Microsoft CEO Satya Nadella hits 10-year anniversary

When Satya Nadella replaced Steve Ballmer microsoft The software company, which he took over as CEO in February 2014, was mired in mediocrity. Its market capitalization was just over $300 billion.

Ten years later, Microsoft’s valuation had ballooned tenfold to $3.6 trillion, making it the world’s most valuable publicly traded company, surpassing Microsoft. apple. We are firmly positioned as a leader in key areas such as cloud and artificial intelligence.

Mr. Nadella, celebrating his 10th anniversary in office, is widely praised across the tech world for changing the outlook on Microsoft, whose stock price has fallen 30% during Mr. Ballmer’s 14 years at the top. During that time, the company was influenced by: Google It was completely left behind on web search and mobile, and completely left behind on social media.

Many tech industry analysts and investors will say that Microsoft is in a strong position for the foreseeable future, thanks in large part to Mr. Nadella.

Nadella is “a special person and someone who should be considered one of the GOATs among tech CEOs,” said Aravind Srinivas, co-founder and CEO of AI startup Perplexity. Amazon Founder Jeff Bezos. The acronym GOAT is best ever.

Many obstacles stand in Nadella’s way as he aims for further growth.

Regulators are concerned about Microsoft’s power. Rivals get jealous. Some customers are skeptical about spending even more money on the company’s AI tools when they already have large budgets for so many Microsoft products. And Microsoft, along with its tech peers, has been dealing with mass layoffs in recent days, cutting 10,000 jobs in early 2023 and cutting 1,900 from its gaming division in January.

One of Microsoft’s biggest problems when Nadella took over was the closed nature of the product. Microsoft was known for defending its proprietary Windows and Office software and denouncing open source alternatives. Interoperability wasn’t the most popular word.

“There was a bit of an adopt-it-or-leave-it culture,” said Aaron Levy, co-founder and CEO of the cloud storage vendor. boxspent his early years directly pursuing one of Microsoft’s products. Levy said Nadella allows the company to be more attentive to its customers’ needs. The companies are currently integrating multiple products.

Mr. Nadella’s Microsoft also has partnerships with some of its most powerful rivals. in 2023 oracle Co-founder Larry Ellison made his first visit to Microsoft’s headquarters in Redmond, Washington, as the two companies made joint cloud announcements. 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.” said.Mr. Gelsinger is currently running intelmakes chips for PCs running Microsoft Windows and clouds like Azure.

During Nadella’s time, Microsoft also contributed to open source projects, releasing software under open source licenses and releasing 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 moved to venture capital. Mr. Nathan said he told Mr. Nadella about the opportunity after the two returned from a client meeting in Silicon Valley. Instead of getting angry or making the situation awkward, Nadella told him to take what he learned at Microsoft and share it.

“I was like, ‘What?'” Nathan said. “That was amazing. He completely took the burden off of the conversation.”

He is also decisive. In 2018, Nadella, then Microsoft’s corporate vice president, told Nat he started believing in the idea of ​​acquiring GitHub just 20 minutes after Friedman started pitching him about GitHub. Friedman said Nadella immediately suggested that Friedman become GitHub’s new CEO. Microsoft paid $7.5 billion for a code storage startup.

Microsoft declined to comment on the matter.

No one would mistake Nadella for showman Ballmer. His predecessor was known for dancing on stage at conferences and thrilling crowds of thousands. Ballmer is currently the owner of the NBA’s Los Angeles Clippers and is often seen doing the same thing courtside.

Nadella may not bring as much entertainment, but he has proven to be more capable than Ballmer when it comes to making deals. In addition to GitHub, Nadella has made big-ticket acquisitions such as his LinkedIn, his Minecraft parent company Mojang, and Nuance Communications, which are contributing to his Microsoft revenue. Mr. Ballmer was not so lucky. His aQuantive and his Nokia deals were disastrous.

Most recently, Mr. Nadella helped lead Microsoft’s $75 billion acquisition of game publisher Activision Blizzard, a deal that investors won’t know what to make of for the time being. And in the field of AI, Nadella has invested billions of dollars in his startup OpenAI, bringing product enhancements and cloud revenue from new and old customers, giving Microsoft a leadership position in emerging markets. It is rated as.

Nadella is perhaps best known in the tech industry for pushing Microsoft deeper into cloud computing. His Azure, which saw a 30% revenue increase in the most recent quarter, was founded during Mr. Ballmer’s time. But “Nadella made it happen and turned it from a research project into a product,” said Kevin Dallas, his CEO at database software company EDB and a 24-year Microsoft veteran.

“I’m shameless in saying that I look at him as a leader that I learned from and grew from,” Dallas said. “I keep seeing him.”

Considering the path ahead for the 56-year-old Nadella, there are some of the biggest challenges ahead of him.

microsoft had considered acquiring TikTok in the US in 2020, but nothing came of the discussion. Some younger generations may be using Microsoft software for work, but it may not necessarily be what they’ve used or what they prefer. Companies must prepare for the era when Gen Z will be in charge of his IT budget. His ChatGPT in OpenAI, which some students are using, could be a start.

Some Microsoft employees have been with us for more than 20 years. Many leave in much less time. Employees have long argued that they could make more money at other big tech companies. Some people received higher compensation after returning from retirement. Microsoft has $81 billion in cash and may want to leverage that stash further to retain talent, especially top talent, for the long term.

Microsoft critics often argue that the company rarely does new hardware or software well the first time, and that it’s best to wait for a third version.Reviewers were not happy with the original work. For example, the 2012 Surface tablet. The current Surface has higher ratings, but it’s nowhere near Amazon’s most popular tablet. iPad teeth. One former executive said Microsoft remains weak when it comes to developing new categories of products. The company’s dual-screen Surface Duo phone, which runs Android, hasn’t caught on, and Microsoft Loop, its answer to modern productivity apps like Notion, hasn’t caught on in app stores yet.

Antitrust authorities recently blocked acquisitions of the following companies: Adobe and Amazon. They tried unsuccessfully to block Microsoft’s acquisition of Activision. But Microsoft’s big push into AI came through investments, not acquisitions. In January, Lina Khan of the Federal Trade Commission announced that the agency would investigate cloud providers’ investments in AI startups.Microsoft also drew Inquiries in Europe About cloud practices. Regulatory crackdowns are nothing new for Microsoft, which infamously changed some of its actions following a high-profile lawsuit brought by the U.S. Department of Justice in the 1990s.

Microsoft refers to OpenAI as “our strategic partner” in regulatory filings. The unusual nature of this arrangement was put on display in November as Nadella. After the board abruptly fired Altman, he worked overtime to bring Sam Altman back to the top of the startup. Microsoft and OpenAI compete in selling AI services to enterprises and have a relationship that can cause internal tensions. For example, when allocating graphics processing units to OpenAI, Microsoft sometimes takes them away from other divisions, two people familiar with the matter told CNBC. Mr. Altman told Mr. Nadella on stage at an event in November that the two companies have “the best partnership in technology.” But OpenAI isn’t necessarily happy with relying on Microsoft as its cloud supplier, one of the people said.

After the November turmoil, Nadella was at least able to secure a seat on OpenAI’s board at Microsoft. An OpenAI spokesperson told CNBC that the company considers Microsoft to be a very good partner.

Nadella is always looking for the next category that can generate revenue and profit. The company’s HoloLens augmented reality headset was introduced in 2016, but it wasn’t a huge hit. Mr. Nadella is The addition of AI Copilot to the Bing search engine in February 2023 is likely to increase its share, but Google remains the clear leader in this category. Nadella did say on a conference call this week that Bing increased share in the fourth quarter. AI may be the next big thing for Microsoft, but the company will have to continue to find new ways to drive growth.

Nadella has plenty to keep busy at the moment. On average, analysts expect the economy to expand enough to predict a 12% rise in stock prices over the next year, according to FactSet.

clock: Microsoft is ahead of its competitors “so far” and gaining market share, Jefferies’ Till says.