Microsoft CEO Satya Nadella speaks during a keynote address announcing ChatGPT integration for Bing at Microsoft in Redmond, Washington, Feb. 7, 2023.
Jason Redmond | AFP | Getty Images
When Satya Nadella replaced Steve Ballmer as Microsoft CEO in February 2014, the software company was mired in mediocrity. Its market cap was just over $300 billion.
A decade later, Microsoft’s valuation has swelled tenfold, to $3.06 trillion, making it the world’s most precious public company, ahead of Apple. It’s firmly entrenched as a frontrunner in key areas, equivalent to cloud and artificial intelligence.
As Nadella marks his 10-year anniversary on the helm, he’s widely praised across the tech industry for changing the narrative at Microsoft, whose stock fell 30% during Ballmer’s 14 years at the highest. In that era, the corporate was squelched by Google in web search and mobile and was completely left behind in social media.
Many tech industry analysts and investors would say that, thanks largely to Nadella, Microsoft is now set as much as be a powerhouse for the foreseeable future.
Nadella “is special and someone to be regarded as one among the GOATs amongst tech CEOs,” said Aravind Srinivas, co-founder and CEO of AI startup Perplexity, which has the backing of Amazon founder Jeff Bezos. The acronym GOAT stands for best of all time.
There are many obstacles in Nadella’s way as he pursues further growth.
Regulators are concerned about Microsoft’s power. Rivals are jealous. Some clients are skeptical about spending even more cash on the corporate’s AI tools once they already allocate a lot budget to so many Microsoft products. And Microsoft, together with its tech peers, has handled mass layoffs of late, cutting 10,000 jobs in early 2023, and eliminating 1,900 in January from its gaming division.
One in every of Microsoft’s biggest sore spots when Nadella took over was the closed nature of its products. Microsoft was known to defend its proprietary Windows and Office software and denounce open-source alternatives. Interoperability wasn’t the most well-liked word.
“There was just a little little bit of a take-it-or-leave-it culture,” said Aaron Levie, co-founder and CEO of cloud storage vendor Box, which spent its early years going directly after one among Microsoft’s products. Nadella has made the corporate more attentive to customers’ needs, Levie said. The 2 corporations now have multiple product integrations.
Larry Ellison, co-founder and executive chairman of Oracle Corp., speaks in the course of the Oracle OpenWorld conference in San Francisco on Oct. 22, 2018.
David Paul Morris | Bloomberg | Getty Images
Nadella’s Microsoft has also formed partnerships with a few of its fiercest rivals. In 2023 Oracle co-founder Larry Ellison visited Microsoft’s headquarters in Redmond, Washington, for the primary time, as the businesses made a joint cloud announcement. In a 2020 interview, Pat Gelsinger, then CEO of VMware, said offering his company’s software on Microsoft’s Azure cloud was akin to a “Middle East peace treaty.” Gelsinger now runs Intel, which makes chips for PCs running Microsoft Windows and clouds equivalent to Azure.
Within the Nadella age, Microsoft has also contributed to open-source projects, released software under open-source licenses and released a version of its Teams communications app for Linux.
Nadella has surprised people in other ways.
Michael Nathan was a senior director at Microsoft until 2016, when he left for a job in enterprise capital. Nathan said he told Nadella in regards to the opportunity after the 2 of them left a customer meeting in Silicon Valley. As an alternative of getting indignant or making the situation awkward, Nadella told him to take what he’d learned at Microsoft and share it.
“I used to be like, ‘What?'” Nathan said. “That was amazing. He totally lifted the burden of getting that conversation.”
He’s also decisive. In 2018, Nadella got here to consider in the concept of shopping for GitHub just 20 minutes after Nat Friedman, then a Microsoft corporate vp, began pitching him on it. Instantly, Nadella suggested that Friedman turn out to be GitHub’s recent CEO, Friedman said. Microsoft paid $7.5 billion for the code-storage startup.
Microsoft declined to supply a comment for this story.
No person would mistake Nadella for Ballmer, the showman. His predecessor was known for dancing on stage at conferences and hyping up crowds of 1000’s. Ballmer is now the owner of the NBA’s Los Angeles Clippers and might regularly be seen behaving similarly courtside.
Steve Ballmer, former chief executive officer of Microsoft Corp., gestures as he speaks during a news conference after he was introduced as the brand new owner of the Los Angeles Clippers in Los Angeles, California.
Kevork Djansezian | Bloomberg | Getty Images
While Nadella may not bring as much entertainment value, he’s proven to be more practical than Ballmer in relation to dealmaking. Along with GitHub, Nadella has made pricey acquisitions equivalent to LinkedIn, Minecraft parent Mojang, and Nuance Communications which have contributed to Microsoft’s top line. Ballmer was not so lucky. His aQuantive and Nokia deals were disastrous.
More recently, Nadella helped Microsoft land the $75 billion acquisition of game publisher Activision Blizzard, a deal that investors won’t know tips on how to assess for some time. And in AI, Nadella is credited for investing billions of dollars in startup OpenAI, resulting in product enhancements and cloud revenue from customers each recent and old, and giving Microsoft a leadership position in an emerging market.
Nadella is probably best known within the tech industry for pushing Microsoft deeper into cloud computing. Azure, which delivered 30% revenue growth in probably the most recent quarter, was began in the course of the Ballmer years. But Nadella brought it to life, transforming it from a research project right into a product, said Kevin Dallas, CEO of database software company EDB and a 24-year Microsoft veteran.
“I’m shameless in saying I have a look at him as a frontrunner that I’ve learned from, grown from,” Dallas said. “I proceed to observe him.”
In taking a look at the road ahead for the 56-year-old Nadella, listed here are a few of the biggest challenges in his way:
Relevance
Microsoft checked out buying TikTok within the U.S. in 2020, but nothing got here of those discussions. While some within the younger generations have Microsoft software at work, it is not necessarily what they grew up using and will not be what they like. The corporate must prepare for the era when Gen Z is in command of IT budgets. OpenAI’s ChatGPT, which some students use, could possibly be a start.
Retention
Some Microsoft employees have been there for over 20 years. Many will leave after far less time. For years, employees have said they’ll earn more money at other big tech corporations. Some have received higher compensation after leaving after which returning. Microsoft has $81 billion in money and might wish to use more of the stash to maintain talent — especially the highest tier — around for longer.
Products
Microsoft critics often say the corporate rarely gets it right the primary time with recent hardware or software and that it is best to attend for the third version. Reviewers didn’t take kindly to the unique 2012 Surface tablet, for instance. Today’s Surface gets higher marks, but it surely’s nowhere near the most well-liked tablet on Amazon — the iPad is. Microsoft stays weak in relation to constructing products in recent categories, a former executive said. The corporate’s dual-screened Surface Duo phones running Android have not caught on, and Microsoft Loop, a response to modern productivity apps equivalent to Notion, has yet to catch fire in app stores.
Regulation
Antitrust officials have recently blocked acquisitions at Adobe and Amazon. They tried and did not squash Microsoft’s purchase of Activision. But Microsoft’s big push in AI has come through an investment, not a purchase order. The Federal Trade Commission’s Lina Khan said in January that the agency will examine cloud providers’ investments in AI startups. Microsoft has also drawn inquiries in Europe over its cloud practices. Regulatory crackdowns are nothing recent at Microsoft, which infamously modified a few of its behavior following a high-profile case brought by the U.S. Justice Department within the Nineties.
OpenAI relationship
In regulatory filings, Microsoft calls OpenAI “our strategic partner.” The weird nature of the arrangement was on display in November, as Nadella worked time beyond regulation to get Sam Altman back on top on the startup after the board fired Altman suddenly. Microsoft and OpenAI compete to sell AI services to corporations and have a relationship that could cause internal tension. In allocating graphics processing units to OpenAI, for instance, Microsoft is typically depriving its other departments of them, two people conversant in the matter told CNBC. Altman told Nadella onstage at an event in November that the 2 corporations have “the most effective partnership in tech.” Nevertheless, OpenAI is not at all times satisfied counting on Microsoft as its cloud supplier, one among the people said.
Following the November brouhaha, Nadella was at the very least in a position to get Microsoft a seat on OpenAI’s board. An OpenAI spokesperson told CNBC that the corporate views Microsoft as a superb partner.
Next big thing
Nadella is consistently trying to find the subsequent category that may generate revenue and profit. The corporate’s HoloLens augmented reality headset, announced in 2016, hasn’t turn out to be an enormous hit. Nadella hoped that an AI Copilot added to the Bing search engine in February 2023 would convert into share gains, but Google stays the clear leader in that category. Nadella did say on a conference call this week that Bing gained share within the fourth quarter. While AI could be Microsoft’s next big thing, the corporate can have to proceed to search out recent ways to drive growth.
Nadella has plenty to maintain himself busy for now. Analysts on average see enough expansion to project a 12% gain within the stock price over the subsequent yr, in accordance with FactSet.
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