Microsoft Corporation (MSFT): Is Satya Nadella Biting More Than He Can Chew?


Satya Nadella, the new CEO of Microsoft Corporation (NASDAQ:MSFT) brought a lot of optimism for the company’s shareholder. A testament to this fact is the company’s stock price, which has climbed up by 23% to nearly $45 since his appointment as the CEO, a figure that it last touched in April, 2000.

Microsoft MSFT Offices Hyderabad

The Economist, recently did a story on the Microsoft’s CEO, titled ‘Cloud Lifting’ which elaborated on how Mr. Nadella’s vision of “mobile-first and cloud-first world” is only working partially for the company as even though the company’s cloud business is growing, the mobile business is dragging the company down, especially its recent acquisition of Nokia’s mobile phone division.

Microsoft Corporation (NASDAQ:MSFT) announced the acquisition of Nokia Corporation (ADR) (NYSE:NOK)’s mobile phone division last year, but the deal eventually saw its closure in April, this year. The company declared its fourth quarter results on July 22, in which the figures from the mobile phone division were also mentioned. The mobile phone division contributed $2 billion to the company’s revenues, but shaved off $692 million from its net income, making it stand at $4.6 billion, well below analysts’ expectations and below what it reported for the same quarter last year.

The cloud segment of Microsoft Corporation (NASDAQ:MSFT)’s business is going strong with spending by companies increasing by 147% year-over-year for cloud services. The company has also finally seen a growth in the PC market after years of downfall, which will help its most known product, the operating system, Windows, to have an increase in sales. Apart from PCs, Microsoft Corporation (NASDAQ:MSFT) is also trying to lure smartphone and tablet manufacturers by offering a royalty free license for screen sizes smaller than nine inches.

Even though Microsoft Corporation (NASDAQ:MSFT) announced that it would be laying off 18,000 employees, in line with Mr. Nadella’s promise of making Microsoft Corporation (NASDAQ:MSFT) leaner, the company is focusing on too many things at once. This, as the Economist rightly pointed out is only making the company leaner, not ‘narrower’.

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