Microsoft Corporation (NASDAQ:MSFT) investors are concerned over who will be the next CEO of the world’s largest software company, as well as the impact of a declining PC market on its business. But Microsoft Corporation (NASDAQ:MSFT) is busy transforming its enterprise business to a cloud and subscription-based model. The company is planning to protect its consumer Office business by moving it to subscription model.

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Microsoft moving to the cloud and subscription model

Microsoft Corporation (NASDAQ:MSFT) is moving its desktop Office apps (Word, Excel, PowerPoint, etc.) to a subscription model. And its enterprise data center businesses (SharePoint, Exchange, Azure, etc.) are going to the cloud. That will allow its corporate users to obtain Office across laptop, PCs, desktop and virtualization. Microsoft Corporation (NASDAQ:MSFT)’s decision to shift its datacenter business to the cloud is based on a solid ROI case.

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Bernstein analyst Mark L. Moerdler estimates that the shift of existing users to subscription and cloud may generate an additional $11-$21.5 billion in annual sales and 31-78 cents a share in annual earnings. The move to SharePoint, SaaS for Exchange and Lync, along with the up-sell to Office 365 may boost sales by 64-99% and earning by 15-26 cents. Currently, only one-third of small and medium businesses run Exchange due to relatively higher costs. But the Exchange Online will have a lower cost, making it more affordable to small and medium businesses.

Microsoft SaaS

Shifting the desktop Office app to the subscription model can easily add $1.5-$4.7 billion to Microsoft Corporation (NASDAQ:MSFT)’s annual sales and 9-31 cents to its earnings. According to Bernstein, the SQL Server, Windows and Azure (Iaas and PaaS) may add another $4.7-$9.5 billion to the company’s revenue. According to research firm IDC, the IaaS market is expected to grow to $30 billion and the PaaS market to $3 billion by 2017. If the Redmond-based company captures even 15-30% of the market, it can easily generate $3.5-7 billion in revenue. These estimations don’t include any new users or decreased piracy.

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Microsoft’s commercial cloud revenue almost doubling

Initial indications show that Microsoft Corporation (NASDAQ:MSFT)’s commercial cloud revenue grew 93% YoY in 2013, and rose 103% in Q1 2014. As users move to a subscription-based model, Office 365 user base surged 135% YoY. Bernstein says that Microsoft Corporation (NASDAQ:MSFT) is expected to provide additional strong positive data when it releases its Q2 earnings on January 23.

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Bernstein Research has a Buy rating on the stock with $44 price target. Microsoft Corporation (NASDAQ:MSFT) shares inched up 1.32% to $35.46 at 11:12 AM EST.