What is transforming Microsoft?

Microsoft, the word (amalgamated from microcomputer and software) is one we use so very frequently and products of which we depend upon every day, has truly grown as a company, in part due to the growth mindset. The American multinational technology company, founded by famous business magnates - Mr Bill Gates and Mr Paul Allen, majorly develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and related services.

It is best known for its software products (Microsoft Windows, Microsoft Office and the Internet Explorer). Hardware products include the very loved Xbox series and Microsoft Surface.

Microsoft’s Annual Report- FY19

The very proud Chief Executive Office of Microsoft, Mr Satya Nadella, believes that 2019 was a record-breaking year for the company, as:

  • Microsoft delivered more than $125 billion in revenue;
  • $43 billion in operating income;
  • Over $50 billion in operating cash flow;
  • It returned more than $30 billion to its shareholders;
  • The company’s commercial cloud business, the largest in the world, surpassed $38 billion in revenue for the year, with gross margin expanding to 63%;
  • Microsoft became the first one to open cloud data centers in the Middle East and in South Africa;
  • Microsoft Teams had a breakout year with more than 13 million daily active users and 19 million weekly active users;
  • Windows 10 was reportedly active on more than 900 million devices.

A cornerstone for Microsoft’s transformation lies in the fact that it believes that the next big technology breakthroughs will not come solely from the technology companies, but retailers, healthcare providers, and manufacturers have a significant role to play in global advancement. The company thrives to work in such productive partnerships from across the globe and is optimistic about the opportunities ahead.

Microsoft’s Financial Data (Source: Microsoft’s Report)

Microsoft’s Breakthroughs, Progress and Acquisitions

Before diving into the major breakthroughs of the year, it should be noted that Microsoft diligently focusses on consumer privacy and cybersecurity. It is currently investing heavily to safeguard consumers in the present “zero trust” situation, and processes 450 billion authentications, analyses over 6.5 trillion signals daily, and scans 400 billion emails for phishing and malware every month.

In the age of competitive computing, cloud, artificial intelligence and a digitally transforming world, Microsoft has edged up to have a great role in value creation and growth across every industry. An example of the same is the GitHub acquisition (last year), which has paced the company’s growth, brought together the world's largest community of developers to discover, share, and build better software and is used by more than 40 million developers (many of whom work for the Fortune 50!).

Besides GitHub, Visual Studio Code and Visual Studio, the most admired code-editing tools of the world have gained vital traction. TypeScript is counted amongst the quickest developing programming languages.

The company is currently building Azure as the world’s computer, which will address clients’ regulatory needs and real-world operational sovereignty. It should be noted that Azure is the sole cloud with analytics capabilities and limitless data across the company’s customers’ entire data estate.

LinkedIn, which was acquired in 2016, now has over 645 million members and has turned out to be the most inclusive solution for organisations, helping them efficiently to manage and engage their respective talents.

In the field of gaming, the company’s new breakthrough game streaming technology, Project xCloud is much awaited by gaming enthusiasts. The Xbox Live community is growing, and the fast-growing subscription services like Xbox Game Pass, are now available on both console and personal computers.

While discussing Microsoft’s breakthroughs, one cannot ignore the element of diversity. The company’s recent Diversity and Inclusion Report lays emphasis on inclusion and equal pay. Moreover, the racial and ethnic minorities represent 46.7% of the US workforce, up 2.2 percentage points from 2018. The overall representation of women increased 1.1 percentage points to 27.6%, and 37% of Microsoft’s executives are women, currently.

What is Working in Favour Of Microsoft?

So, what is it that has geared Microsoft to compete in the 21st century? The answer to this question can be vastly discussed, but we could consider it as a tripod stand- with 3 major elements that is transforming the company which made Bill Gates a very rich man:

  • Collaborative Work Culture- Much-needed performance reviews over the years, change in management structures, and a private hackathon has helped to create the fast-moving and collaborative organisation that the company is at present in the digital-first world.
  • Partner Strategy- Understanding that fast-moving and specialist partners aiding in providing expertise and innovation has been an integral part to Microsoft’s success. GitHub is a classic example of this strategy, which has placed the company at the top.
  • Investment Strategy- Fewer but bigger bets have been extremely instrumental to the company’s success. Intelligent Cloud’s launch (products - Server and Azure), and other smart acquisitions like LinkedIn and Lobe shows that Microsoft has capitalised on these companies’ growth through exclusive partnerships or acquisitions and streamlined the process of digitally transforming itself.

What is new with Microsoft?

Several researchers and market experts believe that the strong and consistent organisational mindset at Microsoft, and the important cultural norms have been driving forces of its current success.

Let us now browse over a few developments around the company:

  • Suncor Energy of Calgary, Alberta recently intimated that it has entered into a multi-year strategic alliance with Microsoft Canada, to digitally transform itself. Microsoft will be Suncor’s cloud provider (Microsoft Azure), aiding to create a connected and collaborative workforce.
  • The company has recently bagged a US$10 billion cloud computing contract with the United States Department of Defence, marking one of its most significant contract wins.
  • According to the company, Salesforce has named Microsoft Azure as its public cloud provider for Salesforce Marketing Cloud to help customers scale and grow, an integration which is likely to boost productivity.
  • Paving its way further towards digital transformation, the company recently launched its first-ever global Experience Center in Singapore, which celebrates innovation, where the company aims to bring in ideas and co-create with its customers and partners.
  • On the productivity side, Microsoft Japan conducted an experiment recently. Results showed that with a four-day workweek for employees, the productivity soared by 40%.

Share Price Performance

After the trading session of 18 November 2019, Microsoft (NASDAQ: MSFT) settled the day at a price of US$150.34, up by 0.25%. The company has a market cap of $1.15 trillion, and the stock has a P/E ratio of 28.31x, with the annual dividend yield of 1.36%.

As the company’s mission states- ‘empower every person and every organisation on the planet to achieve more’, Microsoft does seem to be on a global growth trajectory, and it would be interesting to watch it unfold its revolutionary moves in the coming months.


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