This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How Microsoft Gets a Boost, Thanks to Apple

Stocks in this article: MSFT AAPL

Updated from 9:16 a.m. to include additional analysis about Apple's software revenue in the fifth paragraph.

NEW YORK (TheStreet) -- As new Microsoft (MSFT) CEO Satya Nadella starts to make his mark on the Redmond, WA.-based company, he's getting a boost from an old friend and enemy: Apple (AAPL).

Since details leaked that Nadella, who took over from Steve Ballmer earlier this year, would announce Microsoft Office will come to Apple's iPad next week, investors have been rewarding Microsoft, crossing $40 for the first time in a long time. That marks a stark contrast from Ballmer, who had been resistant to putting Microsoft's enterprise software and one of its primary revenue drivers, on Apple's tablet.

It's expected that Microsoft will make the announcement, allowing iPad users to use Office with an Office 365 subscription.

Jefferies analyst Ross MacMillan boosted his price target and earnings estimates for Microsoft, following the rumors that Microsoft will unveil Office for iPad next week, noting that moving Office to the world's best selling tablet could be bigger than originally estimates. "Our updated analysis suggests that O365 could be a bigger driver than we previously assumed," MacMillan wrote in the note. "We now think native Office for iPad (available through an O365 subscription) could drive $2-4 incremental value per share predominantly from the consumer market."

MacMillan raised his price target to $47 from $42, but kept his "buy" rating on shares.

Not only does this boost Microsoft by opening up Office to Apple's iOS platform, it boosts Apple as well. Apple has worked hard to make software and services a more important part of its business, due to the notion software and services companies trade at higher earnings multiples than traditional original equipment manufacturers. By taking it's standard 30% cut of all software purchase, Apple could boost its iTunes/Software/Services revenue drastically with Office being made available on the iPad. Last quarter, Apple's iTunes/Software/Services segment generated $4.397 billion in sales, up 19% year over year.

Shares of Microsoft were fractionally higher in Friday trading, gaining 0.02% to $40.34, while Apple shares tacked on 0.17% to $529.61.

In Nadella's first email to Microsoft employees, he strongly hinted that Microsoft needs to remain relevant, as the world goes mobile, and software moves to the cloud. "As we look forward, we must zero in on what Microsoft can uniquely contribute to the world," Nadella wrote in the email. "The opportunity ahead will require us to reimagine a lot of what we have done in the past for a mobile and cloud-first world, and do new things."

Nadella is expected to make the announcement on March 27, in San Francisco. News of the announcement was first reported by, a tech-focused website.

Earlier this week, Microsoft also made OneNote, an Evernote competitor, free, and available on all Macs.

Cloud computing is exceptionally important to Microsoft's future. ValueAct Capital, which owns a 0.8% stake in Microsoft and recently added Mason Morfit to Microsoft's board, believes in Microsoft's future as a cloud computing company. Results are showing just that. In Microsoft's fiscal second-quarter, commercial revenue grew 10% to $12.67 billion, as Office 365 commercial seats and Azure customers both grew triple-digits. Overall, revenue from commercial cloud services more than doubled.

--Written by Chris Ciaccia in New York

>Contact by Email.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,040.92 -12.79 -0.07%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs