Can Microsoft make money from Windows 11?
Microsoft (NASDAQ: MSFT) has surrendered to the open source and mobile revolutions.
Windows 11 will support Android Apps, The Verge claims. Additionally, The Verge claims Windows 11 users could download Android Apps through Amazon’s Appstore in the new Windows Store. They include the Windows Store in Windows 11.
Moreover, Verge writer Tom Warren saw TikTok running on a Windows 11 computer on 24 June 2021. Warren claims Windows 11 users could pin Android Apps to the taskbar alongside traditional Windows 11. Theoretically, a Windows 11 user could pin Google Docs and YouTube next to Microsoft Word.
Why Microsoft is Adding Android to Windows 11
Hence, Windows 11 is an enormous victory for Alphabet (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN). To explain, I suspect Microsoft CEO Satya Nadella thinks open-sourced software and Mobile devices are the future of the future of the internet and computing.
Alphabet (GOOGL) made a huge bet on mobile devices and open sourced software with Android and won. Notably, Business of Apps estimates Android had 2.8 billion users worldwide in 2020. Furthermore, Business of Apps estimates Android had 71% of the global mobile device operating system in First Quarter 2021.
In contrast, Statcounter estimates Android controlled 72.72% of the worldwide Mobile Operating System Market in May 2021. In contrast, Apple’s iOS had 26.46% of the Mobile Operating System Market. Plus, they shipped 1.05 billion Android devices in 2020. Business of Apps estimates.
How Microsoft plans to Cash in on Android Apps
Android Apps are lucrative. Statista estimates Google Play (Alphabet’s App Store) generated $38.6 billion gross app revenue in 2020. Google Play’s gross app revenue rose from $29.3 billion in 2019, $24.8 billion in 2018, $19.5 billion in 2017, and $15 billion in 2016.
Thus, Microsoft (MSFT) wants a piece of Alphabet’s Android market share and business. Nadella has been trying to get that piece for some time. In 2018, Microsoft bought GitHub one of Google Play’s biggest competitors for $7.5 billion.
Over 56 million app and software developers were on GitHub in 2020, GitHub claims. Those developers built over 60 million software depositories and contributed over 1.9 billion apps and pies of software to GitHub in 2020.
Microsoft Grows in the Cloud
Android is not the only growing market for Microsoft (MSFT). Microsoft’s Global Internet as a Service (IaaS) public cloud services market share grew by 59.2% between 2019 and 2020, Gartner estimates.
In detail, Microsoft’s public cloud services revenues grew from $7.95 billion in 2019 to $12.658 billion, Gartner calculates. Moreover, Microsoft’s world cloud services market share grew from 17.4% in 2019 to 19.7% in 2020.
Gartner ranks Microsoft as the second largest cloud services provider in the world after Amazon (AMZN). Gartner estimates Amazon had a 40.8% share of the global public cloud services market in 2020. That share fell from 44.6% in 2019.
Will Microsoft Abandon PCs?
Naturally, some people will wonder if Microsoft Inc. (MSFT) plans to abandon personal computers (PCs).
My answer is no. Instead, I think Nadella believes mobile and desktop devices are coming together. To elaborate, today’s consumer wants an operating system and apps she can use on either a mobile device or a PC.
For example, the consumer wants to read her business documents on her phone and search for coupons from her favorite retailer on her PC. Similarly, the consumer wants to watch TikTok and YouTube videos on her PC and hold meetings through her phone.
Notably, Microsoft Teams will be a feature in Windows 11, TechCrunch claims. Hence, they built Microsoft 11 for the post COVID-19 world. TechCrunch’s Brian Heater speculates; “Microsoft is looking to blur the line between consumers and professionals with the platform (Windows 11).”
To elaborate, Microsoft will offer apps and features that run of both phones and computers. In addition, the cloud will enable users to run Windows 11 at home or work. One obvious use of Windows 11 will be to connect remote workers to the office.
Does Mr. Market like Windows 11?
Mr. Market has a little faith in Windows 11. He paid $268.72 a share for Microsoft (MSFT) on 27 June 2021.
On the other hand, Microsoft’s share price rose from $259.79 on 21 June 2021. Conversely, Microsoft did thrive during the COVID-19 pandemic. Microsoft’s share price rose from $196.33 on 26 June 2020 to $265.02 on 25 June 2021. Thus I consider Microsoft a pandemic-resistant stock.
Hence, I think Microsoft offers a high-level of share growth. It also offers significant amounts of revenue growth. Stockrow estimates Microsoft’s revenues grew by 19.09% in the quarter ending on 31 March 2021.
Moreover, Microsoft’s revenues experienced double-digit growth in every quarter of 2020. For instance, revenues grew by 14.56% in the First Quarter of 2020 and 16.72% in the Fourth Quarter of 2020.
Microsoft is a Magnificent Growth Stock
I consider Microsoft (NASDAQ: MSFT) a magnificent growth stock. For example, Microsoft’s quarterly revenues grew from $35.021 billion on 31 March 2020 to $41.706 billion on 31 March 2021.
Moreover, Microsoft’s quarterly gross profit grew from $24.046 billion on 31 March 2020 to $28.661 billion on 31 March 2021. Additionally, Microsoft’s quarterly operating income grew from $12.975 billion on 31 March 2020 to $17.048 billion on 31 March 2021.
I consider Microsoft a great growth stock because its growth generates more cash. For instance, Microsoft’s quarterly operating cash flow rose from $17.504 billion on 31 March 2020 to $22.179 billion on 31 March 2021.
How Much Cash Does Microsoft Generate?
Conversely, Microsoft’s quarterly ending cash flow fell from $2.846 billion on 31 March 2020 to -$730 million on 31 March 2021. The ending cash flow is low because Microsoft pays off enormous amounts of debt.
For example, Microsoft reported a negative quarterly financing cash flow of -$13.192 billion on 31 March 2021. The quarterly financing cash flow fell from -$14.645 billion on 31 March 2020. Consequently, Microsoft’s total debt fell from $84.025 billion on 31 March 2020 to $81.26 billion on 31 March 2021.
Microsoft (MSFT) is still a cash-rich company. Microsoft reported $125.407 billion in cash and short-term investments on 31 March 2021. The cash and short-term investments fell from $137.626 billion on 31 March 2020.
Therefore, Microsoft had the cash to survive the pandemic and build a new version of Windows 11 at the same time. I think those capabilities those characteristics make Microsoft a wonderful value investment.
What Value Does Microsoft have?
Consequently, Microsoft (MSFT) added value during the pandemic. For instance, Microsoft’s Total Assets grew from $285.449 billion on 31 March 2020 to $308.879 billion on 31 March 2021.
Hence, Microsoft is both a value investment and a growth stock. Additionally, the $125.407 billion in cash and short-term investments gives Microsoft a high margin of safety. I think that makes Microsoft one of the best value investments available today.
Microsoft also offers a dividend. Microsoft will pay a 56₵ quarterly dividend on 9 September 2021. That dividend grew from 51₵ on 10 September 2020 to 56₵ on 10 December 2020. Overall, Microsoft offered a forward annualized dividend of $2.24 and a dividend yield of 0.84% on 28 September 2021.
If you are looking for a value investment that can profit from the popularity of mobile devices, the cloud, and open-sourced software Microsoft Inc. (NASDAQ: MSFT) is worth investing. I think Windows 11 could drive enormous amounts of growth at Microsoft and Microsoft could make enormous amounts of money from that growth.