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WASHINGTON: Microsoft is back at the top of the technology world
following an extraordinary comeback to close the gap with Apple, some
three years into a transformation of the onetime leader by chief
executive Satya Nadella.
Microsoft regained its title as the world's most valuable company when
it closed Friday at a higher market value than Apple for the first time
since 2010, after a brief move ahead of the iPhone maker earlier in the
week.
At Friday's close, Microsoft's market capitalization was $851.2 billion,
having tripled in value since Nadella took over in early 2014.
Apple's valuation stood at $847.4 billion, having dropped some 20 per
cent in the past eight weeks. Not far behind were Amazon ($826 billion)
and Google parent Alphabet ($763 billion).
In the 1990s, Microsoft held the crown as the top tech firm and most
valuable company as it powered the revolution in personal computers with
its Windows operating system.
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But in recent years, it appeared headed to obscurity after spectacular
failures in mobile computing, while Apple, Google and Amazon saw their
fortunes rise.
Analysts say patience, diversification and the willingness to jettison
failing ventures helped fuel Microsoft's surge.
"Microsoft is firing on all cylinders right now," said Jack Gold,
technology analyst with J Gold Associates.
"Satya Nadella has been doing a fantastic job in leading them away from
dead-end areas and being more innovative."
Thriving in the cloud
Microsoft still draws considerable revenue from Windows, the software
that powers the vast majority of PCs.
But it has leveraged its position to bring business customers to its
cloud computing platform known as Azure, and has developed a steadier
revenue stream from its Office software suite for both consumers and
enterprises.
"Azure has been really big for Microsoft," Gold said.
For companies already using Microsoft systems for PCs and servers, "it's
easy for them to stick with Microsoft, and that's the advantage for
Microsoft."
Microsoft has become far less dependent on a single product than in the
past, with strong growth from its cloud services and revenues from its
Xbox gaming business, Bing search, Surface tablets and PCs, as well as
the professional social network LinkedIn acquired in 2016.
It won a $480 million contract with the US Army last month to supply
HoloLens devices that will help troops train using augmented and virtual
reality.
It is also competing with Amazon and others for a multibillion-dollar
contract for Pentagon cloud services.
The diversified revenue stream is in contrast with Apple, which still
relies on iPhone sales for the vast majority of revenue and profit.
"Microsoft is pretty well-balanced across a number of different
categories," said Bob O'Donnell of TECHnalysis Research.
"For Apple, we've reached peak smartphone and it's a very challenging
market. Longtime observers of Apple knew this would happen at some
point, and the question is how quickly they can transition to services."
Microsoft's emphasis on business services makes the company less visible
to consumers, but "it means they are not subject to the whims of tech
fashion, and their revenue base is more solid and more stable,"
O'Donnell said.
Learning from failure
A big part of Microsoft's transformation came when it decided to throw
in the towel on its Windows mobile phone business after acquiring the
device business of Nokia but failing to get a foothold in the sector
dominated by Apple and Google-powered Android smartphones.
"I think Satya Nadella exercised extraordinarily good judgment," said
Roger Kay, a consultant and analyst at Endpoint Technologies Associates.
"He ceded the consumer business to Apple and focused on the corporate
sector and the cloud."
Microsoft´s failures in mobile may have actually helped it by forcing
the company to work with rival operating systems, analysts say.
Apple, meanwhile, has largely required its own devices for its services,
a strategy which Gold called "troubling."
"That's the same path Microsoft went down a decade ago," he said. "Apple
is going to have to change that."
The company appeared to move a step toward opening its services in the
past week, agreeing to offer its streaming music on Amazon's Alexa-powered
devices.
"Apple has a great track record when it comes to reinvention," said a
research note from Gene Munster and Will Thompson of the investment firm
Loup Ventures.
It anticipated that the company's "next reinvention does not involve
product replacement; rather, it will require a shift in mindset to
consuming Apple products as a service." |