In late April, Microsoft valuation crossed the $1 trillion mark in stock market trading. While market fluctuations mean that all benchmarks can change from to day-to-day, this was still a historic moment. Microsoft joined Apple and Amazon as the only two companies to put twelve zeroes after the 1 on their market valuation. And Microsoft did it in a different way than either of their competitors.
Apple and Amazon’s path to a trillion was marked by dominance in one specific area. For Apple it was the I-Phone and for Amazon it was sales in their online store. Both companies generate more than half of their earnings through their primary area of strength. Microsoft is different. No single product or area accounts for even a third of total earnings, much less half. Microsoft’s balance makes their success more sustainable over the long haul.
That doesn’t mean they aren’t clear and identifiable keys to Microsoft’s success though. The most noteworthy is their success in cloud-based services. They’ve moved legacy clients to Azure and Office 365 products. Office 365 now accounts for 25 percent of the firm’s total earnings.
The shift is not accidental. This is the fifth year for CEO for Satya Nadella, who made reducing Microsoft’s reliance on the sales of Windows operating systems a key organizational priority. Windows accounted for only 18 percent of earnings in 2018.
The $1 trillion mark is admittedly as much show as it is substance. The market fluctuations pushed valuation back below that level almost as quickly as it rose above it. Microsoft’s own management team low-keyed the benchmark when it was hit.
But the overall value of Microsoft, the balanced way they have done it and the success of Nadella’s leadership over a five-year period are certainly all substance. If the showmanship of the $1 trillion benchmark called attention to the real success that lies beneath the glitter, then so much the better for Microsoft.