Microsoft Corporation
Microsoft is a major technology company and one of the most successfully diversified companies. I choose Microsoft Corporation for my research because it has existed for long as compared to other competitors like Apple and Google, which were not players back then. Apple and Google are loved and cherished, but Microsoft is always the best option for firms because of its quality and up to date technology. Microsoft in known for always keeping up with the competition by incorporating the best features of their competitors into their own and its quality keep on improving. Businesses’ speed, performance, and productivity have already been catered by the corporation. Also, Microsoft technicians are easier to find than its competitors. One sure thing is that Microsoft is going nowhere; they have billions of money, and they produce new products every year. Microsoft Corporation is a giant company with millions of customers, and it is going to be around in future. In this paper, I will provide a deeper understanding of the company by exploring its history, its products, and services, its marketing strategies and financials profile.
Company History
Microsoft was originally founded by Bill Gates in 1975 after dropping out of school at the age of 19 and teaming up with Paul Allen, his high school friend, to sell a version of programming language BASIC. Gates had discovered the ability of the language to run computers of that time during his programming class when studying BASIC. Gates and Allen were programming enthusiasts and used this energy to make BASIC compatible with MITS Altair, which was released at that time (Lange et al. 67). They succeeded and were able to sell the product to MITS who accepted, marketed, and distributed it under the name of Altair Basic. This deal inspired Gates and Allen to start their own software company on April 4, 1975, with Gates as the CEO.
The company was originally called “Micro-soft”, a name that was used by Bill Gates in July 1975 in a letter to Paul Allen referring to their partnership. This name was registered on November 26, 1976, with the secretary of state of New Mexico. In 1977, the company was re-registered with the name Microsoft Corporation; Gates was appointed the president, and Allen became the vice president. Later on, Allen left the post but remained on the Board of Directors. The company opened an office in Japan called ASCII Microsoft. Bill Gates moved the Company to Seattle in 1979 where he started developing software that allowed others to write programs. In 1980, IBM chose Microsoft to write the operating system of its new machines giving birth to the modern personal computer. The company went public in 1986, and by the next year, Bill Gates emerged the industry’s first billionaire. In 1995, Gates paid $1.5 billion dollars to be antitrust for acquiring his personal finance. The following years Gates did a couple of projects, namely introducing the Microsoft network that licensed the Java Web Programming Language, introducing its Internet Explorer, and launching its online travel site, which was named Expedia.com. The company faced problems launching these programmers. For example, Sun claimed that Java version was incompatible including being accused of investing $5 billion for the minority stake in AT&T as a strategy to acquire cable operator Media. In the same period, Microsoft also bought Windows, technical drawing software Visio at the cost of $1.3 Billion, and sold a portion of Expedia to the public.
Ballmer was named the new CEO of the company appointed by Gates in 2000 who remained the chairman. The company continued facing lawsuits. At the end of 2000, it was charged with using its Monopoly powers to violate the antitrust laws. This led to Microsoft signing to license its Windows operating Systems, stop offering exclusive contracts to manufacturers, and allow its software be included in the operating system. The lawsuits did not stop there. In 2002, Netscape sued the company on the same monopoly bases. In 2005, the company announced its plan of reorganization that intended to streamline its decision-making and enhance the execution process across its divisions (Stross 16). In 2008, Microsoft partnered with mobile device makers including Hewlett-Packard and Motorola where they would develop computers and mobile devices that used the Microsoft Windows and software. By 2012, Microsoft had 94,420 employees throughout the world and net revenue of $74, 30 billion US dollars (Manes et al. 12). The company had five divisions, namely Windows and Widows Live Division, Server and Tools Division, Online services Division, Microsoft Business Division and the Entertainment and Devices Division.
Going public in 1986 was a lifetime decision that made Gates a $350 millionaire at age 30. According to Wallace et al. (21), “On March 13, 1986, Microsoft had a highly successful initial public offering at an offer price of $21; by the end of the day, the stock price had risen to $35.50, and Bill Gates made the headlines as the wealthy owner of 45 percent of the corporation’s stock.” If one had the ability to invest 100 shares back then at the price of $22 and maintained the investment for 30 years, it would have grown to more than 29,000 shares over the course of the several stock splits and be worth about three-quarters of a million today. Today Microsoft institutional holdings are 73.47% with about 2,487 holders. According to 2016 report on dividend growth of the powerhouse, Microsoft’s biggest assets are its net cash, which stands at $60, and when compared to the $100 billion gross, it shows significant financial flexibility that keeps the pay-outs increasing. In March 2016, the tech powerhouse yielded 2.7% with a fantastic cushion ratio. On its last quarter result on July, the company’ cloud revenue reached $12 billion on an annualized rate basis, which is 13% of its revenue (Roumeliotis 20). Although Microsoft has been faced with a poor rating at some points in its life due to the competition presented by other tech companies, the powerhouse has been significantly growing over the years, and its performance is expected to keep improving in future.
Company Products
Microsoft offers many products, services, and devices, which are all uniquely positioned to working together. The company has a tremendous breath and height of products lines they offer, which brings more than a billion dollars. Gawer (419) divided the Microsoft’s product into seven main families, “Windows, servers, Business Solutions, Xbox Game Console and Games, MSN, Developer Tools and Windows Mobile.” Of all the products offered in these families, there are those that are most important as credited by many buyers. These products include Windows, Office, Exchange, SharePoint Sql Server, Windows server, Visual Studio, Xbox, Bing, Dynamics, Systems Centre, and Skype (Azure et al. 45). Windows has been criticized by some people, but the operating system is doing quite well. In 2012, the company reported that it had sold 400 million copies of its latest version of Windows 7. The problem with PC growth is that it is slowing down, but Microsoft continues to invent new versions including the new Windows 8 and 10, and the company remains to watch how the market responds to this version. The other most important product is the Office. Companies find their Office franchise very important. Microsoft has been able to ship 100 million copies of it since 2010 after the product was released in 2010 (Winston 2). The exchange is the most widely adopted enterprise email platform. SQL Server is a key pillar of the Microsoft Server and Tool Business. Revenue for this database increased by 20% in 2011, and the company continues to introduce better versions of it.
Windows Server is a core product to companies for authenticating services through Active Directory and Virtualization as well as providing tools for products like Windows Storage Sever. Visual Studio enables Microsoft developers to target the company’s latest platforms including various Windows versions. Microsoft also has such engine, Bing, which succeeded to grab about 14% share of the search market in 2010. Among the products that highly contribute to Microsoft revenues is the System Centre, which brings more than $1 billion in revenue. This product is used to manage hardware and software running in enterprises datacentres. Skype, on the other hand, has enabled consumers and enterprises to have real-time voice and video communications. It has been embraced well since it was introduced. In 2010, Skype brought gross revenue of $860 million to the company. The only product that is not close to generating a billion dollar in revenue is Windows Azure. But the product is very important to Microsoft consumers and enterprises in transitioning their systems to the cloud, and the failure or success of this product has a huge implication for the Microsoft.
Company Services
Services provided by Microsoft corporations include Microsoft product consulting services. The company has a diverse group of technical architects, engineers, consultants, and supports professional who ensure enterprises successfully, deploy, and adopt Microsoft technologies. The second service provided by the company is Cloud Vantage services, which help the organisation to transition their processes and infrastructure to the cloud through professional guidance. Thirdly, there is Business and Mission Critical Service, which help enterprises strategize, plan, and deploy application platforms efficiently. The other service is Client Solutions, which designs, plans, and deploys desktop operating systems, office, and customer applications using App-V. Other services provided by the company are Dynamics for implementation of Microsoft Dynamic, Business productivity services, and finally, Voice service, which facilitates customer voice communication, conferencing, online collaborations, and instant messaging (Gawer 429). Microsoft is committed to bringing decades of collective experience, knowledge, and professionalism that will help customers to use technology to do great things.
Company Marketing
Marketing is important in every business whether it is a new company or already established one like Microsoft. Companies need to build their brands awareness all the time to keep up with the face of competition, and for tech companies, it is not an option considering how quickly technology keep advancing with continued production of new inventions (Weed 14). One marketing strategy of Microsoft is delivering the right services at the right time by strengthening technology, which gives their customers an implication of focus and business aligned organization thus looking at their every next move (Gawer et al. 420). They try to make their products unique by designing them in a way that competitors cannot imitate, and this is one of the Microsoft’s core competencies, which makes customers perceive benefits associated with their products.
Microsoft has successfully employed networking strategy. This is by making Windows versions compatible to each other. Documents can be opened on most of the computers, which work for the big number of customers using Microsoft across the world. Microsoft is also customer focused. One of the reasons the company is working and customers cannot abandon it is because it can provide customer support both offline and online. If your computer crashes, you know the reason; and if you are a technician, it is easy to rectify it. Even a 10 year old can rectify Windows. In addition, Microsoft products are easy to use even by the youngest. For example, for Nokia mobile phones, the OS has always been easy to access. The start button has always been the same over time.
Microsoft has also been rebranding its products and services to logos, which have enabled it to reposition itself in prioritising value to enrich the life of its customers worldwide. In fact, Microsoft operating system and several softwares are the best positioned by individuals across the globe. Because of this brand value, customers look forward to every product it launches and positions it at the top. There are some cases where Microsoft products are not always positioned as the best. For example, Microsoft mobile phone vs. Samsung or Apple in the smart phone market. Android has benefited from high demand around the globe. More users have been considering purchasing Apple products because of its distinguished features. The problem with these platforms however is compatibility. Compatibility has been an issue from the past and still is. All new apps have been web based and run well only on standard based browsers. Microsoft, therefore, remains the only company that has been considering compatibility issues. Microsoft’s OS is installable on any PC or laptop, and there is no hardware binding on it, which is the key problem with Apple smartphones (Arthur 11).
Another marketing strategy Microsoft has adopted is modelling new products as a better version of the previous ones. Microsoft learns and rectifies problems of the previous products. For example, looking at Windows, XP has the most security problems, Windows Vista had holes too, it upgraded to Windows 7 with quite less security issues, and then Windows 8 with even less number of drawbacks, and the trend is expected to continue towards perfection. The upgrade has always been a speeded up process as Microsoft values that people need security. In fact, Microsoft focuses on improving their products rather than releasing innovative products except for the Kinetic gaming system for X-Box. Microsoft has been spending billions of dollars doing research, development, and acquisitions over the last decade for new breakthroughs to the public.
The company also promotes its products, which are in the high competition segments like Lumia phone with Windows, which is a collaboration between Nokia and Microsoft. For online products, Microsoft uses digital marketing and advertising to make them known and bought (Nayyar 56). These promotions and advertising always pushes on Microsoft’s key attributes, which are reliability and usability of its products. These are some of the strategies of Microsoft that has helped it be among the best brands in the world. Overall, Microsoft marketing strategies has positioned it perfectly since its inception from the perspective of customer acceptability and reliability. It has enveloped to a model that has been universally accepted and adopted.
Company Financial Profile
Microsoft has been able to produce a continuous positive net income and increased cash flow. In regard to stock prising, in the fiscal year of 2015, the highest price was $50.05 while the lowest price was $40.12. In 2014, the highest price was $42,29 while the lowest price was $30.84. In 2013, the board of directors approved share repurchases of $40 billion, more than 50% of which was paid in cash. In 2014, 175 million shares were repurchased, 128 million out of which were sold at $4.9 billion and 47 million shares repurchased at $1.5 billion. In 2015, the board of directors declared the following dividends made out of the shares: a total of $2,547 in September 2014 and $2,532 in December 2014. In March and June 2015, the total dividends were $2,496 and $ 2,488 respectively (Annual Report 2015).
According to the 2016 annual report, the company generated $85.3 billion in revenues, $52.5 billion in gross margin, and $20.2 billion in operating income. Adjusting all expenses including Windows 10 deferrals and restructuring expenses, the revenue was $92.0 billion with 27.9 billion in operating income. Microsoft maintained its commitment to shareholding return as it increased its innovations and geographical expansion. In that regard, in 2016, the total cash returns on shares were $26.1 billion, which is up to 12% from 2015. This financial profile shows how the company has built a momentum in its reports for the past two years. This is considering the challenges it has faced. For example, Firefox had blunted Internet Explorer dominance, and the Microsoft’s Bing has never managed to come close to Google. The Microsoft Division online services had been continuously losing since 2006 with a total online services loss worth $726 million in 2011 (Roumeliotis et al. 33). Microsoft has, however, managed to raise its assets value from $41 billion in 2011 to $181.87 billion in the first quarter of 2016.
In conclusion, Microsoft is one of the most innovative companies that have enhanced better living of people. The company has come a long way from settling lawsuits to being the most powerful software company today. Microsoft has been advancing its technology over the years by producing great products. Its strategies and innovative breakthroughs have enabled it to exist for many years, and it will continue to be around in many years to come. This research has improved my knowledge on Microsoft in learning what the company has reached since its inception starting from its interesting history of keeping up with the competition to today being one of the most powerful tech companies in the world. I was afraid of discovering and uncovering potholes that would discourage readers on buying its products, but the amazing thing is that the company stands out as the most reliable with its services and support. Its tremendous growth even encourages me to have shares with it one day, and if I am fortunate to have my own enterprise, I will not think twice about investing in Microsoft for the assured speed, performance, and productivity.
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