Microsoft Teams Up With Intel, Qualcomm To Make PCs Better

Microsoft Corporation (NASDAQ:MSFT) announced new opportunities for its global partners to pursue innovation on its Windows 10 operating system at the Windows Hardware Engineering Community event in Shenzhen, China.

Together with Microsoft, technology bigwigs Intel Corporation (NASDAQ:INTC) and Qualcomm Inc (NASDAQ:QCOM) demonstrated innovative ways through which partners will be able to build modern devices so as to empower the creators of the next generation.

The objective of the collaboration will be to develop the next generation of modern PCs that are secure and support mixed-reality for enhanced gaming and mobile experiences.

Microsoft flagged off Project Evo in collaboration with Intel at the event to develop smart devices that will feature advanced security, mixed reality, gaming and last but not the least Cortana and artificial intelligence. Also, the company has submitted papers for government approval of its HoloLens technology that it plans to launch in China during the first half of 2017.

What this Means for Microsoft?

As per a Gartner report, during the third-quarter of 2016, 68.9 million units of PCs were shipped worldwide, down 5.7% on a year-over-year basis due to weak consumer demand, especially in the emerging markets.

Moreover, as per a Statistia report, 261 million PCs are expected to be shipped globally with the downward trend continuing through 2020 when a total of 249.5 million units are expected to budge from their shelves.

Given the sluggish outlook for PCs, Microsoft’s decision to make the PC better may look a bit out of place. However, its collaboration with technology behemoths Intel and Qualcomm to bring in innovative security features, making the PC compatible with mixed reality for an enhanced gaming experience along with ingenuous technologies such as the HoloLens and voice-controlled search agent Cortana may help to revive PC demand in the future.

Moreover, we note that, Microsoft’s decision to build a Windows 10 operating system that is compatible with laptops powered by Qualcomm chips could help it to gain market share in the mobile computing space that is currently being dominated by Intel.

Stock Performance Overview

Notably, Microsoft’s stock has outperformed the broader Zacks Computer Software Services industry on a year-to-date basis. While the stock has returned 10.6%, the industry has returned only 2.3%.

The bullish performance of the stock could be primarily attributed to the continuing enterprise strength, benefits from the Office 365 subscription model, strong growth prospects of Azure and promising new products that will continue to generate top-line growth in 2016. However, execution and foreign exchange risks coupled with intensifying competition in the software space remain concerns for the company.

Zacks Rank and Key Picks

At present, Microsoft carries a Zacks Rank #3 (Hold).

A better-ranked stock in the broader technology space is Konami Holdings Corporation (OTC:KNMCY) sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Notably, the consensus estimate for Konami Holdings’ current year has improved to $1.67 from $1.59 seven days ago.

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