Technology Sector: Expertise, Size And Reputation Are Its Best Assets

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Microsoft (MSFT)

  • Market cap: 1,765B
  • Yield: 0.95%

cp business forward

Source: Microsoft Website

Business Model

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three overarching segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops). Through acquisitions, Microsoft owns Xamarin, LinkedIn, and GitHub. It reports revenue in product and service and other revenue on its income statement.

Investment Thesis

Microsoft is one of the oldest and newest tech companies at the same time. While it benefits from a strong core business model generating cash flow through a subscription-based model, management has proven its ability to develop other growth vectors. Its most recent success is called Azure, which is No. 2 in public cloud services. Azure is on a path for strong growth over the upcoming years. Cloud services will also be part of the future of any serious business. Speaking of which, its strong relationship with corporate America opens the door for additional cross-selling opportunities as the cloud business expands.

Open Text (OTEX.TO) (OTEX)

  • Market cap: 16B
  • Yield: 1.80%

Scooter de, CC BY-SA 4.0, via Wikimedia Commons

Business Model

Imagine a big business that employs 100 people and keeps growing. Each day, tons of information is collected about products, sales, employees, expenses, contracts, etc. This information is piling up in mountains of unreadable reports. It needs a solution to receive, integrate and digest this data. This is called an Enterprise Information Management (EIM) system. EIM helps managers make better decisions by organizing the information to access it rapidly, understand it and trust it. OTEX is a leader in the industry and Canada’s largest EIM provider. It helps over 100,000 customers share, store, retrieve and analyze their company’s information.

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