Microsoft Is Rising Again

Disclosure: I own shares of MSFT

After remaining in the shadows of Apple , Google , and other rising technology companies for several years, Microsoft is rising again, as evidenced by the release of new products and improving financials.  Today, the company announced its own system for consolidating health and fitness data from various fitness gadgets and mobile apps; and a $199 fitness band to work with this system. Last week, Microsoft reported a strong performance in the most recent quarter ended September 30, 2014.

Gross margin, operating income and diluted earnings per share (“EPS”) for the quarter were $14.93 billion, $5.84 billion and $0.54 per share, respectively.

At the core of Microsoft’s turnaround is a host of strategies that focus on customer-driven innovations and partnerships that have yielded value propositions which address emerging trends in the technology industry.

“We are innovating faster, engaging more deeply across the industry, and putting our customers at the center of everything we do, all of which positions Microsoft for future growth,”  said Satya Nadella, chief executive officer of Microsoft. “Our teams are delivering on our core focus of reinventing productivity and creating platforms that empower every individual and organization.”

“Customers are embracing our latest technologies from Surface Pro 3 and Office 365 to Azure and SQL Server,” said Kevin Turner, chief operating officer of Microsoft. “Through great execution by our sales teams and our partners, we have been able to deliver our truly differentiated value to the marketplace.”

In fact, the launch of the different versions of Surface Pro is a good example how the company develops new products to address emerging consumer trends.

First, the company got the hardware-software bundle right, at a competitive price. With its Windows operating systems, Office Suite and keyboard, the Surface tablet has bridged the gap between laptop and tablet, catering to users who seek the full functionality of a laptop rather than a smartphone in a tablet.

Second, Microsoft forged a partnership with Best Buy BBY +0.85% to place Windows Stores at  Best Buy stores.The company’s Windows Stores occupy between 1,500 square feet to 2,200 square feet of Best Buy floor space, allowing consumers to compare and purchase a broad range of the company’s products and accessories, including Windows-based tablets and PCs, Windows Phones, Microsoft Office, Xbox, and so on.

Obviously, getting the bundle right, and bringing it to consumers in the right locations, has helped Surface Pro 3 gain momentum, and add $908 million to the company’s top line in the last quarter.

Microsoft’s strategic moves is a good sign that the company has been effective in addressing the “innovator’s dilemma” -- as explained by M. C. Christensen -- and rise again.