Microsoft - one of the most successful pivots of all time?
Microsoft stock delivered an Investor ROI of 14.82% over 2010 – 2014.
Over 2015 – 2019, it delivered 2x that - an IRR of 29.19% or 57% more than the NASDAQ Computer Index.
So, what changed in 2014?
In 2014, Microsoft was suffering.
It looked at the business as 2 segments, licensing or
hardware – based on how it felt as a division internally.
Between 2012 & 2014, they managed less than 4%
growth in their operating income.
In 2015, they decided to relook at their business inside
They changed their reporting segments – to show their
renewed focus on the customer rather than their internal functions.
They embarked on a vision that covered “high-value digital work and digital life experiences” and “everyone moving to the cloud”.
This changed everything.
Software was not for legacy sale anymore.
It was a solution that was being continually refined – a service of productivity.
Office 365 & Windows 10 were soon launched on a subscription 'service' thinking.
The vision was to envelop the digital life of every consumer – business, personal, or academic.
~200 Mn subscriptions as of 2020.
Microsoft closed 2019 with $125Bn ($87Bn in 2014) and generates 40c of cash on every $.
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