Microsoft (MSFT.O) is the oldest of the current crop of technology Goliaths. Yet despite roots in the bell-bottom days of 1975, the $2.5 trillion software maker has been a recent Big Tech standout in terms of share-price performance. Boss Satya Nadella is poised to deliver again. That could make him the most successful second-generation chief executive ever, measured by the value created.
Nadella took over in 2014 from Steve Ballmer, an early employee of founder Bill Gates. Microsoft’s market worth has grown by $2.2 trillion, from little more than $300 billion then. So far, Tim Cook at Apple (AAPL.O) has presided over a slightly larger increase in market value since officially taking over from Steve Jobs in 2011. But Nadella, who started from a smaller base and has had less time, is breathing down Cook’s neck. Sundar Pichai, first at Google and then at parent Alphabet (GOOGL.O), is far behind.
And Microsoft is on a roll. The so-called FAANG stocks – Meta Platforms (FB.O) (formerly Facebook), Apple, Amazon.com, Netflix and Alphabet – are a favorite yardstick for investors. Stacked against them, the total return on Microsoft stock over the year to Dec. 8 is second only to Alphabet, and over three and five years it’s second only to Apple.
Gates’ middle-aged company still has plenty of energy left, too. In a November report, analysts at Deutsche Bank pointed to the “crown jewel” known as Azure, Microsoft’s cloud-computing business. Amazon Web Services used to dominate the public cloud. It had a 65% market share in 2017, versus 20% for Azure and just 15% for Google’s offering. By 2020, Microsoft had raised its share to 30%, almost entirely at Amazon’s expense, according to Deutsche.
Microsoft has traditional strengths with business customers and the resources to come from behind. That happened with the company’s Teams product after Slack Technologies developed the market for workplace-chat software - and it could happen again with the idea of the so-called metaverse, beloved of Meta boss Mark Zuckerberg.
Between cloud computing, productivity, collaboration and even gaming, Microsoft’s activities mesh with powerful, global digital trends. Deutsche’s number-crunchers picked a target stock price that’s more than 15% above the company’s early December trading price. That could add another $400 billion or so to Nadella’s value-creation tally, and take him past Cook.
