Worth Its’ Weight In Technology

Microsoft Is Worth as Much as Apple. How Did That Happen?

Microsoft’s stock price has nearly tripled since Satya Nadella became chief executive in 2014.CreditTed S. Warren/Associated Press
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Microsoft’s stock price has nearly tripled since Satya Nadella became chief executive in 2014.CreditCreditTed S. Warren/Associated Press

By Steve Lohr Just a few years ago, Microsoft was seen as a lumbering has-been of the technology world.

 

It was big and still quite profitable, but the company had lost its luster, failing or trailing in the markets of the future like mobile, search, online advertising and cloud computing. Its stock price languished, inching up 3 percent in the decade through the end of 2012.

It’s a very different story today. Microsoft is running neck and neck with Apple for the title of the world’s most valuable company, both worth more than $850 billion, thanks to a stock price that has climbed 30 percent over the past 12 months.

So what happened?

There is a short-term explanation for Microsoft’s market rise, and there is a longer-term one.

The near-term, stock-trading answer is that Microsoft has held up better than others during the recent sell-off of tech company shares. Apple investors are worried about a slowdown in iPhone sales. Facebook and Google face persistent attacks on their role in distributing false news and conspiracy theories, and investor concerns that their privacy policies could scare off users and advertisers.

But the more enduring and important answer is that Microsoft has become a case study of how a once-dominant company can build on its strengths and avoid being a prisoner of its past. It has fully embraced cloud computing, abandoned an errant foray into smartphones and returned to its roots as mainly a supplier of technology to business customers.

That strategy was outlined by Satya Nadella shortly after he became chief executive in 2014. Since then, Microsoft’s stock price has nearly tripled.

One of the data centers that power Microsoft’s lucrative cloud computing services.CreditRichard Duvall
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One of the data centers that power Microsoft’s lucrative cloud computing services.CreditRichard Duvall

Microsoft’s path to cloud computing — processing, storage and software delivered as a service over the internet from remote data centers — was lengthy and sometimes halting.

Its forerunners to cloud computing go back to the 1990s, with Microsoft’s MSN online service and later its Bing search engine. In 2010, four years after Amazon entered the cloud market, Microsoft introduced its cloud service. But it did not have an offering comparable to Amazon’s until 2013, analysts say.

Even then, Microsoft’s cloud service was a side business. The corporate center of gravity remained its Windows operating system, the linchpin of the company’s wealth and power during the personal computer era. That changed after Mr. Nadella replaced Steven A. Ballmer, who had been chief executive for 14 years.

Mr. Nadella made the cloud service a top priority, and the company is now a strong No. 2 to Amazon. Microsoft has nearly doubled its share of that market to 13 percent since the end of 2015, according to the Synergy Research Group. Amazon’s share has held steady at 33 percent over that span.

Microsoft has also retooled its popular Office apps like Word, Excel and PowerPoint in a cloud version, Office 365. That offering caters to people who prefer to use software as an internet service and gives Microsoft a competitive entry against online app suppliers like Google.

The financial payoff from the shift came gradually at first, but is accelerating. In the year that ended in June, Microsoft’s revenue rose 15 percent, to $110 billion, and operating profit increased 13 percent, to $35 billion.

“The essence of what Satya Nadella did was the dramatic shift to the cloud,” said David B. Yoffie, a professor at the Harvard Business School. “He put Microsoft back into a high-growth business.”

It is the perception that Microsoft is on a high-growth track that has fueled its rising share price.

A 2014 phone produced by Microsoft after its ill-fated purchase of Nokia.CreditMarkus Schreiber/Associated Press

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A 2014 phone produced by Microsoft after its ill-fated purchase of Nokia.CreditMarkus Schreiber/Associated Press

When Microsoft acquired Nokia’s mobile phone business in 2013, Mr. Ballmer hailed the move as a “bold step into the future.” Two years later, Mr. Nadella walked away from that future, taking a $7.6 billion charge, nearly the entire value of the purchase, and shedding 7,800 workers.

Microsoft would not try to compete with the smartphone technology leaders, Apple, Google and Samsung. Instead, Microsoft focused on its developing apps and other software for business customers.

Microsoft does have a successful consumer franchise in its Xbox video game business. But it is a separate unit, and though it generates revenue of $10 billion, that is still less than 10 percent of the company’s overall sales.

Microsoft products, in the main, are about utility — productivity tools, whether people use them at work or at home. And its Azure cloud technology is a service for businesses and a platform for software developers to build applications, a kind of cloud operating system.

Mr. Nadella’s big acquisitions have been intended to add to its offerings for business users and developers. In 2016, Microsoft bought LinkedIn, the social network for professionals, for $26.2 billion.

“It’s really the coming together of the professional cloud and the professional network,” Mr. Nadella explained at the time.

This year, Microsoft paid $7.5 billion for GitHub, an open software platform used by 28 million programmers.

Under Mr. Nadella, Microsoft has loosened up. Windows would no longer be its center of gravity — or its anchor. Microsoft apps would run not only on Apple’s Macintosh software but on other operating systems as well. Open source and free software, once anathema to Microsoft, was embraced as a vital tool of modern software development.

Mr. Nadella preached an outward-looking mind-set. “We need to be insatiable in our desire to learn from the outside and bring that learning into Microsoft,” he wrote in his book “Hit Refresh,” published last year.

The company’s financial performance — and its stock price — suggest that the Nadella formula is working.

“The old, Windows-centric view of the world stifled innovation,” said Michael A. Cusumano, a professor at the Massachusetts Institute of Technology’s Sloan School of Management. “The company has changed culturally. Microsoft is an exciting place to work again.”

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Email Marketing Works

1. Email marketing is easy.

One of the reasons email marketing is so valuable for business owners is that it is an easy way to start reaching consumers on their mobile devices without requiring a big investment in new technology or software.

52 percent of US cell phone owners access their email from their cell phones. (Pew Research Center)

42 percent of retailers’ email messages were opened by consumers on their cell phones. 17 percent were opened by consumers on tablets. (Forrester Research)

Conclusion: Nearly three out of every five email marketing messages doubles as a mobile marketing message. Why is email marketing better than SMS marketing?

why does email marketing work1) It works on a variety of mobile devices (phones and tablets)

2) Emails are free to receive for the consumer (texting can incur a charge)

3) Emails have far more space for content than text messages

4) Emails can be formatted much more creatively than text messages
2. Email marketing is effective.

Being a relatively easy strategy makes email marketing very appealing. But one of the biggest benefits to email marketing is how very effective it is at helping business owners and consumers stay connected.

Consumers often seek out email marketing campaigns from their favorite brands and local stores. 28 percent of US online shoppers intentionally subscribe to receive store and product related emails. (Nielsen)

59 percent of US moms say they would sign up for email updates from brands if rewards were offered (Loyalty 360).

There is real value to staying connected to your customers. Email marketing makes that easy to do.

Still asking, “Why Does Email Marketing Work?” Keep reading …
3. Email marketing is adaptable.

The versatility of email marketing is a major reason marketers should keep this tool in their marketing toolbox. Email marketing messages can range from simple to very complex. Emails can be personalized to include the name of the user and even more.

Many of the personalization tactics used on web sites can easily be applied to email marketing. (Retention Science)
4. Email marketing is inexpensive.

The best reason to use email marketing? It’s easy, effective, and inexpensive. Email marketing allows business owners and entrepreneurs to reach a large number of consumers at a rate of pennies per message as compared to much more strategies such as TV, radio, or direct mail.

And it’s not just saying this. A joint study from Shop.org and Forrester Research found that 85 percent of US retailers consider email marketing one of the most effective customer acquisition tactics.
Why Does Email Marketing Work?

The point is this: Email marketing may be an old tactic, It may be misused by some but it remains a vital strategy. It is relatively easy to get started with email marketing, so there really is no excuse for business owners to not be taking advantage of this powerful marketing tool.

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