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Ocado shows potential to become the next Microsoft or Android of retail

Ocado's e-commerce platform has the potential to become the standard used by retailers in the same way as Microsoft's Windows is used by most PC manufacturers

Ocado
Ocado has transformed itself into a logistics technology provider from an online grocer

Ocado Group PLC (LON:OCDO) could follow in the footsteps of Android and Microsoft by becoming the leading software platform for online retail, analysts have suggested.

The company has been continuing to secure deals with retailers for its Ocado Smart Platform, having recently won contracts with Kroger Co (NYSE:KR) in the US, ICA in Sweden, Group Casino in France and Sobeys in Canada.

READ: Ocado downgraded by Bank of America Merrill Lynch as it enters execution phase of Kroger deal

Many stockbrokers are bullish on the stock, expecting the group to continue to win international deals.

It has been suggested that Ocado could turn into the “Microsoft of retail” as its platform has the potential to become the standard operating system used by retailers.

Microsoft’s Windows, which is available to all PC manufacturers, has an 80% share of the market.

Similarly, Android has had success in offering a generic operating system that is used in most smartphones.

In comparison, Apple’s operating systems are exclusively designed for iPhones and Mac PCs.

While Apple's business model has worked in the past, tough competition has forced the company to become less reliant on product sales and turn its focus to its services including Apple Music, iCloud and App Store.

Online grocer-turned- tech provider

Ocado’s first deal for its platform, with UK supermarket WM Morrison Supermarkets PLC (LON:MRW), was exclusive but the company has since agreed a number of partnerships across the globe.

The latest £183mln deal with Kroger, announced in May, led to upgrades from Goldman Sachs and UBS.

READ: Ocado shares jump as Goldman Sachs calls its deal with Kroger ‘transformational’

Goldman called the deal “transformational” in a note to investors, raising its rating on Ocado to ‘buy’ from ‘neutral’ 

UBS, which upgraded Ocado to ‘neutral’ from ‘sell’, said the company has “scaled its 'Solutions' business beyond our expectations” and believes the firm has transformed into a software and tech licensing company from an online grocer. 

READ: Ocado shares surge as online grocer inks £183mln deal with US retail giant Kroger

Shares in Ocado jumped 4.2% to 989p in afternoon trading. 

Quick facts: Ocado Group PLC

Price: 2229 GBX

LSE:OCDO
Market: LSE
Market Cap: £16.68 billion
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