Satya Nadella: the 'poet' who regained the throne for Microsoft | Economy

Satya Nadella: the 'poet' who regained the throne for Microsoft | Economy

The Windows operating system It was an integral part of the computer industry for three decades. Dominated overwhelmingly the PCs and network servers. And it will continue to be so. But the winning horse of Microsoft is now in the management of the data that give life to the Internet, mobile phones and artificial intelligence. The opportunity was seen by Satya Nadella (Hyderabad, India, 1967), who reoriented the structure of technology to dominate the cloud and recover the glory.

Nadella is the third executive Microsoft runs since it was founded in 1975. He is a lover of poetry. His office in Redmond looks like a library. He can not live without books, he says. He appears on stage with a friendlier tone than his predecessor, the eccentric Steve Ballmer. It is even less controversial than Bill Gates, the co-founder. The personality change is reminiscent of its archenemy Apple. But, like the pragmatic and effusive Tim Cook, his leadership is clear and that allowed him to subject the largest software company in the world to a radical change.

He has been able to print to the group a new culture and personality that the market likes

When this electronic engineer took the reins in 2014, everything in Microsoft rotated around the operating system that made it ubiquitous in all computers on the planet. Gates and Ballmer were dedicated to defend the franchise at any cost, before regulators and against new rivals. That excess of zeal distracted them and caused her to be cut off from the battle for the mobile computing market. Nadella did not want to make the mistake again.

Although it was clear that Microsoft was going to be a sprinter, Nadella's first actions were met with a high degree of skepticism. Windows then looked like a sacred cow, which could not be sacrificed. Nadella, despite being a man of the house and his proximity to Ballmer, printed at Microsoft a new culture and personality that investors like. The technology has increased on the stock market by 16% this year. The upward curve is much more stable and consistent than that of Apple, which has allowed him to silently recover the throne of the largest company listed 16 years later. Today Microsoft is the leader with a capitalization of 777,200 million dollars (680,577 million euros).

The success of Azure

In that turn to renew itself, Nadella placed Azure – the data management service devised by Ballmer – at the heart of the new Microsoft's strategy to compete with Amazon, Google, IBM and Oracle. This activity is on track to overtake Windows in fiscal year 2021 as the group's main driver, according to KeyBanc Capital. These experts calculate that by then it will generate 26,400 million, charging customers for the use of their computing and storage resources. Microsoft does not offer precise figures about Azure, but it is estimated that it invoiced about 7,500 million in fiscal year 2018. That would be equivalent to 7% of total revenues compared to almost 18% of Windows, which registered sales of 19,500 million. The only reference we have is the rate of growth of this unit, which is 75% per year. The analysts of Evercore point out, in any case, that the growth in the data management business starts to moderate due to its size. A year ago the Azure service was advancing at a rate of 90%.

The transformation of Nadella to update Microsoft is not finished. Windows, Office and other products related to the old era of the PC continue to generate two thirds of the profits and a fifth of the income. One of his first decisions was to allow programs like Word to work on devices that use rival operating systems, including Linux, which Ballmer said was cancer. It also came off Nokia.

Has made decisions such as selling Nokia or opening programs to the competition

The first reaction of the analysts when the change occurred was to anticipate a smaller Microsoft. But what Nadella did was to adjust the organization to make it more open and vertically integrated at the same time. Instead of just devoting himself to developing his programs, he designed his own devices such as the Surface Book, which combines the power of a laptop and the functionality of a tablet. Or the HoloLens augmented reality glasses. And all this ecosystem of programs, devices and services is increasingly unified by the new artificial intelligence unit.

"His vision of how technology will be used and experienced is exactly what Microsoft needs," Gates said when the Nadella appointment was announced. The Microsoft he inherited was seen on Wall Street and in Silicon Valley as an increasingly irrelevant company, by the rapid change from desktop computers to mobile devices. It was a tremendously profitable business, which was not in danger of imminent death. But investors were wondering if it had entered a decline.

Regulator front

Another of the keys of Microsoft is that it depends less than Google or Facebook on the personal information of its users, the new regulatory front facing the technology sector. The Bing search engine and the MSN family portals generate revenue through electronic advertising. But they are not at the heart of their business as in their rivals, so it does not have the same incentive and gives it an advantage because of the market's perception.

Since its arrival, Nadella has managed to generate more value for shareholders than Uber, Airbnb, Netflix, Spotify or SnapChat, all together. The change that it printed in the corporate culture in Redmond is a case study due to its scale. Microsoft is more profitable than Apple when they compare their profit margins, of 30% and 22.5% respectively. It is also more diversified when you observe how your source of income is distributed. And although it seems ironic, it is no longer the objective of the regulatory yoke that has its rivals in its objective. But Nadella must still demonstrate that it is capable of achieving Amazon's efficiency in data management operations so that Azure is profitable.

Windows and Office allow you to cushion the increase in the cost of capital in the new business areas. The PC market is reluctant to die, true, but if it took a turn for the worse it could severely affect your accounts at a vital moment in Microsoft's transformation.


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