Microsoft, PUD Ink Deal for Clean Energy & Broadband Services

Microsoft MSFT is collaborating with Chelan County Public Utility District (PUD) to work on renewable energy and offer cost-effective broadband internet services to rural communities in Chelan County.

Established in 1963, Chelan PUD is a government held company engaged in developing sustainable energy solutions and offering electricity facilities across the Pacific Northwest. The PUD also provides water, sewer and wholesale telecommunications services.

According to this 5-year deal, Microsoft will be receiving hydropower from Chelan PUD for meeting the needs of carbon-free electricity to power its Puget Sound campuses in Washington State. In sync with this, the company has plans to promote the usage of clean renewable energy in a bid to keep costs under control and reduce carbon emission.

As part of another agreement, both the companies have teamed up to expand broadband internet services to rural group of people of Chelan County.

Microsoft also partners with telecommunications companies and internet service providers (ISPs) to offer innovative solutions for the enhancement of rural connectivity as part of Airband Initiative. Additionally, digital skill training is imparted to the people under this initiative.

Coming to price performance, shares of Microsoft have returned 28.4% in a year’s time, outperforming the industry’s 25.4% rally.

Why This Move?

Cloud computing is gradually gaining traction among the masses, given the convenience and security features it provides to the end user. Per an IDC report, global public cloud services’ spending is estimated to reach $370 billion by 2022 at a CAGR of 22.5%. Per the report, public cloud services’ spending is expected to reach $210 billion in 2019, up 23.8% over 2018.

Given the growing demand for cloud, requirement for datacenters and power is likely to increase in the future. To meet the power requirements, many major cloud players are opting for renewable sources of energy and Microsoft is no different.

We note that dependence on renewable resources to cut down on operating costs is just another way to be more competitive and profitable, and Microsoft’s decision to do so augurs well for the company in the long run.

Notably, the 21st century is basically ruled by the internet. However, per We Are Social and Hootsuite, only 53% of the world’s population utilized internet services in 2018.

By 2022, the latest deal will provide broadband to three million people in rural America. According to general manager Steve Wright, Chelan PUD, "This deal displays hydropower's capability to support achieving 100% clean energy goals, while providing funding and access to expertise to help meet our objective of providing broadband access to 85% of county residents and hopefully more."  

Our Take

The rural pockets bereft of internet connectivity can benefit a great deal from the solution. As a result, businesses including the likes of education, agriculture and telemedicine are likely to develop and prosper. Backed by these factors, Microsoft will expand market reach and explore emerging ventures, eventually providing a boost to the economy.

Other companies like Apple AAPL, Alphabet GOOGL, Amazon AMZN and Walmart among others are also seeking greater use of renewable energy in their operations. In fact, Apple and Alphabet owned Google have achieved 100% renewables target and are powered by green energy. Amazon Web Services (AWS) attained 50% dependency on renewable energy in January 2018 and has plans to hit 100% target in the long haul.

Undoubtedly, going green will help big companies to save on costs and protect the environment at the same time. Moreover, it is expected to help reduce global warming and fossil fuel consumption.

Zacks Rank

Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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