Today’s hot, upstart tech company: Microsoft


Microsoft (MSFT) reported its third quarter earnings after the market closed on Thursday. The numbers were good, perhaps even a bit better than good. The hoary technology megalith reported earning $0.54 per share for the quarter, beating the consensus estimate of $0.48 by 12.5%. That's not something $377 billion companies do very often.

The earnings win is particularly impressive because the money is coming from Microsoft's growing penetration of three key markets: cloud computing, gaming (consoles and software) and mobile / tablet hardware. In all of these markets, Microsoft is taking on an unaccustomed role – that of challenger.

Of course, Microsoft's rising success in these ventures would mean nothing if desktop computer sales had vanished as futurists have been too keen to predict that they would over the last few years. Control of the desktop operating system (and Microsoft's grip on this appears well-neigh unchallengeable) should give the company many opportunities to support its other businesses. Microsoft has tried this twice before under its previous CEOs, and the means by which it did speaks volumes about the importance of a CEOs personal style.

Bill Gates is a wonderful philanthropist, but he was a ruthless businessman, and he stopped at nothing to use Windows to force other Microsoft software down the public's throats in the 1990s. I believe the company's actions at that time strayed well into the realm of criminality, and the US Justice department agreed, but Microsoft's lawyers won that fight.

Much more recently, under Steve Ballmer, there was Windows 8, which launched a flailing effort to turn the PC interface into that of a tablet so as to gain entrée into mobile phone and tablet market. To break the interface that more than a billion people use every day was so abominably stupid that it was easy to be confused into assuming it might somehow be… brilliant? Well, like most things that seem stupid, it wasn't brilliant, just stupid.

If Nadella finds the key to leveraging Microsoft's power, Microsoft could well be one of America's dominant technology companies for the next twenty years. And if he, or anyone who reports to him is listening, here's a hint: bullying won't work, and tricks won't work, but adding value for the consumer just might. 

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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