This week was quite eventful for the tech sector, with a lot of significant developments related to major companies like Microsoft (NASDAQ:MSFT), Zynga (NASDAQ:ZNGA), and the recently listed Yelp (NYSE:YELP). We analyze a few such developments which could impact their value in the coming years.
Microsoft officially launched the Windows 8 Consumer Preview version at MWC 2012 last week. It comes with a lot of new features, including touch-based computing, and could be Microsoft’s most important product release yet. With Windows 8, Microsoft will be targeting not only the desktop and notebook markets, but also the tablet computing market. We expect it to be a bigger hit than Windows 7 which has sold 550 million licenses to date, and the largest revenue growth driver for Microsoft in 2012 and 2013. Microsoft also unveiled two other versions of Windows 8 – Windows 8 Server Beta and Windows 8 Embedded Beta. While Windows 8 Server will target the Server market, which also accounts for a significant portion of Microsoft’s revenues, Windows 8 Embedded will target the growing embedded systems market.
Microsoft was also in the news this week because of a licensing dispute with OnLive, which provides a remote hosted Windows and Office experience to customers on iPads and Android tablets through OnLive Desktop. Microsoft currently claims that OnLive would have to buy separate licenses for each customer. If it wins, that could mean a sizable revenue source for Microsoft through the Windows division.
Zynga finally launched its own independent platform last week, in yet another attempt to reduce its dependence on Facebook, which currently accounts for a major portion of its revenues. Zynga’s platform will initially host some of Zynga’s most popular games, but will eventually enable other game developers to leverage Zynga’s scalable zCloud infrastructure to deliver their games, and will also integrate a social network which will increase player engagement levels across all games hosted on the Zynga platform.
Zynga seems to have attracted quite a few big names in the gaming industry to its platform already. It announced deals with the likes of Konami, Playdemic and Rebellion which will soon be launching games on its platform. It has also signed up Mob Science, Row Sham Bow and Sava Transmedia as well as some other social game developers. Zynga’s platform could turn into a major revenue driver in the coming years.
Yelp which went public last week, saw a jump of almost 60% in its stock price on the first day of trading. However it declined almost 20% on the very next trading day. We currently have a $10 Trefis price estimate for Yelp, which stands nearly 50% below its markt price.
Our value estimate is based on a series of mildly optimistic assumptions related to Yelp’s revenue growth from its various businesses, and we expect the stock to converge with our value estimate in the coming months. Check out our complete analysis explaining Why Yelp is Only Worth $10.