MICROSOFT CORP. $43 (Nasdaq symbol MSFT; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 8.0 billion; Market cap: $344.0 billion; Price-to-sales ratio: 3.5; Dividend yield: 2.9%; TSINetwork Rating: Above Average; www.microsoft.com) is the world’s largest software company. Its Windows operating system powers about 90% of the world’s personal computers.

Microsoft’s other main product— its Office suite, which includes a word processor (Word) and spreadsheet program (Excel)— controls 90% of this market.

Over the past few years, Microsoft has expanded into computer-hardware products, including its Xbox video game console and Surface tablet computer.

Mobile misstep triggers writedown

Thanks to its expanding hardware businesses, Microsoft’s revenue rose 33.8%, from $69.9 billion in 2011 to $93.6 billion in 2015 (fiscal years end June 30). Excluding unusual items, earnings rose 0.1%, from $23.15 billion in 2011 to $23.17 billion in 2012. Per-share profits gained 1.1%, from $2.69 to $2.72, on fewer shares outstanding.

Earnings then fell to $22.5 billion (or $2.65 a share) in 2013 and slipped to $21.9 billion (or $2.65 a share) in 2015.

The company bought Nokia’s mobile phone business for $8.0 billion in April 2014. However, the purchase has not worked out as well as Microsoft had hoped, due to intense competition from the Apple iPhone and Android-powered devices. As a result, the company recently wrote down its handset business by $7.6 billion.

Meanwhile, Microsoft continues to shift from selling software as a one-time purchase to doing so on by subscription. That gives it steadier revenue streams and cuts its reliance on cyclical computer sales.

Cloud revenue set to jump 150%

Another big part of Microsoft’s growth will come from cloud computing. Its offerings include its fastgrowing Azure service, which helps businesses set up their websites and databases. Microsoft aims to increase its annual cloud-services revenue from $8 billion in fiscal 2015 to $20 billion in 2018.

To support these new services, Microsoft spent $12.0 billion (or 12.9% of its revenue) on research in 2015, up 5.8% from $11.4 billion (or 13.1%) in 2014.

The company’s strong balance sheet will let it keep investing in new projects. As of June 30, 2015, it held cash of $96.5 billion, or $12.03 a share. Its long-term debt of $27.8 billion is a low 8% of its market cap.

Buybacks will continue to spur stock Microsoft is also using its strong cash balance to repurchase more shares. In October 2013, it authorized a new $40-billion buyback plan. There are no time limits for these purchases. As of June 30, 2015, it could still buy back $21.9 billion worth of stock.

The high U.S. dollar will dampen the contribution from Microsoft’s overseas customers, which supply 54% of its revenue. Even so, its fiscal 2016 earnings should improve to $2.72 a share, and the stock trades at a reasonable 15.8 times that estimate. The $1.24 dividend yields 2.9%.

Microsoft is a buy.