The market has cheered Microsoft Corporation (NASDAQ:MSFT)‘s bold decision to let go off, nearly 18,000 of its employees, a number higher than expected and 14% of its entire workforce, including that of Nokia Corporation (ADR) (NYSE:NOK). Half of the job cuts include those from Nokia workforce, thus, clearing concerns of investors that the $7 billion acquisition will stand to impact its earnings. In the meanwhile, NBR took the insights from David Garrity, Principal of GVA Research about how the massive layoffs will help Microsoft Corporation (NASDAQ:MSFT) to reshape its future.
Garrity is positive about the focus of the company’s CEO Satya Nadella on the company as he recalled that Nadella took charge as a CEO after attaining a substantial success in the cloud segment of the company, which positions him well to lead it.
“Taking these costs out and investing it in areas of higher growth certainly should get the company up to where the earnings right now are going down 10% year-over-year and revenues are going 16%. If we can get the earnings growth along with the revenue growth, the stock probably moves higher from where it is now,” said Garrity.
Over the length of five years from now, Garrity sees Microsoft Corporation (NASDAQ:MSFT) to expand its mobile service offerings and cloud operations, which at present contributes to 30 to 50% of its revenues. At the same time, Garrity anticipates a huge competition for Microsoft in the area of office productivity suite and the windows operating system from the likes of Google Inc (NASDAQ:GOOGL) and Apple Inc (NASDAQ:AAPL). In addition to this, Garrity sees the possibility that Microsoft Corporation (NASDAQ:MSFT) could entirely take over the search advertising business from Yahoo! Inc (NASDAQ:YHOO), which is fumbling in the segment.
Since the stock of Microsoft Corporation (NASDAQ:MSFT) is already 14-year high, returning 20% gain alone this year, Garrity stated, “We will have to see, clearly how well the execution goes in the second half of the year. But I would say it’s probably not out of the question that if we have a positive market environment overall, without today’s volatility, we might see $50-share price between now and the end of the year.”