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19 May 2022

Microsoft: Can this Powerhouse Continue to Perform?

Microsoft is More Diversified Than You Think
Microsoft Corp operates through three core fundamental segments:
  • Productivity and business processes – through Microsoft Office, LinkedIn, GitHub and Dynamic business solutions.
  • Cloud services - Current CEO Satya Nadella has led major projects that include the company’s move to cloud computing with Azure, and the development of one of the largest cloud infrastructures in the world, which can power modern businesses as well as being available for personal use.
  • Personal computing - which encompasses products and services geared toward the interest of end-users and developers, as well as the hardware side of things such as phones, tablets, PCs and the entire gaming division through Xbox hardware and services, while having a plethora of gaming studios under its control too.
 
Since 1986, when Microsoft initially floated shares on the stock market, Microsoft and the markets as a whole have certainly seen times of adversity. From Black Monday in late 1987, the dot com bubble in the early 2000s, the Subprime Mortgage Crisis of 2007 and the COVID-19 pandemic, Microsoft has endured and even outperformed the market. As inflation fears are hanging over central banks and the global economy, Microsoft looks to prove its resilience yet again. Its Q4 2021 earnings proved this, as it announced US$51.4bn in sales, up 20% from a year previously, with profit rising 21% to US$18.8bn.
 
Microsoft was founded in 1975 by two college dropouts and childhood friends, Bill Gates and Paul Allen, who sought to create a business that could utilise their computer programming skills. Initially, they started by selling coding software to companies, however, in 1980, Microsoft developed its first computer operating system, winning a lucrative contract with IBM. This was the precursor for the ‘crown jewels’ as, five years later, Microsoft released the first edition of Microsoft Windows and, within a decade, Microsoft Office – containing Word and Excel. Even to this day, Microsoft Office dominates the productivity software market, with 89.2% of the market share in 2020. Coming into the turn of the millennium, Bill Gates began turning the company’s focus onto the World Wide Web, with the development of applications such as its web browser, Internet Explorer. It also ventured deeper into developing hardware, creating handheld PC devices, innovating the computer mouse and keyboard, and taking its first step into the gaming industry with the Xbox – finally challenging Sony and Nintendo who were the industry leaders at the time. Moreover, the company has turned to the exponentially growing cloud services and even has a share in the professional social networking space through its acquisition of LinkedIn. It remains very diversified in tech and still fares as trailblazer in the sections of tech it dares to deal in.
 
At the turn of 2022, Microsoft made its largest acquisition, an eyewatering US$75bn takeover of Activision-Blizzard, a video gaming publisher famous for its Call of Duty series…
 
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This article was taken from the February 2022 issue of Market Insight.
 
Please note that this communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned. The value of investments and any income derived from them may go down as well as up and you could get back less than you invested.
 
Microsoft: Can this Powerhouse Continue to Perform?
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