Microsoft Corporation MSFT is reportedly pushing forward in the auto technology space with the introduction of new software and services. Although the company doesn’t intend to venture into manufacturing self-driving cars itself, it does have plans to provide the required platform to achieve the same.
With regard to an agreement that Microsoft had signed with Renault-Nissan in Sep 2016 over car technology, it was announced on Thursday (Jan 5) that Microsoft will provide them with its Connected Vehicle Platform that works on Azure cloud.
The objective of the system will be to collect real-time usage and sensor data that could be used in other Microsoft products such as Cortana, Skype and Office to derive meaningful actionable data. A preview of the product is anticipated to be available during the latter part of 2017.
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What Does this Mean for Microsoft?
Microsoft is gradually shifting its focus from being an operating system provider for automakers to run their in-car information and entertainment systems to being a platform provider based on its Azure cloud, Cortana and Office to further the Internet of Things (IoT) cause.
As per an IDC report, by 2020, the IoT space is estimated to be worth a whopping $1.7 trillion with 30 billion connected “things”. Given the huge opportunity that the space has to offer, the time is ripe to delve deeper.
However, not surprisingly, competition in the space is intensifying with every passing day. We note that, General Motors is in a similar partnership with IBM’s IBM Watson, while Amazon’s AMZN Alexa digital assistant offers similar services.
Given Microsoft’s strong position in the cloud space, we expect to see increased adoption of its technologies going forward that could contribute valuably to the company’s bottom line.
Stock Performance Overview
Shares of Microsoft have outperformed the broader Zacks Computer-Software industry in the last quarter. While the industry generated a positive return of 3.6%, the stock returned 7.8%.
The outperformance of the stock could be attributed to Microsoft's continuing enterprise strength, benefits from the Office 365 subscription model, strong growth prospects of Azure and promising new products. However, despite the cloud focus, we believe execution and foreign exchange risks remain.
Zacks Rank & Key Pick
At present, Microsoft carries a Zacks Rank #3 (Hold).
A better-ranked stock in the broader technology space is NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the consensus estimate for NVIDIA’s current year has improved to $2.43 from $1.86 over the last 30 days.
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