Market value briefly surpassed that of Apple. What did Microsoft do right?

Tencent "First Line" Ji Zhenyu posted from Silicon Valley on November 30

In recent years, Microsoft has been like a "giant that has been left in the corner." Although you can't ignore its existence, people still use the Windows operating system and Office software every day, but they talk about Apple phones, Google search, and Facebook mobile ads, and Microsoft is not included in these topics.

After being absent from this wave of mobile Internet trends, Microsoft is easily labeled as "old and heavy" by the outside world, and will soon be classified as another "giant that has been eliminated by the times." After all, such stories have been repeated in the past, and almost no one believes that Microsoft can stage a comeback.

When Microsoft's market value briefly surpassed Apple's this week, people were surprised to find that Microsoft has never fallen behind. Before surpassing Apple's market value, Microsoft's market value has been among the top five in the world. In the past five years, Microsoft's market value has nearly tripled. In the competition for a trillion-dollar market value, Microsoft has also kept pace with giants such as Apple, Amazon, and Google.

When Microsoft, led by Nadella, put forward the new phase of Microsoft's development slogan of "cloud first, intelligence first", it was the most prosperous period of mobile Internet development. Many people believed that this was a new breakthrough direction that Microsoft had to seek while strategically abandoning the mobile Internet business.

However, in less than three years, the industry has undergone tremendous changes. The smartphone market has reached saturation. After four consecutive quarters of sales decline, Morgan Stanley predicts that smartphone sales in 2018 will decrease by 3% compared with 2017.

Even as powerful as Apple, it is difficult to remain immune to industry trends. Recently, a series of news showed that the sales of Apple's latest iPhone XS series were not satisfactory, and supplier orders have been significantly reduced. Apple's stock price immediately suffered a sharp fall. Since exceeding US$1 trillion in August, Apple's market value has evaporated by nearly US$200 billion.

At the same time, a new industry is emerging. The cloud services market reached nearly 60 billion US dollars this year, but it is still less than 10% of the total potential market value considered by Goldman Sachs. Microsoft is the leader in this emerging industry, although it started earlier than Amazon. It was late, but Microsoft has been catching up after aiming at the direction of cloud services. From the end of 2015 to the present, Microsoft's share of the cloud service market has almost tripled to 13%. It belongs to the first group in the cloud service market with Amazon, and the third place Google has been far behind.

Cloud services have also brought huge financial returns to Microsoft. As the fastest growing department among all business sectors, cloud services have become the engine of Microsoft's performance growth and continue to increase Microsoft's overall profit margins. In its last fiscal year, which ended in June, Microsoft's operating profit margin was as high as 13%.

In just a few years, Microsoft is no longer the software giant with Windows as its core. Under Nadella's leadership, Microsoft has not been bound by the baggage of the past. At the beginning of this year, Microsoft's latest round of structural adjustments completely broke up the original Windows operating system department and re-divided the three major departments focusing on cloud, artificial intelligence and applications.

While its business focus is shifting, Microsoft's own mentality is also undergoing major changes. It no longer clings to its past glory, admits failure and decisively gives up on areas where it can no longer catch up. It is fully betting on cloud services and artificial intelligence, while showing an unprecedented openness to the outside world. In the past, you might not have been able to imagine that Microsoft would develop a version of its database software to run on its old rival Linux system. Nor could you have imagined that Microsoft, with its own smart voice assistant Cortana, would have Echo speakers with built-in Amazon smart assistant Alexa on store shelves. Nor could you have imagined that the product managers of Microsoft's applications would appear on the stage of Apple's WWDC developer conference to promote applications to appear on more platform terminals.

Microsoft's "rebirth" provides an excellent example of how to make the most of its strengths while avoiding the baggage of its past. Although it has been "left out" for several years, Microsoft has gained a rare development opportunity. It has abandoned the noise of the outside world, focused on the established strategic direction, and viewed competition and cooperation with a more open mind. The new "giant" Microsoft is no longer easy to ignore.

[Source: Tencent "First Line"         Author: Ji Zhenyu]