Microsoft Corp. (MSFT) recently announced a partnership with Best Buy (BBY) to roll out Windows Stores across the its 500 outlets in the U.S. with an additional 100 in Canada. The terms of the deal were not disclosed.
The stores will feature Windows-based PCs, tablets, Windows Phone, Xbox and various accessories. Unlike the Apple (AAPL) stores at Best Buy, which are approximately 200 square feet, the Windows Stores will be spread across1,500 to 2,200 square feet and Microsoft will train1,200 sales associates.
Additionally, Microsoft will collaborate with Best Buy to open an online version of its Windosw Store to provide customers with updates on marketing campaigns. The new Windows Stores are expected to be operational from June through September.
Microsoft has been dealing with plummeting sales of its Windows 8 operating system. Though its new Windows 8 operating system has sold more than 100 million copies since its launch last October, both tablet and PC sales have been below the company’s expectations.
According to IDC, 49.2 million tablets were shipped worldwide in the first quarter of fiscal 2013. Apple led the market with a 39.6% share, having grown 65.3% from the first quarter of 2012, followed by Samsung with a 17.9% share, Asustek with 5.5% and Amazon with 3.7%. Microsoft is in fifth position with a mere 1.8% market share.
Additionally, IDC estimated that Google’s (GOOG) Android and Apple’s iOS operating systems together held approximately 96.1% of total market share in the first quarter of 2013. But Microsoft’s Windows and Windows RT operating systems accounted for only 3.3% and 0.4% of market share, respectively.
Therefore, Microsoft is leaving no stone unturned to attain incremental revenues, which is reflected in its strategic initiative of opening 500 Windows Stores within Best Buy stores. Earlier this year, the company said that it is transforming several holiday stores into permanent Microsoft retail outlets, which should further boost sales.
Best Buy, a consumer electronics retailer, has been working with Apple for long and has a dedicated floor area for its products. A few months back, Samsung announced a similar three-year deal with Best Buy to open Samsung Experience shops within its stores.
We believe that the platform provided by Best Buy would help Microsoft to increase its sales. For Best Buy, the deal adds more compelling products to its portfolio to better compete against discount giants and online retailers like Amazon (AMZN).
Microsoft remains one of the best-positioned software vendors, given the wide range of its products, emerging markets strength, continued technology deployment at data centers and growth in cloud computing. The company delivered better-than-expected second quarter results with non-GAAP earnings up sequentially. New products across segments, strength in the cloud computing segment and share gains in search combined to generate encouraging results.
Microsoft has a Zacks Rank #3 (Hold). Another stock that has been performing well and is worth considering is Pegasystems (PEGA), carrying a Zacks Rank #1 (Strong Buy).
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