Microsoft’s Deal with Apple a Lucrative Move?

The business climate appears to be changing at Microsoft Corporation (NASDAQ/MSFT), as the company attempts to evolve from its roots as a maker of operating systems for personal computers (PCs) to a more dynamic business focused on the surging mobile sector. 

It has been a long time coming for this former Wall Street star. Out with former Microsoft CEO Steve Ballmer and his lack of vision and execution in acknowledging the significance of the mobile sector. The new leader at the helm, Satya Nadella, appears to be steering Microsoft out of troubled waters and into the new realm of mobile. 

The stock is at a new 52-week high and looking higher on the charts—finally rewarding shareholders and institutional investors after years of miscalculations. 

Instead of focusing on the “Windows” operating system and PCs, Microsoft has shifted its focus to smartphones, tablets, entertainment gaming consoles, and now, it’s creating applications that could be used on the Apple Inc. (NADSAQ/AAPL) “iPad.” 

Microsoft announced it would be offering as a downloadable app from the Apple App Store its widely used “Office” suite, which includes the popular “Word,” “Excel,” and “PowerPoint” applications. This strategy is a sharp contrast to the past years, when Microsoft was battling Apple to sell smartphones and tablets. Now having recognized the fact that Apple is tops, Microsoft is looking to build apps for the iPads and harness the hundreds of millions of users. 

A smart move by Nadella and based on the share price, the stock market is pleased with the new direction. 

Of course, Apple also benefits, as the company will receive 30% of the fees paid for the Office app purchased through the App Store. The app costs between $100.00 for consumers and $160.00-plus for businesses per year. This creates another new line of revenues for Apple. 

Whether Microsoft can become a relevant technology stock again remains unclear, but if it can continue to harness the power and growth in the mobile space, I wouldn’t be betting against the company. The company also still has a valuable application in its “Skype” call and text solution that is excellent but is somewhat underappreciated by the market. 

Microsoft’s ability and success in building up its entertainment and gaming console business from scratch clearly indicates the company can do the same in mobile. Its recently launched “Xbox One” is selling extremely well and is an impressive machine that is giving Sony Corporation’s (NYSE/SNE) “PlayStation4” a run. (Read “Why Microsoft May Finally Be Set to Turn Its Fortune Around.”) 

Nadella is on track and is quietly making Microsoft newsworthy again. 

This article Microsoft’s Deal with Apple a Lucrative Move? was Originally Posted at Profit Confidential