MICROSOFT NOW—HOW IT RECLAIMED ITS TITLE

Microsoft dominated the software industry during the 1980s and 90s, while at the same time revolutionizing office productivity around the world. In fact, it was so successful, that the US government wanted to break it up. 

However, the company stagnated during the first decade of the 20th century. While it remained very profitable, growth was slow, and the company no longer dominated the tech industry as it had in the past. It was widely viewed as a dinosaur plagued with bureaucracy during a time when companies like Amazon, Google, and Apple captured the world’s imagination.

Well, Microsoft is officially back! It is once again vying with Apple for the position of the most valuable company in the world. Both are worth close to $1.1 trillion, while Amazon, trailing in third place is worth over $200 billion less.

So, how did Microsoft bounce back? The answer has partly to do with leadership, partly to do with culture, and a little bit to do with luck.

The 2000s—Bill Gates to Steve Ballmer

During the 1980s and 90s, Bill Gates led Microsoft. Since he was also leading the technology innovation, the company had an innovative culture. He handed over the reins to Steve Ballmer in 2000 just as the Dot Com bubble burst. This was a bit of a poison chalice as the next few years were very challenging for the tech industry.

Ballmer’s background was in management, sales, and marketing. His strategy was, therefore, to build technology that he believed had a market. This was a mistake, as many other tech companies were innovating and building technology that the market didn’t even know about.

At the time, Windows and Office were the most successful Microsoft products, and the company focused on growing the market by taking Windows to mobile. They did this with Windows Mobile and the Windows Phone. However, their culture didn’t support open source technology like Google did, which ultimately limited them.

Both mobile projects failed to gain traction and they lost out to Google and Apple’s mobile operating systems, both of which succeeded for different reasons.

During this period Microsoft’s cash cows, Windows and Office continued to generate cash, but no new products gained traction.

When Ballmer took over, the share price was in the process of falling from its $60 high to $20. When he retired 14 years later, the stock was still trading below $40. During that period revenue grew from $23 to $78 billion, an annual compound growth rate of less than 10%. Furthermore, margins steadily declined during this period.

The move to enterprise cloud computing

Satya Nadella took over as CEO in early 2014. While he gets a lot of credit for Microsoft’s turnaround, the foundations were in fact laid earlier. This happened when Microsoft embraced enterprise and cloud computing.

Azure is Microsoft’s cloud computing platform. It allows clients to build and deploy cloud-based applications that are run on servers in Microsoft’s data centres. The platform makes Microsoft a SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service) player.

Cloud computing platforms give companies more flexibility as their computing power is no longer limited by their own hardware. Capacity can simply be added or reduced as and when needed. Microsoft has used its corporate reach to grow Azure into the second-largest cloud provider in the world, behind Amazon’s AWS. Azure is now the company’s primary growth driver growing revenue at 60% a year.

Other areas of the business have also improved over the last 5 to 7 years. The office was switched to a subscription model with Office 365. This has expanded the market to include people previously reluctant to buy software that will need to be replaced after a few years. Rather than trying to force customers to use Windows devices to access Office apps, Microsoft took the apps to Apple and Android users. This again expanded the market for Office365.

In 2018, Microsoft also bought GitHub, the leading repository for code. Developers use GitHub to store, share and collaborate on code. The purchase will give Microsoft better access to the world’s development community and improve its image amongst developers. This marks a big change for a company that previously kept everything in the house and closely protected.

The hardware division is also gaining more momentum, though growth and margins trail the rest of the business. However, a new innovation in this segment can be used to showcase Microsoft’s capabilities.

The next frontier for the company is healthcare. Microsoft hopes to use its expertise and resources along with artificial intelligence to transform the industry on several fronts.

When Nadella took over in early 2014 the stock was trading around $37. Five and half years later it is above $140, a gain of nearly 400%.

Revenue growth has accelerated from around 5% to 15% and profits are now growing at over 20% a year.

Perhaps more importantly, Microsoft’s culture has changed. It is embracing open source development and collaboration with other companies. In the process, the company has regained the respect of the development and investor communities.

Interested in Microsoft Corp Shares? Join One Financial Markets today.

 

All content is provided for your information only.

This article may contain opinions and is not advice or a recommendation to buy, sell or hold any investment. No representation or warranty is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however we have put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.

One Financial Markets expressly disclaims all liability from actions or transactions arising out of the usage of this content. By using our services, you expressly agree to hold One Financial Markets harmless against any claims whatsoever and confirm that your actions are at your sole discretion and risk.

Begin trading today! Create an account by completing our form

Privacy Notice

At One Financial Markets we are committed to safeguarding your privacy.

Please see our Privacy Policy for details about what information is collected from you and why it is collected. We do not sell your information or use it other than as described in the Policy.

Please note that it is in our legitimate business interest to send you certain marketing emails from time to time. However, if you would prefer not to receive these you can opt-out by ticking the box below.

Alternatively, you can use the unsubscribe link at the bottom of the Demo account confirmation email or any subsequent emails we send.

By completing the form and downloading the platform you agree with the use of your personal information as detailed in the Policy.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Back to top

Office network
  • London Office
    One Financial Markets
     

    Level 2
    36-38 Leadenhall Street
    London
    EC3A 1AT
    United Kingdom


    T: + 44 ( 0 ) 203 857 2000
    E: info@ofmarkets.com
  • Kuwait Office
    VI Markets 
    Sharq - Mazaya Tower 02 - 10th floor 
    PO BOX 3040
    22031
    Salmiya, Kuwait   

    T:
    + 965 22256988
    E: info@vimarkets.com.kw
  • Dubai Office
    One Financial Markets 

    Office 1404
    Ubora Tower
    Business Bay
    P.O. Box 31482 Dubai
    United Arab Emirates


    T:
     +971 4 4531200
    E: info@ofmarkets.com

One Financial Markets is the trading name of C B Financial Services Ltd, a company registered in England with company number 6050593. C B Financial Services Ltd is authorised and regulated by the Financial Conduct Authority in the UK (under firm reference number 466201) and the Financial Sector Conduct Authority in South Africa (with FSP number 45784).

The information on this site is not directed at residents of the United States, Belgium, Poland or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
www.onefinancialmarkets.com is owned and operated by C B Financial Services Ltd.

Award winning broker
We have been presented with a number of awards that recognise the quality of our service and dedication to our clients :

Best FSA Regulated Broker
Saudi Money Expo

Best Education Product
Saudi Money Expo

Best Broker - Online Trading
IAIR Awards

Best Institutional Broker
Saudi Money Expo

Best FX Services Broker
CN Forex

Top International
FX Broker 2015

Saudi Money Expo

Broker of the Year
Online Trading – Middle East

IAIR Awards

Best Forex
Customer Service 2018

JFEX Awards

We accept the following payment methods: