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Microsoft, NFL Enter into Partnership

Microsoft Corp. (MSFT) and the National Football League (:NFL) have announced a multiyear partnership where NFL will use Microsoft’s Xbox One and Surface technology to deliver unique NFL viewing on Xbox One.

Following the agreement, Microsoft will provide enhanced interactive experiences through devices such as Surface and Xbox One. The partnership will lead to a viewing experience enriched by innovations around Xbox SmartGlass and Skype.

The partnership will also enable NFL teams to access Microsoft solutions, which will enhance on-field communications, photo viewing and play calling among players and coaches. Thus, on-field performance and decision-making will improve with the help of technology.

Microsoft has lost its top position in the gaming console market to Sony (SNE). Sony’s PS3 gained the top slot and sold 1,808,127 units in March. It was followed by Microsoft’s Xbox 360 and Nintendo’s Wii, which sold 1,213,932 and 455,946 units, respectively. Thus, deals such as this one could help Microsoft play catch-up in the gaming console market.

Currently, just like other PC makers, Microsoft is also battling the slump in the PC market caused by the sluggish economy. To make matters worse, tablets continue to cannibalize its core PC market. Although Microsoft has launched its own mobile devices (both tablet and smartphone), it will have to deal with significant competition in these markets.

According to a report by IDC, Google’s (GOOG) Android OS shipments touched 162.1 million units in the first quarter of 2013, up 79.5% year over year. In the process, it captured 75% market share, followed by Apple’s (AAPL) iOS, which managed to hold on to a 17.3% share and Research In Motion’s (BBRY) Blackberry OS, which captured 2.9% market share. The Windows OS lagged far behind with a mere 3.2% share.

Despite these concerns, Microsoft remains one of the best positioned software vendors, given its wide range of products, emerging markets’ strength, continued technology deployment at data centers and growth in cloud computing. We believe that Microsoft’s current investments are supported by its strong balance sheet and expect these to drive the next growth phase, improving prospects of market share gains.

Microsoft reported revenues excluding deferrals of $20.49 billion in the third quarter of fiscal 2013, which were down 4.5% sequentially but up 17.7% from last year, more or less in line with our estimates. All segments grew strongly from the year-ago quarter but declined only slightly from the seasonally strong December quarter. Microsoft’s Business Division grew both sequentially and year over year.

Microsoft has a Zacks Rank #3 (Hold).

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