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Microsoft, Walt Disney Partner to Boost SLAB initiatives

Zacks Equity Research

Microsoft MSFT recently announced a five-year partnership with The Walt Disney Company DIS in an effort to create new ways for “production” and “postproduction” workflows via Microsoft Azure cloud platform. The tech giant will support Walt Disney as an Innovation Partner to bolster StudioLAB (SLAB) initiative. However, the financial terms of the deal have been kept under wraps.

SLAB aims to build upon advanced technology by improve prototypes and designs to enhance video production. SLAB campus, which is likely to span across an area of 3,500 square feet, has been proposed to be built on the famous Disney studio space in Burbank.

Microsoft’s Azure offerings will improve the SLAB project by providing advanced collaboration, storage and network facilities. The collaboration is also aimed at delivering effective ways to shift production assets and data from the studio set to the cloud.

Azure creates a high-speed, low-latency, private link between customer’s on-premises infrastructure facility and Azure cloud regions.

According to Kate Johnson, president of Microsoft US, “The combination of Azure'shyperscale capacity, global distribution, and industry-leading storage and networking capabilities with Disney's strong history of industry leadership unlocks new opportunity in the media and entertainment space and will power new ways to drive content and creativity at scale.”

This will deal will significantly benefit Microsoft and provide it an edge in media and entertainment industry.

Innovative Initiatives Fuel Optimism

The latest deal win is instilling confidence in the stock. Microsoftremains well poised to capitalize on this opportunity by developing technology to enhance entertainment. Notably, the stock has returned 20.4% in the past year, outperforming the industry’s growth of 14.2%.

Integration of Microsoft’s Azure cloud platform with Walt Disney's SLABis anticipated to bolster customer base of both the companies. We believe that the transformed IT environment, increasing spending on cloud based applications and growing clout of digital transformation will favor the partnership.

This apart, Microsoft is focusing on up scaling the utilization of AI, IoT, and blockchain capabilities, to aid enterprises in streamlining the otherwise complex processes. In this direction, the company is rolling out innovative products, including Azure Kinect DK and HoloLens 2, which hold promise.

Markedly, the tech giant acquired Express Logic in April, this year, to improve competence in edge and IoT market. Notably, IoT sensors play a crucial role in maintaining connectivity in this era of smart devices.

Notably, IDC expects worldwide IoT spending to hit $1 trillion in 2022 from projected $745 billion estimated in 2019.

We believe Microsoft’s IoT initiatives aimed at providing robust tools and platform to developers, and strengthening partner base will aid it in improving overall performance.

Zacks Rank and Stocks to Consider

Microsoft currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Alibaba Group Holding Limited BABA and Anixter International AXE. Both the stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alibaba and Anixter is currently pegged at 28% and 8%, respectively.

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