Microsoft's 'Best Cloud Days Are Ahead'

In a report issued Wednesday, FBR & Co.’s Daniel H. Ives shared an update on the state and prospects for the technology, media and telecom industry.

Although the firm expects attention to continue to concentrate around many of the same next-generation software technologies that garnered attention in previous years, they anticipate that the ongoing explosion of data nicely positions “vendors with strong cloud, security, and big data analytics offerings […] to capitalize on robust market growth in 2016.”

Favorite Names

Consequently, the experts recommended investors to remain selective, focusing on “high-priority secularly strong growth areas” rather than being long the wider group.

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In this line, their favorite names for 2016 are:

• Palo Alto Networks Inc (NYSE: PANW)
• Proofpoint Inc (NASDAQ: PFPT)
• Qlik Technologies Inc (NASDAQ: QLIK)
• Splunk Inc (NASDAQ: SPLK)
• Synchronoss Technologies, Inc. (NASDAQ: SNCR)
• Nice-Systems Ltd (ADR) (NASDAQ: NICE)
• Microsoft Corporation (NASDAQ: MSFT)

Microsoft And The Cloud

“Cloud remains the Rock of Gibraltar for Nadella,” Ives assured in Wednesday’s research note.

Microsoft’s commercial cloud transition has set the standard for other tech giants, he explained. However, according to the analyst, field checks have indicated that the company’s best cloud days are still to come.

It is true that Amazon.com, Inc. (NASDAQ: AMZN)’s AWS is still the undisputed leader in the cloud segment, the report continued. Nonetheless, Microsoft/Azure has still got a “long runway to cross-sell into its massive enterprise customer bases with a broad platform of cloud offerings for the next few years.”

In fact, according to the firm’s calculations, this $50 billion market opportunity is still very underpenetrated (less than 10 percent); “and with Windows 10 in Nadella's back pocket, Microsoft is in a strong position to further gain share in the cloud while its mature tech brethren (Oracle, HP, Cisco, IBM) walk the innovation treadmill at 2.5 mph heading into 2016.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Image Credit: Public Domain