Microsoft's portfolio of public cloud products is critical to its success, and we are impressed with early inroads, in particular in Office 365, which we believe enables enterprises and SMBs to cut back on email administrator costs. The natural outcome of public cloud competition is public cloud commoditization; therefore we feel Microsoft will need to differentiate itself from Amazon?s AWS by moving up the stack and providing value-add cloud software applications.
Microsoft's potential opportunities in the public cloud space with Office 365 and Azure, and note an improved capital allocation policy
SaaS Bundle with LinkedIn
Given the acquisition of LinkedIn in June of 2016, Microsoft may need to invest in incremental products to round out its application portfolio of Dynamics products that are cloud-enabled, or do smaller tuck-in acquisitions to strengthen its enterprise apps portfolio, which outside of Office has failed to meaningfully grow organically in a highly competitive end market. However, we view the move into the SaaS application layer as a long-term positive trend, which is supportive of stickier customers and ultimately higher margins.
