• Pradyumna Nag

Microsoft - one of the most successful pivots of all time?

Microsoft stock delivered an Investor ROI of 14.82% over 2010 – 2014.

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Over 2015 – 2019, it delivered 2x that - an IRR of 29.19% or 57% more than the NASDAQ Computer Index.

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So, what changed in 2014?


In 2014, Microsoft was suffering.

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It looked at the business as 2 segments, licensing or

hardware – based on how it felt as a division internally.

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Between 2012 & 2014, they managed less than 4%

growth in their operating income.


In 2015, they decided to relook at their business inside

out.

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They changed their reporting segments – to show their

renewed focus on the customer rather than their internal functions.

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They embarked on a vision that covered “high-value digital work and digital life experiences” and “everyone moving to the cloud”.

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This changed everything.


Software was not for legacy sale anymore.

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It was a solution that was being continually refined – a service of productivity.

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Office 365 & Windows 10 were soon launched on a subscription 'service' thinking.

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The vision was to envelop the digital life of every consumer – business, personal, or academic.

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~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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