This article explores how Microsoft is designing their business for the long term growth and why investors may take interest in their stock.
Cash rich companies like Microsoft are well known for inorganic growth by making strategic acquisitions. This strategy helps in consolidating fragmenting market segments and as a result offering easier buying decisions and stability for customers. The strategy is also used for integrating end-to-end value chains to help reduce overall operating costs, optimize margins, reducing the middle man, improving time to market, and passing on the advantages to the end customers. Microsoft’s notable acquisitions over the years include:
- 2022: Activision Blizzard in video games for $68.7 billion.
- 2021: RiskIQ in Cybersecurity for $500 million.
- 2021: Nuance Communications in speech synthesis and speech recognition for $19.7 billion.
- 2020: ZeniMax Media in video games for $8.1 billion.
- 2020: Affirmed Networks in 5G networking for $1.35 billion.
- 2018: GitHub in software development for $7.5 billion.
- 2016: LinkedIn in professional social networking for $26.2 billion.
GitHub and LinkedIn bring largest networks for open source developers and professionals to Microsoft providing market segment access. GitHub further strengthens the leading developer tooling business of Microsoft led by Visual Studio. ZeniMax and Activision Blizzard bring the largest gaming studios under Microsoft umbrella stregnthening the Xbox value chain, content, and talent. While Affirmed Networks, RiskIQ, and Nuance Communications represent accelerating market segments in telecom, cybersecurity, and speech recognition.
Introducing Tech Trends Graph
One of the ways to analyze company strategy over the long term is to understand the macro technology trends within their industry and how these relate to each other when designing for future solutions. The Tech Trends Graph is based on the essential eight technologies identified by PwC and presents a possible scenario where these technologies converge around solution design.