Dividends and Microsoft is worth more than Apple. How did that happen?

In the last days of November the value of Microsoft went higher than Apple, partly it was because the tech had a selloff and Apple shares fell. The other reason was Microsoft shares have been climbing. Hopefully readers have heard and invested in FAANG stocks which are Facebook, Apple, Amazon, Netflix and Google; if you have not if you own a fund then it likely owned some shares. Microsoft has the name left out but the stock has gone up 30% in the last 12 months. However for a time, Microsoft was trying to do get into the FANG themes but was not successful, it stock was essentially flat for a decade.

In an article by Steve Lohr of the New York Times News Service, he asks what happened? Similar to many stories there is a short term reason and a longer one.

The short term is Microsoft has been a case study of how a once dominant company can build on its strengths and avoid being a prisoner of its past. It has embraced cloud computing, abandoned smart phones and returned to its roots as a supplier of technology to business customers.

The payoff since Satya Nadella became CEO in 2014, the stock has tripled. Mr. Nadella has made cloud service a top priority and now the company is No 2 to Amazon. Microsoft’s share is 13% while Amazon remains 33%.

Microsoft has retooled its popular Office applications such as Word, Excel and PowerPoint in a cloud version. This caters to people who prefer to use software as an internet service and gives Microsoft a competitive entry against online app supplies such as Google.

Microsoft sold off or closed bad investments – it bought Nokia and then wrote it off.

The company has refocused its offerings and ideas toward what does business customers want and need? This helped drive up revenues to $110 billion and operating profit increased 13% to $35 billion.

Think of Microsoft are about utility – productive tools, whether people are at work or at home. Azure cloud service is for businesses and a platform for software developers to build applications.

Microsoft bought LinkedIn, the social network for professionals and GitHub an open software platform used by 28 million programmers.

Mr. Nadella wrote in his book Hit Refresh, we need to be insatiable in our desire to learn from the outside and bring that learning into Microsoft.

Linking to dividend paying stocks, Microsoft has been a dominant player for a long time and it remained important but somewhere in the background generating lots of money but not necessarily moving the stock. Recently, the company has changed which means it may not be in the consumer spotlight, but is in in the business spotlight and they pay their bills and many will grow. Microsoft is now firmly into helping businesses grow and as they grow, money continues to flow into their coffers and into your pocket.

There are more questions than answers, till the next time – to raising questions.

 

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