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Why Microsoft Bought Express Logic

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Express Logic develops IoT software

Microsoft (MSFT) announced this month that it had acquired a San Diego startup called Express Logic for an undisclosed amount. Express Logic specializes in developing software that powers IoT (Internet-of-Things) devices. These are dedicated-function objects, such as vending machines and vehicles, that have the ability to connect to the Internet. Express Logic’s operating system, ThreatX, powers over 6.2 billion IoT devices.

According to Microsoft, Express Logic will help it increase the number of IoT devices that can be managed through its Azure cloud platform.

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Two birds with one stone

Express Logic is one stone with which Microsoft hopes it can kill two birds. First, the acquisition of Express Logic expands Microsoft’s participation in the multibillion-dollar IoT market. According to Grand View Research, the global IoT analytics market will increase more than ten times to reach $57.3 billion by 2025. The market was estimated to be worth $5.7 billion in 2016.

Second, Express Logic is likely to drive the uptake of Microsoft’s Azure cloud service by developers, thereby allowing the company to capture a larger piece of the cloud computing market. The global public cloud service market was valued at $182.4 billion in 2018 and is expected to grow to $331.2 billion by 2022, according to Gartner estimates.

Race for cloud dollars

Through its Azure business, Microsoft has positioned itself as one of the top contenders for cloud computing dollars. Microsoft exited 2018 holding a 15% share of the global cloud market, coming in second place after Amazon (AMZN) with its 35% market share. Google (GOOGL) and IBM (IBM) each held 7.0% of the global cloud market at the end of 2018. Alibaba (BABA) rounded out the list of the top five cloud vendors with a global market share of ~5.0%.

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