Microsoft (NASDAQ:MSFT) is making a series of moves to improve its profit margins. It is apparently trying to restructure its marketing operations in order to bring down its operating expenses and improve profitability. A reshuffle of its marketing workforce could lead to hundreds of job cuts and a decline in the company’s increasing marketing expenditure over the years. Microsoft’s revenues have been under pressure due to increasing competition from the likes of Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and enterprise giants like Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP).
Check out our complete analysis for Microsoft
We currently have a $32 Trefis price estimate for Microsoft, which stands nearly 15% above its current market price.
Any decline in marketing expenses could improve profitability
According to a report by Bloomberg, Microsoft CEO Steve Ballmer “doesn’t think the company is getting enough return on the billions it spends annually on marketing.” [1] It spent $13.9 billion on marketing and sales in FY2011. Its operational expenses have been rising steadily in the last couple of years, and are expected to increase further as its cloud-based software offerings become more popular in the enterprise.
Microsoft’s Windows and Office operating margins have been declining in the last couple of years. You can check the impact of an increase in its operating margins on the Trefis price estimate using these widgets:
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