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Microsoft is now a $1T company (theverge.com)
127 points by ABS 8 months ago | hide | past | web | favorite | 67 comments

It's pretty amazing to see how much Microsoft has changed since Nadella took helm (even though as some have stated before -- the efforts already began before Ballmer left).

Agreed. IMHO Nadella did a few things that made an enormous difference:

- End the war on open source and instead embrace it. This unlocked a lot of potential and put a stop to a lot of counter productive efforts in MS where the only point was "not invented here". Some of these things were already tolerated grudgingly under Balmer but Nadella made it company policy to embrace it 100%. There are many examples of this ranging from reviving .net via the mono ecosystem, launching mssql on linux, making linux a first class citizen on Azure (now a key driver in the valuation), vs code studio, the github acquisition, embracing chromium, etc. Through this, MS regained a lot of the street credibility with developers that it used to have in the nineties and subsequently lost.

- Kill off windows phone and de-emphasize the windows brand in favor of an office on any platform type approach. Office now runs great on ipads, os-x, browsers, android, as well as windows laptops. Not having the distraction of windows first means all the non windows teams that are making lots of money (azure, office, etc) can now focus on doing the right thing on non MS platforms instead of up-selling windows to their users. Balmer left Nadella one huge headache which was the Nokia acquisition (I used to work there). Nadella killed that off swiftly and decisively by effectively starving it of resources and almost immediately cutting staff by the tens of thousands.

- Fix the toxic work culture. There was a lot of negativity around this topic under Balmer. It seems much less of an issue these days.

People tend to see performance of CEOs by stock price. While it makes sense as shareholder, it's a very narrow view. From revenues as well as profit perspective Ballmer actually grew Microsoft more than Nadella. Market just decided not to reward that. Current growth centers including Azure, Surface etc were all started and championed originally by Ballmer. It was Ballmer who was willing to pour in investment like crazy in Hololens as well Bing. On the other hand, Nadella has failed to add single new product in Microsoft's portfolio during his half decade as CEO. Microsoft today has simply no presence in home automation, smart assistants, wearable or self-driving markets that have emerged during past 5 years. Nadella has literally missed boat in every single new category that has came around during his time. All the while its rivals have moved fast and picked up top spots in these new markets. Windows revenues is still falling like crazy and obviously there is no Smarthone story from Nadella yet.

The only thing that is compensating all these troubles is cloud and that too had been hazy on actual utilization. The engineering execution in Azure begs a question about how much worse it can get. Out of all providers, Azure literally has been the least impressive from technical standpoint in everything from UX to availability to features to documentation to API design. Once cloud market saturates and race to bottom ensues, Microsoft could have big trouble in maintaining current revenues and profits due to lack of new products. It will take few quarters before stock market reacts but all of these same people praising Nadella right now would suddenly come around and brand him the worst CEO in history as soon as stock dips.

> Microsoft today has simply no presence in home automation, smart assistants, wearable or self-driving markets that have emerged during past 5 years.

Good, Microsoft spent a decade building "me too" products that weren't that good and even if they were nobody used anyway. Jumping on bandwagons too late didn't help them at all in fact it made them look like a bit of a joke.

This tends to happen in every major bull market. The CEOs get an undeserved amount of credit. Nadella's been CEO only since 2014. Since then MSFT market cap gained $650 Billion in value. That's not all Nadella. It's simply the bull market and a strong economy boosting everyone's market cap.

The market keeps hitting new record highs and that's helping a lot of stocks


On the flip side, CEOs tend to get an undeserved amount of blame during recessions and market declines.

Microsoft today has simply no presence in home automation, smart assistants, wearable or self-driving markets that have emerged during past 5 years.

Home automation and smart assistance as platforms are profit loss centers to either invade user privacy in the case of Amazon and Google or as a moat for more profitable hardware in the case of Apple. Microsoft has positioned itself as a neutral platform provider with Azure. There is no real money in the home automation market. The only people who make money in a gold rush are the people who sell shovels.

Wearables outside of the Apple Watch aren’t doing too well either.

There is no “self driving market”. There might be one in the future.

Windows revenues is still falling like crazy and obviously there is no Smarthone story from Nadella yet.

There is a story. Microsoft is supporting both Android and iOS with appps, development tools, and Azure.

Seeing that Google has only made $21 billion in profit on Android in its entire existence (came out in the Oracle trial), and that most phone manufacturers are losing money, the entire phone market is low profit margin business for anyone who isn’t Apple, the carriers, or component suppliers (ie Samsung).

As far as cloud, it’s a lot easier to convince a company to use Azure than GCP and their relative market share shows as much.

Balmer started (and continued) a lot of things and he made a lot of money for MS mainly by riding the post windows 95 boom of milking office + windows licenses. By the time he left, the dependence on those two as the primary source of revenue was becoming a problem because the market was changing. MS needed a few of the things he started to actually become major revenue drivers.

Windows Phone already looked like it was flopping and MS needed to be part of mobile to continue to stay relevant with its consumer software. On the server, people were flocking to AWS to run Linux software, which was very much a second class citizen on Azure under Balmer.

Nadella fixed these problems and now office and azure revenues are doing great and even Windows is not looking too bad these days. This is why MS just crossed the 1 trillion $ valuation point. That would not have happened under Balmer.

Or you may say that Nadella chose to focus on improving Microsoft's core business products to maintain the company's leadership in those areas through quality instead of chasing new industry fads.

If you have ever interacted with Azure, you might have found that quality is far less of a focus then selling it at any cost. It's a model Oracle has practiced for long time. Just go give it a spin at portal.azure.com.

Also, these new markets are absolutely not fed. Smart speakers is already $7B market, Apple/Android/Fitbit wearables at $10B and along with smart home are the fastest growing markets. No one now doubts if cars would self-drive in 5-10 years. That would be a market that would transcend economies of many countries and industries.

Neither Fitbit or Android wearables are exactly shining beacons of success technically or in terms of profitability. The smart speaker business is also a no profit business.

They're actually heavily focused on consumption, not just sales.

The portal could be better, but all of the large cloud providers have areas of difficulty there. For the basics like spinning up a VM, it's pretty easy these days.

I'm not buying any home automation crapware that routinely spies on me inside my house, either by design or by being comically easy to subvert with spyware.

There are 118 million customers who are ok with it, however.

And that’s a full of people buying $40 speakers....

> Current growth centers including Azure, Surface etc were all started and championed originally by Ballmer. It was Ballmer who was willing to pour in investment like crazy in Hololens as well Bing.

Is Surface really a growth centers?

Azure is Linux. Without Linux Azure don't mean a much, and without the goodwill that is coming from Nadella, developers are not going to deploy anything on Azure.

Having said that we still don't know how much Azure is within the Cloud Business, which includes Office 365.

Microsoft, by and large is a company that does more business to developers and Enterprise than to Consumers. How many consumers have actually spent money buying or upgrading Windows?

Without the brand images changes and good faith, how many of those I.T people were willing to continue put money into their products?

>It was Ballmer who was willing to pour in investment like crazy in Hololens as well Bing.

And we know how both of those ended.

There are definitely a lot more new things Microsoft could do. But he managed to turn the 2nd most hated company in the industry, ( First will definitely be Oracle ) and now with people thinking Microsoft have redeemed themselves, all while growing its business revenue and profits.

What sours MS for me these days how messed up Win10 is. Utter disregard of what users want, utter disregard of privacy is intolerable in 2019.

I don't care about the rest, they can be stellar. Its the same company, same top management making these decisions. If somebody makes 8 nice and 2 evil decisions, these don't cancel out.

> obviously there is no Smarthone story from Nadella yet.

probably because that boat has sailed.

Ballmer was also hamstrung by the 10 year antitrust deal

I’ve been using Linux for deployment and development for literally decades now. I would never have even considered using .NET for anything under the old MS regime. I’m keeping an eye on it now though. I can see some real technical merits there. It just needs a longer track record of maturity and stability outside of windows.

I agree with your points, and teams should be freed to compete without having to prop up Windows, but that doesn't mean that Microsoft shouldn't have a presence in mobile. Specifically, I think they should build a pocket PC: https://medium.com/@karti/microsoft-should-launch-a-pocket-p... Not a smartphone, not the old Windows Phone 8, not an iOS or Android clone, but a Pocket PC, as the link describes. It's important, because using a Google or Apple platform drives you to using Google or Apple apps.

Just checked his wiki page. I always thought his would be a more humble story than most Indian IT titans since he went to Manipal rather than one of the IITs, but turns out his dad was an IAS officer. Interesting tidbit.

A lot of people (from every kind of background) come to the US and work. I would say someone dad's being an IAS would have almost zero impact on stepping up in the career ladder in a US tech company, however, being from a prestigious university gives one a strong network and connections.

>>I would say someone dad's being an IAS would have almost zero impact on stepping up in the career ladder in a US tech company

That's like saying, having an IAS father makes no impact for someone wanting to be a top doctor in the US.

In reality having an IAS dad means having access to tuitions, mentoring, ability to afford a whole lot of other things like say education in a foreign university etc etc.

Most kids don't have access to this because they have to work immediately after they finish their education in India, or worse have to work through their education. There is no one back home providing financial support to your family. There is also pressure to send money back home, or handle other responsibilities(eg. Marrying off a sister). Each of these things gradually drive to last straw on the Camel's back for a lot of people.

There is only that much you can do in life when you have n things demanding your attention, and resources all at the time when you should be focusing on working on that career.

I expected someone would make such response, and that is exactly why I was talking about people who already made it to US, and talk of that demographic. I by no means, am comparing him with the guy who took a job at Infosys, or he couldn't pursue a masters or get a less paying job at startup for the reasons you mentioned.

That said, we are also making this huge presumption that since his dad is an IAS, he must have have shitload of money for US tuitions and rest. This isn't possible with normal salary, unless of course he is corrupted, and I find it distasteful to deduce something like that about someone specific. It is one thing to say most IAS are not honest, and it's another thing to insinuate that this particular IAS isn't honest.

We all try to make best of whatever situation we are in, and most of us (at-least I most likely) wouldn't achieve what he did even with 100x resources (lack of hard work, motivation, making excuses to ourselves). Let's not undermine that by saying "there is only that much you can do in life when you have n things demanding your attention".

What's IAS? Is it a big deal?

IAS is Indian Administrative Services. It means his dad most likely worked as a top level bureaucrat in the government and was relatively privileged.

"relatively" is underselling it. Indian IAS officers are basically modern day nobility.

That is definitely an oversell. An entry level IAS officer makes Rs. 56100[1] which is about 800 USD a month. Definitely not an amount to scoff at in India but not even close to a level of privilege that would make you the CEO of a trillion-dollar company.

Satya has two advanced degrees from US Institutions and has worked at Microsoft for over 27 years. I think his father has had very little to do with his current stature.

[1] https://www.clearias.com/salary-of-an-ias-officer/

The original statement was about Nadella's own privileged background. No one is arguing that an IAS officer is more privileged than the CEO of Microsoft.

As an aside, salary is just about the worst way to evaluate power and privilege of government officials. By that metric, an AVP at Google is more privileged than the President of the United States.

That's like splitting hairs. C'mon. On the job perks include Free accommodation, chauffeured cars, pensions, maids, bribes, pensions, plot buying opportunities in top govt layouts and peons to do everything including for something as simple as forwarding a memo.

Heck bribes itself can set your 7 generations for a life time of nobility.

There is a reason why people waste years behind cracking these exams.

Getting education in US as a foreign student from 3rd world country typically requires existence of rich parents.


The gov of India has a cadre or trained bureaucrats, who are selected after passing a rigorous exam. Its a check on your real world thinking skills in many ways.

The exam is hard, and people spend years to ensure they get through.

The people who pass are sent to the foreign services, admin services, and police services.

IAS officers have over the years earned a rep for being capable bureaucrats (modulo the level of noise coming from a massive developing World population dealing with issues ranging from poverty to corruption).

These are the people who run municipalities for what would be high populations cities in the west, secretaries to ministers and so on.

They don’t have money, but they are the nerves and ligaments of state machinery.

If you're a corrupt IAS officer, you're a big deal: https://www.quora.com/Can-an-IAS-officer-earn-in-crore

If you're not, you are still a big deal, on a different scale.


They still treat their enterprise customers like shit, have no opt out data collection on all their platforms now, are extending their tentacles across everything that has a processor in it, QA has actually dropped off a cliff and they've left a half finished charred pile of shit for an OS on our laps, disposable low quality line of tablet wannabees and have piled their entire effort into marketing away their problems rather than delivery.

But everyone focuses on Nadella being the second coming of corporate Jesus. Wolf in sheep's clothing I'm afraid. In ten years I bet you I am not wrong on this.

Honestly I think that windows is the best desktop platform out there (seeing as Apple can't make a keyboard that works) with all the compromises but it's difficult to actually compliment it in any way. We could be somewhere a lot better and everyone knows where that is.

For earnings and shareholders they're doing good. But for the customers, not necessarily. They're just doing barely ok in an ocean of crap.

What? I have a somewhat recent surface. It’s brilliant. It forced the entire windows ecosystem to rethink their approach.

Behind the scenes for that miserable OS, is a mountain of work to make all their parts work. No longer will there be three tcp-ip implementations over Xbox,OS,server and other teams.

A lot of this was started under ballmer. It’s comtinuing under nadella.

TBH they seem to mostly just depend on their enterprise lock in, The azure story is just a reflection of this. Most enterprises just can not move out of the stranglehold and will have to cough out whatever price Microsoft demands,(which will creep up inevitably) for decades.

I've always wondered, Are these heavy bashing against Ballmer as someone he's incompetent or whatever the complaint is, right at all? I agree that Both Gates and Nadella are more of Techies and Ballmer was a Sales guy. But isn't he the guy who actually expanded MSFT Sales Network and made them grow with Office Suite of products?

The way I see is that he was the right person for a certain role at a certain company size in a certain time period. That isn't CEO of Microsoft in 2019 but he served his purpose and became really rich through it.

I can’t help but feel Nadella is playing catch-up, and winning at it. It’s almost like Microsoft had a lost decade under Ballmer.

I am surprised how my attitude about Microsoft has changed. My daily driver is macOS and Linux but Office 365 is a fantastic value (for $100/year my wife and I get a terabyte if cloud storage, web versions of all office apps for Linux use, and if we want them native macOS apps). Azure is also a good cloud service which I used for a year when I was accepted into Microsoft’s free incubator program.

I agree with a few of your points...My attitude towards MS has certainly improved - I can track it to happening around shortly after Satya Nadella began steering the ship - and this shift in my attitude was not something I expected to happen if I'm honest.

As to the value of office 365 - while philosophically i don't like this cloud subscription model (So, if i stop paying, i lose "license" to use software? Pfft)...i have to agree the price is very fair. I mean, even if I were to only pay for the onedrive storage (without Word, Ecel, etc.), that onedrive alone is worth $100/year. My only disappointment here is that i wish MS would pump out a native, official onedrive client for linux already. Except for my dayjob forcing me to use a windows machine for work, Linux is my personal daily driver (and for side hustles I develop only on linux)...So I totally can understand - from a capitalist perspective - why MS would not distribute the full office 365 suite for linux...but why not at least just onedrive? I'm pretty sure that many people like us who use linux would gladly use a native onedrive client. (And, while i give much props to existing onedrive clients [1][2], sorry, but i need official support from MS.)

I have not used Azure yet in any meaningful capacity, so can't say MS is doing better or worse here...but the fact that they quickly focus on supporting linux, and their pricing isn't bad is inspiring.

You didn't mention MS' recent privacy/data control issues related to windows 10 telemetry - this is a big annoyance for me...but hey, no one is perfect. And, i mean, this is the same company whose previous leader considered linux a cancer...so, even with the little disappointments that i feel about MS, i still have to give them big kudos for their positive change regardless of what wall street thinks that they're worth.

[1] = https://github.com/skilion/onedrive

[2] = https://github.com/abraunegg/onedrive

I find this worrying. I know this is market valuation and it's not comparable, but this is nominally more than the GDP of 168 countries in the world. The fact that 5 enormous companies are owning the future through tech is an astounding fact that can't lead to any positive outcome for our global society.

MSFT gross margin is 72B, this number better matches GDP and its c.70 rank by nominal GDP. Interestingly, Luxembourg has $69B GDP with 590K population, MSFT's "population" is 131K. Each MSFT citizen is 4.5x more productive. And Luxembourg is the top country by nominal GDP per capita.

It’s not that MSFT citizen is 4.5x productive but rather they are able to create product that is inexpensively and infinitely replicable. On the other hand majority of Luxembourg citizens probably are mainly just renting their time which is highly limited resource. I would actually expect much bigger ratio.

Is Gross Margin closest to GDP? In GDP when I sell Paul a loaf of bread for £5 I'll probably make £4 gross margin but my revenue is £5. GDP measures the total cost of the output, not the output minus the costs (in fact for the GDP of the whole system it's output PLUS costs since the costs count as outputs of other people in the economy)

I think a better comparison would be revenue surely?

Company costs are revenues to someone else (even payroll is then spent on goods & services). Revenue will double count. Also I just did a very quick number lookup without pretending for scientific correctness, just became curious after reading the parent comment.

GDP is C + I + G + NX. In MSFT 10-K R&D are after the gross profit, so I is there. C attributable to MSFT is sales less costs to avoid double counting. G are taxes which are also there. We should also add D&A and Capex normally as a part of I, but for software companies it's mainly R&D that is allowed to be recognized as cost (which gives huge tax benefits and should stimulate R&D activity, in theory).

The MSFT campus is practically a utopian city. I actually think that if you included contractors, support, restaurants, city utilities, etc. you’d have a reasonable basis for a high-producing self-sustaining economy.

Isn't this economy called Seattle?

Referring more to just their campus in Redmond, including surrounding residences and corporate housing: https://www.google.com/maps/place/Redmond,+WA/@47.6425094,-1...

Is it any different to the last 100 years where "enormous companies are owning the future" could be applied to railways or oil giants.

Tech is just the latest iteration and these 5 companies are our front runners. Will something else come along and dethrone them? Maybe, who knows.

The only difference i see here is these large companies are generating wealth for a much larger group of people via employment or shares. I'm willing to bet Microsoft and google have made far more millionaires then Rockefeller adjusted for inflation.

Their products and services also obviate many more people, contributing greatly to the wealth and income gap in my opinion. Office can do the work of many secretaries, Amazon can do the work of many retail establishments, Google lets people do work quicker with instant information, airline/hotel websites cut out the need for most travel agents, Apple's and others' devices cut out the need for 10 different devices and package it into 1, Netflix and streaming services remove the need for "TV channels" and all the people that worked in that field.

Much of these productivity gains due to the scalability of software solutions result in fat margins for those companies, hence the high pay for people in the tech field, but the remainder also goes to the capital owners who get more productive workers.

It's good news (if you believe those valuation mean something). There would even be more companies competing with each other "owning the world and the future" only if states didn't gave them so much advantages (taxes, intellectual "property", entry barriers etc.)

Those countries are still pretty much USA. So nothing changes.

Two things people don't talk about a lot are Surface and XBox. Microsoft has gone from a distant threat to a legitimate competitor in both these categories, especially with Surface.

People used to think that Microsoft can't do hardware, but Surface has shown that MS can be more competent than most laptop manufacturers.

Still no thunderbolt in all their portables ? I've used a Surface Pro before from a coworker and in general I liked the device but no thunderbolt 3 was a deal breaker for me.

It sounds so frivolous when describing but in practice I noticed having a single cable thunderbolt setup is a huge win for me - I used to avoid moving my laptop because plugging in 3 cables and keeping them organized on the desk was a chore. I have to work on two laptops (I sometimes take my work laptop home) so dock is not an option either.

With thunderbolt this became a non-issue - no docks, no messy cables, just one clean USB-C cable connecting 5K monitor, charger, USB hub, network adapter.

Ports are an easy problem to fix. I was talking in general about their build quality and engineering which, by all accounts, is excellent.

Apple still beats them easily but MS is catching up.

That USB-C cable still has to end at some sort of dock to connect all of those devices. Hopefully the Surface connector will be replaced by USB-C at some point, but as it is, it's still one cable to the dock to provide power and let you connect all your devices.

My monitor (https://www.lg.com/us/support-product/lg-34WK95U-W) has a USB hub and thunderbolt input + power output - no dock required.

Xbox has been seriously competing since the 360, almost 15 years ago. PS3 at launch was such a disaster, that the 360's failure rate couldn't stop it.

Congratulation Microsoft employees (if anyone is lurking here)

*congratulations those who own stock.

I bet quite a few of them do :)

Microsoft is closing fast on AWS. This is going to be an XBox vs PS again except with no japanese loyalty to help the PS.

Better link- https://www.cnbc.com/2019/04/25/microsoft-hits-1-trillion-ma... without the verge fluff

It's never made clear exactly which piece of AWS that Azure is growing faster than.

I think Office 365 is counted as part of Azure and it's extremely popular, but that wouldn't make it an apples to apples comparison wrt AWS.

No, it isn't counted. Office 365 is counted in Productivity and Business division. [1]

[1] https://www.microsoft.com/en-us/Investor/earnings/FY-2019-Q3...

Ahh, thanks for the info

The numbers are never very clear - Office 365 is a bundle of licenses for desktop services and a set of online services (Exchange Online, SharePoint Online etc.) that all have dependencies on Azure Active Directory but aren't normally regarded as 'part' of Azure.

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