Microsoft To Shut CodePlex To Focus On Cloud Opportunity

Microsoft Corporation’s (NASDAQ:MSFT) vice president for Cloud Developer Services, Brian Harry announced in a blog post that the company will pull the plug on CodePlex, a website for code sharing and project hosting. The move comes in the wake of intensifying competition from GitHub, spam epidemic and a decline in the number of users over the last 30 days.

CodePlex has discontinued the creation of new projects on the platform. Moreover, the website will become a read-only platform by October, followed by a complete shutdown on Dec 15, 2017.

However, before the shutdown and the decommissioning of the CodePlex platform, Microsoft will take a complete and final backup of the site that will allow users to browse through the published projects.

Although shares of Microsoft were up only marginally (+0.23%) on Friday following the announcement, we note that, shares of the company have underperformed the Zacks Computer – Software industry over the last one year. While the industry gained 19.7%, the stock registered growth of 19.0%.

The underperformance of the stock could be due to stiff competition in the cloud space and the PC market.

However, we expect the stock to rebound in the rest of 2017 given such strategical moves being made from the company’s end.

Focus Remains on Cloud

With Satya Nadella at the helm, Microsoft remains focused on its “cloud first, mobile first” motto and the recent announcement is another step in that direction. The CodePlex shutter indicatesMicrosoft’s focus on growing its core businesses i.e. cloud and Office 365.

We believe that Microsoft’s partnership with GitHub allows the company free-up resources previously engaged with the CodePlex.Moreover, many open source codes are now being built to work in the cloud architecture, which could drive the demand for Microsoft’s cloud platform Azure.

Notably, during the last reported quarter, Microsoft joined the Linux Foundation and announced a new Azure partnership with Open AI which again could drive further adoptions of Azure.

As per an IDC report, worldwide spending on public cloud is estimated to reach a whopping $203.4 billion by 2020 at a CAGR of 21.5%. We hope that Microsoft’s increasing collaborations with open source providers will help it to become a dominant player in the long run.

However, we note that competition is fierce in the cloud space with the presence of other major players such as Amazon’s (NASDAQ:AMZN) AWS, IBM Corp’s (NYSE:IBM) IBM Cloud and Alphabet’s (NASDAQ:GOOGL) Google Cloud Platform.

Zacks Rank

At present, Microsoft carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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