Microsoft to hit a trillion dollars thanks to stopping phone making?

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There's plenty of chat around the web about Fortune's prediction that Microsoft could be the 'world's first trillion dollar company' (in terms of stock valuation), though one phrase in the report caught my eye. 

From the Fortune article, and with my emboldened text:

The race to become the first public U.S. company valued at $1 trillion has largely been seen as  Apple versus Google, with a recent surge by Amazon putting the e-commerce giant in the conversation as well. But on Monday, analysts at Morgan Stanley made the case that Microsoft has a good chance of reaching the $1 trillion mark.

With the company’s shares trading around $87 at Friday’s close, Microsoft had a stock market value of $680 billion. To reach $1 trillion, with some stock buybacks in the mix, its shares would have to hit almost $130. That’s plausible within the next three years, Morgan Stanley analysts Keith Weiss and Melissa Franchi wrote on Monday in a detailed report on Microsoft’s various lines of business called “Plotting the Path to $1 Trillion.”

Microsoft shares jumped 5% to $91.90 in midday trading on Monday after the report came out. With a midday market cap of $707 billion, Microsoft almost exactly tied Google (GOOG, +0.07%) and trailed only Apple (AAPL, +2.74%) at almost $849 billion and Amazon (AMZN, +1.99%) at $733 billion.

The software company run by Satya Nadella could impress investors enough to reach a $1 trillion value within three years by increasing revenue to $136 billion in its fiscal year 2020, up 41% from $97 billion last year, and operating income to $46 billion, up 58% from $29 billion, the Morgan Stanley analysts forecast. Nadella took over for CEO Steve Ballmer in 2014 and immediately prioritized the company’s cloud businesses, while getting out of distracting sidelines like making phones. It has worked so far, with Microsoft’s stock price nearly tripling since Nadella assumed the top job.

As ever, it's money that talks, it seems, and share holders would be very pleased to see the Microsoft financials, but I can't help but wonder if the move away from the consumer, i.e. you and me, will ultimately force Microsoft into a limited role in the technology in our hands in the decade to come. We're already seeing the traditional PC market shrink, with smartphones becoming the dominant computing form factor for many people.

And smartphones in 2018 means Android or iOS, with Apple or Samsung hardware, principally because Microsoft deliberately took itself out of the market by stopping making phones and stopping active development of Windows 10 Mobile. The analyst above calls 'making phones' a 'distracting sideline', but given the industry shifts, surely 'making phones' and 'making a phone OS' should be a top priority?

Obviously I'm biased, since this is AAWP, but imagine if Microsoft had kept the Nokia Devices staff and their portfolio, pressing ahead with Surface-quality smartphones through 2016 and 2017 and investing money in developers and applications. And, here's a radical thought, actually marketing all of this and you know.... telling people, then they'd still be in the hunt for consumers with >10% market share in a number of markets.

'Distracting sidelines'? I hardly think so. Not if Microsoft still wants to be a household name in ten years time.

Source / Credit: Fortune