) recently announced the expansion of its data center and the
Internet-based version of its Office software suite in China to
meet the fast-growing demand for Internet usage and data storage
capacity in the country.
In order to sell its services in China, Microsoft has signed a
licensing agreement with Beijing-based 21Vianet Group Inc., which
will operate the data centers and cloud services in the
By using Office 365, customers can gain online access to
Microsoft's word processing, spreadsheet and email programs.
Windows Azure will enable users to customize online applications
and store data on Microsoft's remote computers.
A recent survey conducted by a data center dedicated website,
datacenterdynamics.com, on 100,000 facilities shows that data
center usage is expected to grow around 7% in 2012. Moreover, the
website has also increased its investment projection for new data
centers from about $30.0 billion in 2010-11 to $35.0 billion
In a bid to benefit from the growing Chinese market, Microsoft
is increasing its investment in the country, expecting to sell
more services to Chinese companies and government agencies.
Recently, Microsoft hired more than 1,000 employees in China
across its research and development (R&D) and marketing
segments. The company plans to boost its R&D spend by 15%
annually. Microsoft is also building a large cloud computing
center in Shanghai that will employ around 600 more
) mobile operating system, Android dominates the Chinese
smartphone market, with
) iPhone dominating the higher end of the market. Both the
technology companies, Apple and Google have already launched new
products in the Chinese market, increasing their market share.
Microsoft's position in the mobile segment remains weak, although
Windows 8 could improve the situation. In the meantime, Microsoft
continues to solidify its position in other segments, such as the
cloud, where its offerings make it one of the most reliable
We believe that Microsoft's current investments are supported
by its strong balance sheet and expect these to drive the next
growth phase, improving prospects of market share gains.
Microsoft Corp. has a Zacks #3 Rank, which implies a Hold
rating in the short term (1-3 months).
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