Mad Hedge Technology Alerts!
What this health crisis did was force us to understand how critical Microsoft (MSFT) and its products, especially Windows, are to the world.
The clamoring for its products whether it be software, hardware, or gaming, spoke volumes to Microsoft’s strategic footprint in the Silicon Valley ecosystem.
That’s part and parcel of why it’s been my go-to, iron-clad tech recommendation for as long as I can remember.
This Redmond, Washington company is an all-weather type of stock and even in an inflationary environment, the first place any business should lean on is Microsoft in order to understand how to ensure that they are able to carve out productivity gains.
And even dealing with constraints, for example, if you have supply chain constraints, one of the goals you want to achieve is run factories or even if that’s your work desk, at the leading edge of the efficient frontier.
That means tools like Microsoft’s cloud products, simulating success is going to make sure that every production run has the least amount of slippage.
So, I think any which way you look, whether it's in the knowledge department, first-line worker, or the cloud products and simulation, utilizing all the stallions in the stable are going to be the best way for any company to deal with inflationary pressures so that they can in fact accelerate productivity the fastest way possible and thereby calculate the fastest way to meet aggregate demand out there.
Microsoft is essentially the best at doing and it’s not even a toss-up.
In a strong inflationary environment, the case for digital transformation strengthens with Microsoft helping others, and this plan is hatched by deploying MSFT’s top-line services to spur digitization as a deflationary force that massages the bottom line.
The signs are everywhere that companies from all walks of life are doing this with Microsoft Cloud quarterly revenue surpassing $20 billion for the first time, up 36% year over year.
Businesses small and large can improve productivity and the affordability of their products and services by building tech in density.
The Microsoft Cloud delivers the end-to-end platforms and tools organizations need to navigate this time of transition and change.
Every organization will need a distributed computing fabric across the cloud and the edge to rapidly build, manage, and deploy applications anywhere.
MSFT is building Azure as the world's computer, with more data center regions than any other provider, delivering fast access to cloud services while addressing critical data residency requirements.
They are partnering with mobile operators from AT&T and Verizon in the United States to Telefonica and BT in Europe, Telstra and Singtel in Asia Pacific, as they embrace new business models and bring ultra-low latency, compute power, and storage to the network and the enterprise edge.
The numbers back up their achievements with 78% of the Fortune 500 using MSFT’s hybrid offerings.
LinkedIn now has nearly 800 million members. Confirmed hires on the platform increased more than 160% year over year. And this quarter, MSFT launched new ways to help job seekers discover roles that align with how they want to work. In a rapidly evolving labor market, companies are increasingly turning to LinkedIn Learning to upskill and reskill their employees.
The totality of MSFT’s dominance translated into MSFT notching first-quarter revenue of $45.3 billion, up 22%.
MSFT will surpass $200 billion of total revenue this year and they will easily surpass $300 billion annually in the next 18 months.
I am highly bullish MSFT — buy on every and all dips.
Mad Hedge Technology Letter
October 29, 2021
Fiat Lux
Featured Trade:
(APPLE HIT BY LOGISTIC CHAOS)
(AAPL)
The numbers tell the story for Apple (AAPL) — 745 million paid subs.
It’s not at Facebook levels yet, but Apple’s 745 million almost entirely can claim to buying multiple Apple devices.
Then step back and admire the increase of 160 million paid subs versus just 12 months ago and understand this minor dip in today’s shares is just another buying opportunity.
Being able to add 160 million paying subs in 12 months stems from the ability to continue to launch new services and new offerings within the services that they already have, new features that are game-changers.
In short, that’s how you grow a large business that does $68 billion in the last 12 months with levers that are diversified as any.
At a granular level, The Apple App Store notched a September quarter record.
This highlights the trend that consumers are paying on the platform and are happy to do it, which is why the services keep growing to double digits.
I applaud Apple for taking a stand against ad technology and giving privacy back to the user.
It’s a luxury they can afford, but I believe it will turn into a tailwind.
The feedback from customers is overwhelmingly positive.
Customers appreciate having the option of whether they want to be tracked or not.
It’s just another feature that goes into making Apple one of the best tech firms in the world.
Some more accomplishments this past quarter was setting an all-time record for Mac sales and quarterly records for iPhone, iPad, wearables, home, and accessories, representing 30 percent year-over-year growth in products.
This level of sales performance, combined with the unmatched loyalty of Apple’s customers and the ecosystem strength drove services to an all-time revenue record of $18.3 billion, up 26 on services.
Some people in the industry and some people outside the industry thought that the pandemic would reduce demand, they pulled their orders down, things reset. And what really happened was demand went up and went up even more than a straight trend would predict. And so, the industry is working through that now.
When everything is working, it’s hard to pick the bad out. However there was one black eye, and I would say nothing structural, but a consequence of the external variables Apple can’t always control, i.e. supply.
“Constraints” reared its ugly head to the tune of a $6 billion revenue dollar impact, driven primarily by industrywide silicon shortages and COVID-related manufacturing disruptions.
Supply constraints cost Apple $6 billion and it affected the iPhone the iPad and the Mac.
Chips are becoming harder to secure, especially the legacy variation.
Next, was the pandemic-related manufacturing disruptions in Southeast Asia which produce many of Apple’s products.
However, the situation has eased in Southeast Asia, and fewer disruptions in October bode well for next quarter’s earnings.
But from a demand point of view — demand is very robust.
Apple supply simply can’t meet the global demand for its own products, which has grown over the pandemic.
Long term, I look at this as a good problem, because the supply chain will get sorted, and bottlenecks will fix themselves.
CEO Tim Cook likes to say that Apple’s operational team is “world-class” and him being an operational guy himself originally, I can give him the benefit of the doubt.
There is nothing to worry about with Apple.
They remain incredibly profitable and efficient, and any short-term weakness is an appetizing buying opportunity for investors.
