Sales 2023: $ 51.519 billion (€ 47.645 billion)

Overview

Microsoft, part of the Big Five of the major technology companies (Alphabet, Meta, Apple, Amazon, Microsoft), was by far the largest company of all with a market capitalization of around three trillion US$ in April 2024 (ahead of Apple, around 2.5 trillion US$). Although the most successful products are the Windows operating system and the office software Microsoft Office, as well as the Xbox console as the main hardware product, Microsoft now makes over 40 percent of its sales with its server and cloud business.

In October 2023, Microsoft bought US game developer Activision Blizzard (ranked 34th in our ranking in 2022) for $68.7 billion, 21 months after the deal was first announced. Together with Microsoft's Xbox platform, this creates the world's third largest gaming companyTo classify the media group rankings for 2023, we take Microsoft's revenues from the "Gaming", "Search advertising" and "LinkedIn" divisions, added to Activision Blizzard's 2023 revenues.

General Information

Headquarters
One Microsoft Way
Redmond, WA 98052-7329
USA
Tel.: 001 425 8828080
Website: microsoft.com/en-us/investor

Branches of trade: Games, Advertising, Software, Cloud Computing
Legal form: Stock Company
Financial year: July 1st – June 30th
Founding year: 1975

Basic economic data Microsoft (in million US$$)

	2023	2022	2021	2020	2019	2018
total sales	211.915	198.270	168.088	143.015	125.843	110.360
Profit	72.361	72.738	61.271	44.281	39.240	16.571
Share price (in US$$, fiscal year end)	367,75	259,58	277,65	206,26	133,06	98,61
Employees	221.000	211.000	181.000	163.000	144.000	131.000

Microsoft media revenue (in million US$$)

	2023	2022	2021	2020	2019	2018
Gaming	15.466	16.230	15.370	11.575	11.386	10.353
Search advertising	12.208	11.591	8.528	7.740	7.628	7.012
LinkedIn	15.145	13.816	10.289	8.077	n/a	n/a
sum	42.819	41.637	34.187	27.392	19.014	17.365

Basic economic data Activision Blizzard (in million US$$)

	2023	2022	2021	2020	2019	2018
total sales	8.700	7.530	8.803	8.086	6.489	7.500
Profit	n/a	1.513	2.699	2.197	1.503	1.848
Stock price (year end)	n/a	76,55	16,53	92,85	58,67	47,17
Employees	n/a	13.000	9.800	9.500	9.200	9.900

Executives and Directors

Management:

• Satya Nadella, Chairman, Chief Executive Officer
• Judson Althoff, Executive Vice President, Chief Commercial Officer
• Chris Capossela, Chief Marketing Officer, Executive Vice President, Marketing and Consumer Business
• Kathleen Hogan, Executive Vice President, Human Resources
• Amy Hood, Executive Vice President and Chief Financial Officer
• Brad Smith, President
• Christopher Young, Executive Vice President, Business Development, Strategy and Ventures

Supervisory Board:

• Satya Nadella, CEO Microsoft
• John W. Thompson, Chairman
• Reid Hoffman, Partner, Greylock Partners
• Hugh Johnston, Vice Chairman, CFO PepsiCo
• Teri List, Former EVP, CFO Gap, Inc.
• Sandra E. Peterson, Operating Partner, Clayton, Dubilier & Rice
• Penny Pritzker, Founder and Chairman, PSP Partners
• Carlos Rodriguez, CEO ARDP, Inc.
• Charles W. Scharf, CEO and President, Wells Fargo & Company
• John W. Stanton, Chairman, Trilogy Partnerships
• Emma Walmsley, CEO, GlaxoSmithKline
• Padmasree Warrior, Founder, CEO and President, Fable Group Inc.

History

William Henry Gates III was born in Seattle in 1955, the son of a lawyer and a teacher. In 1967 he attended the prestigious Lakeside private school, where he met Paul G. Allen. In 1972, Gates and Allen, "bookish nerds," founded the company "Traf-O-Data," whose first assignment was to develop an analysis program to measure car traffic. A year later, the two went their separate ways. Allen attended Washington State University, while Gates went to Harvard to study. There he became friends with Steve Ballmer, who would become president of Microsoft in 1998.

According to the founding myth, the most important event in Microsoft's history was the January 1975 issue of the hobbyist technology magazine "Popular Electronics". The cover featured a picture of the most powerful minicomputer at the time, the Altair 8800, named after a place in the "Star Trek" universe and considered the forerunner of today's personal computer. "Popular Electronics" readers could order an Altair kit for $400. When Paul Allen read the article, he had a vision of a huge market for software he and Gates had programmed. In principle, the idea was to create a kind of bridge between the simple calculators, which were hardly usable for laypeople at the time, and end users. The duo developed a version of the BASIC ("Beginner's All-purpose Symbolic Instruction Code") programming language for the Altair. Allen and Gates sold their "Altair BASIC" to the Altair developer MITS (Micro Instrumentation and Telemetry Systems) with a sales contract that contributed significantly to Microsoft's later success. MITS was allowed to distribute the BASIC version on its computers, but had to pay the rights holders Gates and Allen a share of each computer sold.

In August 1975, Gates and Allen opened their first office in Albuquerque and named their company "Micro-Soft," short for "microcomputer software." A year later, the hyphen disappeared. They agreed: Allen would receive 36 percent of the company's shares, Gates 64 percent (after all, he believed he had made a greater contribution to software development). In its first year of business, Microsoft generated sales of 100,000 US dollars. In 1977, Microsoft expanded by producing its own version of BASIC for the computer manufacturers Tandy ("TRS-80"), Commodore ("PET") and Apple ("Apple II"). Bill Gates was so busy with his company that he dropped out of Harvard.

In 1978, the company headquarters were moved from Albuquerque to Bellevue, Washington (east of Seattle). At that time, Microsoft only employed twelve people, but soon broke the one million dollar sales barrier. In the early 1980s, decisive decisions were made. Gates' college friend Steve Ballmer joined the company, initially as assistant to the president. At that time, Microsoft shifted its focus from programming languages to operating systems. The most important customer was IBM, to whom Gates licensed an operating system based essentially on the QDOS software. The program was sold to other hardware manufacturers under the name MS-DOS. Annual sales soon exceeded eight million dollars.

The Windows operating system helped Microsoft achieve great success. Since 1981, when Apple and VisiCorp first presented so-called GUIs (Graphical User Interfaces) to the public, Microsoft was required to present a similar, graphical and mouse-supported operating system. It is clear that Gates was inspired by Apple's MacOS operating system when developing Windows; Apple CEO Steve Jobs had personally shown Gates prototypes of the Macintosh. When Windows 1.0 came onto the market in 1985, the program was buggy and very slow. In principle, the first version of Windows was an extended form of MS-DOS. In order to improve Windows, Gates met with Apple for secret negotiations and licensed some features of MacOS, such as the "Recycle Bin", overlapping windows and multitasking functions. In return, Apple received guarantees that Microsoft would also develop its word processing program Word for the Macintosh computer and postpone the release of Excel until 1986.

For reasons of space, Microsoft moved to a 12-hectare site in Redmond, the district next to Bellevue, in February 1986, just a few weeks before its IPO on March 13. The "Microsoft Redmond Campus" was built, and the company's headquarters are still located here today. It should be mentioned that co-founder Paul Allen left Microsoft in 1983 after being diagnosed with lymphoma. In 2000, he also resigned from the supervisory board.

The Windows version 2.0 from 1987 was almost identical to MacOS, which was recognizable even to laypeople because it included icons representing files for the first time. Apple was of the opinion that the licensing deal was limited to Windows 1.0, accused Microsoft of copyright infringement and sued the company. The result was the six-year mammoth trial "Apple Computer, Inc. vs. Microsoft Corporation". The main accusation made by Apple's lawyers was that Microsoft had copied the copyrighted "look and feel" of the Macintosh operating system. Microsoft, on the other hand, claimed that Apple had only started the lawsuit to obtain the intellectual property rights for graphical user interfaces in general. In 1994, the responsible court rejected all of Apple's accusations, apart from a few details.

In 1995, Windows 95 was launched, and seven million copies were sold in the first five weeks. These were the years of "unbridled growth" when Microsoft achieved a virtual monopoly position. 80 percent of all computers worldwide ran a Microsoft operating system. Online expansion also began with the "Microsoft Network" (MSN), which after seven months was the world's most successful Internet service provider with over a million users in more than 190 countries. In the same year, MSNBC was founded, a 24-hour news channel from NBC and Microsoft. The travel service Microsoft Expedia also went online and Microsoft bought the email service Hotmail for 400 million. According to surveys, Microsoft was the most admired company in the USA at the time.

In the 1990s, Microsoft used its market power and bundled its operating systems with its own Internet Explorer browser. This resulted in an antitrust lawsuit in 1998. The accusation: From 1995 to 1998, Microsoft had "unfairly suppressed" the competing browser Netscape Navigator. The matter would be remembered as the "browser wars" and at the end of which Microsoft was issued with a warning letter. But it was not over yet, as we will see. In 1998, Windows 98 came onto the market, and in 1999 the company recorded annual sales of almost 20 billion dollars. The eight percent share of the capital held by Steve Ballmer (born 1956, Gates had hired him in 1980) was worth over a billion dollars in 1993. In 1998, Gates made him President, his successor as CEO in 2000.

After another antitrust lawsuit, a ruling in 2000 led to a decision to split up Microsoft. However, this never happened after George W. Bush, US President since 2001, appointed a new head of the US antitrust authority. The ruling was overturned and Microsoft was able to continue with the controversial product bundling (now with the Windows Media Player). In the same year, the company entered the video game market with the development of the Xbox console and was able to successfully establish itself on the market alongside Nintendo and Sony.

The "browser wars" ended in 2003 when Microsoft paid $750 million to AOL Time Warner as part of a settlement (AOL had taken over Netscape in 1998). But in March 2004, the next fine was imposed. Again, it was about monopoly abuse (this time the bundled Windows Media Player). The European Union imposed a fine of 497 million euros with the condition that new versions of Windows XP should only be offered without the Media Player.

The boom years came to an end around 2007. Microsoft missed the opportunity to get into the "next big thing" of the smartphone, leaving the development of an operating system for mobile devices to Google and Apple. In 2008, the European Commission imposed another fine (this time for 899 million euros). Microsoft had simply refused to comply with the fines and requirements imposed in 2004. In 2012, the company posted its first quarterly loss, and in 2013, the next EU fine was 561 million euros, because it had not included a competing browser with the Windows 7 operating system.

Although Microsoft still made huge revenues, its core business was declining. Instead of driving innovation, and despite buying Skype (2011 for $8.5 billion) and Nokia's mobile phone division (2014 for $5 billion), Microsoft simply copied the competition, and to no avail. The iPod and iPhone clones Zune and Kin quickly disappeared into obscurity. Microsoft completely missed the transition to the mobile Internet: in 2014, the company's smartphone operating systems only had a small market share of four percent.

In 2013, Steve Ballmer announced his resignation and Microsoft shares immediately rose by ten percent. In 2014, he resigned and was replaced by Satya Nadella, who was 46 at the time. With him came a new strategy, a "new Microsoft", as the press put it. The change was that money would no longer be made by selling regularly updated operating systems and office programs, but by "using software as a service over the Internet, including computing power and storage space". Nadella's mantra: "Mobile first, cloud first". Other signals that Microsoft sent under Satya Nadella: the $26 billion takeover of the Californian career network LinkedIn on December 8, 2016 and the "Holo Lens" data glasses project, a revolutionary new user interface according to Nadella. If virtual reality technology really is the next big thing Microsoft wants to be able to keep up with the competition from Facebook (Oculus) and Sony (Sony VR).

On October 15, 2018, co-founder Paul Allen died at the age of 65 after a long battle with cancer.

management

Satya Nadella, previously head of the cloud division, has been Microsoft's CEO since February 2014. After Bill Gates and Steve Ballmer, Nadella is only the third boss in the company's history. With his cautious manner, he seems to be the opposite of his sometimes choleric predecessor Ballmer. Nadella comes from Hyderabad, India, and was a manager at the hardware manufacturer Sun Microsystems (now Oracle) before moving to Microsoft in 1992. One of his first official acts was to demand a "fundamental cultural change" from employees in a circular email. He then announced that Microsoft would now focus on the cloud services business. At one of his first appearances, Nadella presented his "One Windows" strategy, according to which the operating system would be implemented on computers, smartphones, and the Xbox games console.

Bill Gates, world-famous Microsoft founder, with a fortune of $98 billion in 2020, the second richest person in the world (after Jeff Bezos) according to Forbes and married to programmer Melinda French in his first marriage since 1994, announced his retirement from day-to-day business in 2006 and gave up his position as chairman of the board in 2014. Today, philanthropist Gates devotes himself mainly to "The Bill & Melinda Gates Foundation", by far the largest private foundation in the world. On May 3, 2021, however, Bill and Melinda Gates announced the end of their marriage. According to the Wall Street Journal, French Gates had already met with divorce lawyers in October 2019 after her husband's business dealings with sex offender Jeffrey Epstein, who was charged in 2019 (and died in custody on August 10, 2019, presumably by suicide), became known.

Business Units

"Productivity and Business Processes“ generated sales of 53.9 billion US dollars in 2021, including with the Office 365 software package (as a subscription) and the social network for business contacts LinkedIn (774 million users, as of: 2021 annual report).

"Intelligent Cloud“ (cloud computing platform Azure) generated sales of around 60 billion dollars in 2021.

With "More Personal Computing” Microsoft generated revenue of $54 billion in 2021. The segment includes the Windows operating system, devices (including the Surface tablet PC family), the Search business (the search engine Bing, Microsoft Advertising) and gaming (Xbox hardware and software). Microsoft says: "Three billion people around the world play games. Games are now the largest category in the entertainment industry. We are expanding our capabilities to reach every single one of them."

For the classification in the media group ranking, only the sales of the “Gaming”, “LinkedIn” and search engine advertising sales are taken into account.

Current developments

"We want people not just to need Windows, but to choose Windows and love Windows," said Satya Nadella, alluding to an "emotional brand deficit." Everyone knows the brand, but everyone associates it only with software, and constantly appearing error messages and advertising banners. There is a lack of cult products with the feel good-potential from Apple or "magic moments" that Nadella is particularly hoping for from "Windows Holograms" to expand the two-dimensional screen to three-dimensional virtual reality. Or as chief developer Alex Kipman described it: "From small to large to no screen at all". Like the HoloLens data glasses, "the world's first holographic PC".

Every year in October, Microsoft hosts the "Surface Event" to present new hardware products. In 2019, there was a surprise: After the disastrous experiences with the colorful Lumia devices and the Windows 10 Mobile operating system, Microsoft wants to return to the smartphone market. After years of rumors about a "Surface Phone," the time has now come. The foldable "Surface Duo" was presented. What Redmond has learned from past mistakes: This time, they are using Google's "more versatile and sophisticated" Android operating system. And on November 10, 2020, the "Xbox Series X" game console came onto the market.