The Surface Hub: Microsoft's Newest Cash Cow?
The laundry list of companies snapped up by Microsoft (MSFT on the NASDAQ, trading for $45.26 a share) may seem either impressive or unimpressive depending on your perspective. They're impressive considering how much capital the megacorporation has expended to conquer the world, or unimpressive if you start to read the list and find your eyes glazing over at the collection of names. Investors often don't have the time needed to peer closely at a company's acquisitions chart in order to mine for hidden gems, making some surprise IT investments go unnoticed as they break out -- look no further than Facebook stock, which actually fell almost 50% in value during the first year of public trading. Those who haven't paid razor-sharp attention to Microsoft should know that their recent acquisition of Perceptive Pixel allowed the company to launch a new digital office tool called Surface Hub, which has the potential to be a big boost to their bottom line and stock performance.
Of Mice and Men
It's been a noticeably bad year for Microsoft, a company that positively took it on the chin in January following the launch of their new Office software suite. Microsoft stock tumbled nearly ten percent in a single day after second-quarter earnings projections forecasted very poor performance in their software divisions. A week after the launch of the new Office, Microsoft traded for a full ten dollars less per share (20% of the stock's total value) than they did prior to the release. In a market where Microsoft has been almost entirely pushed out of computer hardware manufacturing -- no irony there -- the company needs its software releases to provide the lion share of revenue. That's not necessarily a weakness, given that the consumer market for PCs has steadily been eroding for the past decade as the market for tablets remains white-hot. With such customer shifts in mind, Microsoft announced in 2012 the acquisition of Perceptive Pixel, a tablet development company most well-known for giant receptive screens making it easy to do everything from check the weather to purchase a smoothie.
Big Ideas, Big Investments
The takeover of Perceptive Pixel meant that Microsoft badly wanted its own line of interactive screen technology. The launch of the touch-screen friendly Windows 8 (also during 2012) heralded a major shift away from the traditional computer interface that had made Microsoft the largest tech company on Planet Earth. The company's vision shifted from a standard of a Microsoft computer in every office to a Microsoft product for every office function. Perceptive Pixel's development team helped Microsoft to launch a product that could very well be the company's next big cash cow, the Surface Hub. Microsoft wants to release the Surface Hub on July 1st for the rock-bottom price of only seven thousand dollars. For the cost of a lightly-used car, Microsoft customers get an 84-inch touchscreen capable of simultaneous interaction for an office or meeting function, whereby the speaker can move around images or numbers or graphics while the audience interacts with their (Microsoft brand) tablets. Microsoft cannot be faulted for ambition when it comes to the goals of the Surface Hub: the company wants to replace everything from traditional dry-erase marker boards to phones to overhead projectors in a conference room.
Rise or Fall?
This Swiss-army-knife-esque touchscreen may seem to some like an expensive proposition. After all, seven thousand dollars represents no small investment, even for a medium- or large-sized business with available capital to spend on renovating outdated conference functions. Those who want the larger of the two screens, furthermore, need to fork over no less than twenty thousand dollars for the privilege. With these prices, there's no doubt Microsoft's newest product targets established companies and corporations rather than single-person businesses ran out of a home office. Five consecutive numbers in the price tag doesn't project as a large impediment for bigger companies, however, who have to align a variety of existing technologies in order to carry out a productive meeting. The world's expenditures of videoconferencing tallies half a billion dollars per year, keeping Fortune 500 companies like Cisco (CSCO on the NASDAQ, trading for $28.28 a share) in the black. The Surface Hub does more than allow you to videoconference with customers or employees working ten time zones away. Since it loads documents from the cloud, users with simultaneous input from their devices can adjust whatever data pops up on the 4k screen in real-time. Changes made to documents, spreadsheets, graphics, or business charts get synched to devices so that there's no need to take notes on the minutiae of a meeting.
Stock Talk: Keeping Up With The Benjamins
Microsoft's forays into hardware have been few but profitable. Their Xbox video game system, for instance, owns a strong market share, while the sale of Surface tablets netted them three-quarters of a billion dollars in 2014 alone. The Surface Hub appears to be another big name that will continue to propel the Microsoft brand forward and keep the company relevant even as they articulate a business position that's minimally devoted to hardware. Lots of companies will pay out the premium for a next-generation conference screen that replaces all the previous technology needed to hold a meeting, possibly including some of Microsoft's rivals themselves. Without an imitator on the horizon, furthermore, Microsoft has a large head start in this niche. While the Surface Hub won't do for Microsoft what Windows 95 did (increasing the company's stock value by over 1000% in less than five years), it's a nice ace in the hole for a company that's been struggling to expand past their comfort zone. Microsoft stock hasn't produced great results in the past six months, allowing investors to get in at relatively low prices today to ride an upward growth boosted by their launch of the next shiny new toy that businesses will eagerly snap up.