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The Cloud Crowd: How Microsoft and Peers Plan to Stand Out

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Part 13
The Cloud Crowd: How Microsoft and Peers Plan to Stand Out PART 13 OF 14

Microsoft’s Value Proposition in the US Software Space

Microsoft’s scale in systems software

Previously in this series, we discussed Amazon’s (AMZN), Microsoft’s, IBM’s (IBM) and Google’s (GOOG) race to outdo each other in the cloud space, which is expected to dominate IT (information technology) spending. 

On April 11, 2017, Microsoft (MSFT) was the largest software player by market capitalization globally, followed by Oracle (ORCL) and IBM. SAP (SAP) is also a leading player in the space.

Microsoft&#8217;s Value Proposition in the US Software Space

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Enterprise value multiples

Microsoft was trading at a forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of ~12.9x on April 11, 2017. This metric was higher than IBM’s multiple of ~10.1x and Oracle’s multiple of ~10.5x. SAP’s metric was also 15.2x.

Dividend yields

Microsoft’s (MSFT) forward annual dividend yield was ~2.4% on April 11, 2017, lower than IBM’s forward dividend yield of ~3.3% but higher than Oracle’s forward dividend yield of ~1.7%. SAP’s forward yield was ~1.4%.

You could consider investing in the PowerShares QQQ Trust Series 1 ETF (QQQ) to gain exposure to Microsoft. MSFT accounts for 8.4% of QQQ. QQQ may also appeal to you if you’re looking for application software exposure, as application software accounts for ~28.4% of QQQ. In the final part of this series, we’ll look at analysts’ recommendations for Microsoft.

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