Microsoft Corp. MSFT is fast gaining traction in blockchain technology. The company has made impressive progress in recent times through its deal with Accenture Plc ACN and the launch of Coco Framework for making blockchain-based systems faster and secure.
Microsoft is now bringing the technology mainstream for the financial industry. The company is reportedly collaborating with an Israeli lender, Bank Hapoalim for blockchain technology based digital bank guarantees.
Bank guarantees are a declaration of assurance from a bank that a debtor’s liabilities will be met if an obligation is not fulfilled. Notably, this combination of blockchain with bank guarantee will be the first of its kind in the Israel banking sector. This application, once deployed, will not require clients to visit the bank physically. The documentation process will be less time consuming and secure.
Microsoft’s Azure will be used for the service delivery, which is anticipated to bode well for further penetration of the cloud platform. We believe that increased adoption of the company’s new technologies coupled with growth of Azure will help the stock rebound going forward.
Shares of Microsoft have gained 21.1% year to date, underperforming the industry’s 27% rally.
Blockchain Players: IBM and Microsoft
Blockchain technology has been in the industry since the commencement of cryptocurrency transaction. The technology, which was previously just related to bitcoins, has become popular due to the fact that it cannot be breached. The technology ensures unadulterated data storage and transfer via a shared database or ledger and aims at putting a check on cybercrime related losses.
Per MarketsandMarkets, the blockchain market is estimated to reach $2.31 billion by 2021 from $210.2 million in 2016 at a compound annual growth rate (CAGR) of 61.5%.
Microsoft Corporation Revenue (TTM)
Microsoft Corporation Revenue (TTM) | Microsoft Corporation Quote
The blockchain market is currently dominated by International Business Machines Corp. IBM. Like Microsoft, the company has bank guarantee deals with Westpac and ANZ. IBM has also partnered with American International Group AIG and Standard Chartered PLC for a multinational insurance policy using the technology.
Notably, Microsoft’s blockchain technology is based on Ethereum, developed by the Ethereum Foundation while IBM supports Hyperledger. The difference from consumer point of view is that Microsoft is not a member of the Ethereum Foundation while IBM is a key member of the committee behind Hyperledger. Thus, IBM will play a role in any change of the respective infrastructure but Microsoft will not be notified of any in advance.
However, the advancements that Microsoft has already made in the field are testament to the fact that it has gained the confidence of a large part of blockchain customers, and this recent deal with Bank Hapoalim is anticipated to boost the company’s top line in the near term.
Microsoft currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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