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Microsoft Buys Flipgrid, Ups Ante in Edtech Against Google

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Microsoft MSFT recently acquired Minneapolis-based startup, Flipgrid. The startup is an interactive social learning app for teachers and students with a collaborative approach. The app will be integrated with Microsoft’s products, enabling students to record and share videos with others.

Microsoft is making the app free of cost for schools. The ones who had already subscribed the app will avail a refund. Flipgrid is well poised to thrive as it will now get a larger exposure by serving the global educator community.

However, it may be noted that Flipgrid had paid to leverage Amazon’s AMZN Amazon Web Services (“AWS”) cloud, an Azure competitor.

In a bid to provide students and teachers with a safe and secure interactive environment, the company will be aligned with Microsoft’s GDPR, COPPA and FERPA compliant privacy architecture. Moreover, the tech giant will introduce updates to the education app at Flipgrid’s educator conference.

The terms of the deal have been kept under wraps. Notably, shares of Microsoft have gained 47.1% in the past year, substantially outperforming the industry’s rally of 37.6%. This outperformance can primarily be attributed to its rapidly expanding efforts in AI and IoT based developments. Undisturbed focus on Azure remains a key catalyst.

Understanding and Developing Future Skills

Microsoft remains committed to drive innovation by adding capabilities to sustain the future of education industry. With a view to understand the skills which will be in demand in the future, the company had conducted a study with McKinsey & Company. The research authenticated that around 30-40% jobs will demand social-emotional skills.

With the acquisition, Microsoft has strengthened the social learning movement. The students will be the primary beneficiaries. The social platform will enhance their credentials by making them more responsible and “confident digital citizens”.

Intensifying Competition in the EdTech Market

With the Flipgrid buyout, the tech powerhouse mounts challenge in the edtech industry, presently dominated by Alphabet's GOOGL Google, courtesy its Chromebook. Notably, Windows maintained its top position in the year in terms of global shipments of devices by OS. The company’s productivity suite, Office 365, is also seen as a big threat to Google’s G Suite for education.

Google’s Classroom app is helping it gain traction in the field of education. The addition of new innovative features to the platform enables students to have a better understanding of the subjects as well as keep parents aware of their kids’ progress in school.

With the buyout of Flipgrid, we believe Microsoft is exploring the entirety of education technology market. Flipgrid is likely to provide the company a unique edge in this software edtech space.

Per ResearchAndMarkets data, the global educational technology market is forecast to witness CAGR of 18.3% to $40.9 billion between 2017 and 2022. We believe Microsoft is well poised to capitalize on the lucrative opportunity.

Zacks Rank & Stock to Consider

Both Microsoft and Alphabet currently carry a Zacks Rank #3 (Hold).

Micron MU is a better-ranked stock in the broader technology sector sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The projected long-term earnings growth rate for Micron is pegged at 10%.

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