Microsoft’s corporate shake-up will bode well for investors, but only if the company can actually pull off the changes in a timely manner.
“This is a good thing for investors. This is about them being the company they could be,” said Gartner analyst Carolina Milanesi. “Microsoft has all these ingredients to make a wonderful dish, but it’s still coming out unseasoned and not as tasty as it could be.”
The software giant announced a long-awaited restructuring on Thursday that’s aimed at making the company more nimble by cutting its eight product divisions and slimming down to four, broader divisions.
“The silos are meant to work horizontally; they won’t work in isolation as they use to,” Milanesi said. “They’re positioning themselves so that they can look at an organized offering that delivers a better experience across the board.”
Microsoft’s reorganization is about making the user experience uniform across all devices, which is something the company has struggled to achieve. It is basically trying to create the “synergy” that is present in Apple’s ecosystem, Milanesi said.
CEO Steve Ballmer said in a memo that the company “would strive for a single experience for everything in a person’s life that matters. One experience, one company, one set of learnings, one set of apps, and one personal library of entertainment, photos and information everywhere.”
“One store for everything,” he continued. “Microsoft has the clear opportunity to offer consumers a unified experience across all aspects of their life, whether the screen is a small wearable, a phone, a tablet, an 85-inch display or other screens and devices we have not yet even imagined.”
(The full text of the announcement can be found here.)
While the structural changes may benefit the company and its investors, Microsoft does face some headwinds, analysts say.
“The concern I have is timing. Microsoft’s timing has never been their strength. Things take a long time to happen,” Milanesi said. “Is this really going to happen or is it going to make it more difficult? Can they operate as one company? It’s a huge cultural difference making these changes.”
Ed Maguire, CSLA managing director and senior analyst, told CNBC’s “Squawk on the Street” on Thursday that the company’s realignment will definitely take time, but he said that it will eventually pay off.
Maguire, who has an “outperform” rating on the stock with a $38 price target, said that he likes Microsoft’s enterprise business and that concerns over the PC industry have overshadowed Microsoft’s cash generation and growth story.
While Microsoft’s share price is up about 30 percent from a year ago and the company’s enterprise business cloud has done well, the company has continued to struggle against competitors like Apple in consumer products.
“Clearly, on the mobility side, they have some big wood to chop. They have some big challenges on mobility,” said Brent Thill, an analyst for UBS, on CNBC’s “Squawk on the Street” on Thursday.
“I think you are going to see more organic innovation come from Microsoft, and they are going to have to take control of this in their own hands rather than relying on the PC supply chain, which has obviously dropped the ball.”
Thill, who has a “buy” rating on the stock with a $40 price target, said that while the company has the potential to increase shareholder value with the restructuring, it won’t come quickly.
“It’s too early, there’s no operational cost-savings or revenue synergy in the near term. I don’t believe it’s going to have a dramatic impact in the near term, but it’s a needed realignment,” he said. “They needed to shake the tree.”
“It’s been a long time coming,” Thill said. “They have to get realigned around the cloud and mobility, and we think this is the step in the right direction, but it’s going to take time.”