Nokia Acqusition May Cloud Microsoft Office 365 Turnaround

NEW YORK (TheStreet) -- Microsoft (MSFT) is in the process of a turnaround under new CEO Satya Nadella that investors believe will revolve around Office 365 software subscriptions, however, the company's third-quarter earnings may be clouded by the looming acquisition of Nokia's (NOK) handset business.

Such is the Microsoft that Nadella inherited when taking the reins of the company in February 2014, torn between what many believe is an undervalued business software platform and a jumble of mostly failing consumer technology products.

Those issues now will come to the forefront as Nadella seeks to communicate a vision for Microsoft to investors, customers and analysts after the departure of long-tenured CEO Steve Ballmer. While Ballmer boosted Microsoft's sales and earnings significantly in his tenure, he was also excoriated for a string of failed consumer hardware launches such as Zune, the Windows Phone and the Surface tablet.

Nadella appears ready to commit to Office 365 and other recent launches like Azure as the fulcrum of a re-vitalization of the tech behemoth. He also has publicly supported Microsoft's tablet and smartphone products, in addition to the company's Nokia acquisition.

The former has boosted Microsoft's shares in recent months, while it is the latter that may mute investor interest in near-term results.

According to Morgan Stanley analysts, the near-term focus of investors and management guidance will likely hinge on the impact of Nokia, growth in the PC market and software growth after the expiration Windows XP. "Increased execution risk and waning near-term catalysts leave us on the sidelines," Morgan Stanley said.

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