TLDR
- China Merchants Securities initiates Microsoft coverage with Buy rating and $585 price target
- EU accepts Microsoft’s commitments to resolve antitrust probe over Teams bundling
- Microsoft will offer Office suites without Teams at reduced prices in Europe
- Company must allow rival platforms to integrate with Teams and facilitate data transfers
- Microsoft shares jumped 1.46% in early trading following the EU announcement
Microsoft shares climbed in early trading Friday after the European Union accepted the tech giant’s commitments to resolve a years-long antitrust investigation. The stock gained 1.46% to over $508 as investors welcomed the end of regulatory uncertainty.
The European Commission announced it accepted Microsoft’s pledges to address competition concerns. The probe focused on Microsoft’s practice of bundling Teams collaboration software with Office 365 and Microsoft 365 business suites.
The investigation began in 2023 following complaints from competitors, particularly Slack. Salesforce-owned Slack accused Microsoft of unfair business practices by forcing customers to buy Teams with other productivity software.
Microsoft started selling Teams separately in April 2023 across all markets. This move came as the company sought to address regulatory pressure before formal commitments were finalized.
The EU initially found Microsoft violated antitrust rules by bundling Teams since 2019. The practice allegedly gave Microsoft an unfair advantage over standalone collaboration tools.
Slack withdrew its complaints three months ago after the EU completed market testing of Microsoft’s proposed commitments. The withdrawal helped clear the path for today’s settlement.
Key Settlement Terms
Under the accepted commitments, Microsoft will offer Office suite versions without Teams at reduced prices. European customers with long-term licenses can switch to these unbundled versions.
Microsoft must also enable rival platforms to integrate their software with Teams. The company will help competitors access Teams functionality through technical interfaces.
The tech giant committed to facilitating customer data transfers from Teams to competing platforms. This requirement aims to reduce switching costs for businesses considering alternatives.
“By helping to restore fair competition, these commitments will open up the market for other providers of communication and collaboration tools in Europe,” the European Commission stated.
Analyst Coverage and Stock Performance
China Merchants Securities initiated Microsoft coverage with a Buy rating and $585 price target Wednesday. The firm highlighted Microsoft’s strong cloud infrastructure position combined with AI capabilities.
The analyst noted Microsoft’s embedded position in global businesses through Windows and Office. This customer base provides a foundation for cloud migration and expanded service offerings.
Microsoft’s AI integration strategy positions the company to compete with specialized software vendors. The firm sees potential for expanding services within existing customer relationships.
Revenue reached $281.7 billion over the past twelve months, reflecting 14.93% growth. The company maintains a 68.82% gross margin, demonstrating strong profitability.
Wall Street maintains a Strong Buy consensus on Microsoft stock. Thirty-three analysts rate the stock a Buy with one Hold rating over the past three months.
Recent Developments
Microsoft agreed to modify its OpenAI partnership deal Thursday evening. The changes will allow OpenAI to restructure as a for-profit entity while maintaining their collaboration.
The company announced partnerships with federal agencies to expand AI adoption. Microsoft is offering Copilot services at no cost for up to 12 months to government users.
Microsoft introduced two new AI models, MAI-Voice-1 and MAI-1-preview, to advance its artificial intelligence capabilities. These releases support the company’s competitive position in enterprise AI services.
The average analyst price target of $626.88 suggests over 25% upside potential from current trading levels.
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