strategy• The past strategy was based on a old past
vision “A personal computer in every home”
• Company had only one real competitor (IBM). IBM supplied the PC and MS provided the OS
• Cashed in on low barging power of customers, customer had no choice in OS (pre-installed)
• Little to no threat for substitutions
• Eventually deemed as a Monopoly
*All of these are no longer a factor.*
Present StrategySingle Strategy: “One Microsoft” the product lines will be viewed as a whole not as individual divisions. The single core strategy will ensure that there is shared goal throughout the company.
Executing Innovation: Executing innovation ahead of the competition is the main factor
Expansion: Open a new device and service chapter. Moving to develop continuous product cycles which bring consistent user interfaces to PC, tablets, phones and gaming systems.
Mobility: Creating a family of devices that will empower the consumer at home, at work, and on the go with the digital activities that are most valued.
Microsoft Strategy
Current Performance
Microsoft is a well known company specifically for its software and virtual services such as Bing and Skype
Company Microsoft Corporation
Industries Served
Computer Software, Electronics
Geographical area
Worldwide
Headquarters United States
Current CEO Steve Ballmer
Revenue $77.8 billion
Profit $17.98 billion
Employees 99,000
Main Competitors
Apple, Google, Samsung, IBM
• Profitable yet stagnant in the last 10yrs
• Window OS provides 75% of profits
• MS is not a hardware company, but rely on the PC for its sales
• Less than 25% profits comes from servers and tools
• The PC, their main target, is on a steady decline.
• Focuses are now on smart phones and tablets – not MS specialty
• Consistently losing relevancy
Competitors:
Apple, Google, Oracle Corp, IBM , Sap AG, CA Tech,
Current Performance cont.
Recommendation:Differentiation Strategy
• Change in long-term industry growth rate
• Emerging of new internet capabilities and
application
• Technological change and manufacturing
process innovation
• Product and marketing innovation
• Highlighting skills and expertise of
company personnel
Performance Targets
Performance Targets 2014
Licensing $5.2 – 5.4 Bill PC business will be stable
Hardware 35 – 45%$3.8 – 4.1 Bill
Xbox One – Xbox Products
Devices and other CS $1.7 – 1.8 Bill
Commercial 9 – 11% Low cost added value products
Commercial Licensing $10.7 – 10.9 Bill
Software
Commercial Other $1.7 – 1.9 Bill Cloud services
Operating Expenses 6 – 8%$8.5 – 8.6 Bill
Quarterly
Capital Expenditures $6.5 Bill
Tax Rate 18 – 20% Dependent on geographical mix of earnings
Performance Targets Recommendations
There can be a horizon in the future of Microsoft if the performance goals or met and or exceed. Actions must be taken to ensure a successful
outlook :
The formulation of Gesture Recognition Technology
Expand the company’s Cloud Services
Provide Unification for Devices
Partnering with other companies such as Toyota
Financial / Strategic Performance
• Microsoft financials in the last decade has been varied
• Great Recession – greatly affect MS share price (from $35 - $25 per share)
• The total revenue from 2002 to 2013 has doubled over ($28.4 to $77.85 B)
• Microsoft OS and the introduction of the Xbox gaming system supported their revenue over these years
Financial / Strategic Performance
Annual Earnings Per Share
• Best performances are generally prior to December. MS EPS is stable compared to its closest competitors
• MS achieved good results while continuing to increase their dividends from year to year
Sept. 30, 2013 0.62
June 30, 2013 0.57
March 31, 2013 0.72
Dec. 31, 2012 0.76
Sept. 30, 2012 0.53
June 30, 2012 -0.059
March 31, 2012 0.60
Dec. 31, 2011 0.78
Sept. 30, 2011 0.68
June 30, 2011 0.69
March 31, 2011 0.61
Dec. 31, 2010 0.77
Sept. 30, 2010 0.62
June 30, 2010 0.51
Annual Earnings per Share
(Microsoft EPS, 2013)
RETURN ON EQUITY INVESTMENT
ROE TrendsSept. 30, 2013 29.89%
June 30, 2013 30.08%
March 31, 2013 23.23%
Dec. 31, 2012 22.70%
Sept. 30, 2012 23.99%
June 30, 2012 26.90%
March 31, 2012 38.56%
Dec. 31, 2011 41.53%
Sept. 30, 2011 44.24%
June 30, 2011 45.91%
• The past economic crisis had a great affect the on the ROE
• Stocks were at an historic low to include MS
• Recent MS strategic acquisitions were not recorded or calculated
• The increase in dividends with the acquisitions strengthened the organization; it is not reflected in the given numbers
Return on Equity Investment
(Y Chart, 2013)
Stock prices have be constantly flat, but high
2013 MS had a 42% gain
Compared to peers, MS’s stock has acted anomalously
High prices are due to stock market is generally high
Shareholders are applauding MS for strategic risks
Stock prices look to continue prices based on shareholders demand
Year:
2013 - $33.00
2012 - $29.50
2011 – $25.00
2010 – $21.50
2009 - $22.00
2008 - $23.50(MSFT Monthly Historical Prices, 2013)
End Of Year Stock PricesEnd of Year Stock Prices
Financial & Strategic Recommendations
MS could continue to increase their dividend and share repurchase plan to:
Continue to return cash to MS shareholders
Appeal to shareholders that are seeking long-term steady growth and benefit from
quarterly dividends
Solidify shareholder’s loyalty and encourage future holdings
(Amin, 2013)
Financial & Strategic Recommendations cont.
Cost-efficient Acquisition Operations:
Demonstrate growth potential over short-term profitability
This recommendation is an alternative to the first and could possibly be considered a contradiction. However, given the size and girth of their competitive landscape, MS may be at a competitive disadvantage (long-term) if they continue to play it safe.
(Ong, 2013)
Annual Credit Rating
• Scored consistently, the highest credit rating given: “AAA” (2008-2013)
• The capital structure of the company allows it to maintain this rating
• Was the first company to achieve this rating in a decade
Recommendation:
The company should maintain their actions in reference to the credit rating.
MS maintains its equity and keeps debts low which in turn, produces a spectacular credit rating.
Annual Credit Rating
16.30%
83.70%
(Late 2013) Microsoft Capital Structure
Debt Equity
Debt vs Assets
Debt vs Equity
Assets vs Liability
Debt / EBITDA
CF / Total Debt
0.11
0.2
2.87
0.49
1.79
0.17
0.27
2.75
0.830000000000001
0.690000000000001
-0.06
-0.07
0.12
-0.34
1.07
Debt RatiosCompared to industry Industry MSFT
(Morning Star, 2013)
Annual Image Rating
MS is being labeled as “old” (synonymous with Bill Gates)
MS maintains a steady image, but the consumer sometimes seems uninterested in the company
Recommendations
Company’s Face: Introduce a fresh new face
Company Logo: Consider sponsoring a logo contest that incorporates the iconic color blocks, but more appealing to the new technological generation
Customer Support: Reevaluate customer support services to ensure a satisfactory experience
Corporate Responsibility: Incorporate programs that demonstrate MS dedication the public and the environment
Annual Image Rating
2008 2009 2010 2011 2012 20150123456789
Fortune Image Rating
(CNNMoney, 2013)
Annual Image RatingConclusion
Microsoft is and has always been a strong company. It has in some cases lagged behind, but is taking steps to improve its situation. With the appropriate plans and strategic moves, the company may be able to regain it shine in the
industry and the world.
Annual Image RatingReferences
• Amin, S. (2013 September 17 ). Microsoft Continues $40 Billion Share Repurchase Program; Increases Quarterly Dividend 22%. In Microsoft News. Retrieved from http://microsoft-news.com/microsoft-continues 40-billion-share-repurchase-program-increases-quarterly-dividend-
• CNNMoney. (2012). World’s Most Admired Companies. Retrieved from: http://money.cnn.com/magazines/fortune/most-admired/2012/snapshots/3063.html
• Microsoft. (2013). Annual Report. Retrieved from http://www.microsoft.com/investor/reports/ar13/index.html
• Microsoft. (2013). Our Commitment to Citizenship. Retrieved from: http://www.microsoft.com/about/corporatecitizenship/en-us/reporting/
• Morningstar. (2013). Microsoft Corporation MSFT. Retrieved from: http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=MSFT&country=USA
• Ong, J. (2013 January 30 ). Google, Facebook led private tech M&A activity in 2012 as companies spent $46.8b on over 2,200 deals. In TNW News. Retrieved from http://thenextweb.com/insider/2013/01/30/google-and- facebook-led-private-ma-activity-in 2012-as-companies-spent-46-8b-on-over
• Y Charts. (2013 November 20). Microsoft Historical Return on Equity. Retrieved from: http://ycharts.com/companies/MSFT/return_on_equity