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Microsoft CEO Satya Nadella.
Software licenses and cloud services aren’t exciting, but they’re very good business.
We don’t usually think of “boring” as a compelling business strategy. When you think about what makes a successful company, you probably think of one that makes interesting products or introduces the world to something it hasn’t seen before. Neither of those is what anyone would consider boring.
For example, Apple isn’t boring. It didn’t become the most valuable company on Earth by being boring, it did it by making the iPhone — a device that changed everything about how we connect and communicate with the people in our lives. It’s not hard to draw the line between the iPhone and Apple becoming a $2-trillion company that makes more profit than any other company in history.
It turns out, however, that boring is actually a pretty good strategy.
Look no further than the fact that Microsoft just unseated Apple as the most valuable company in the world by being boring. I don’t mean that as an insult, but a quick look at the company’s most recent quarterly earnings, released last week, paints the picture:
Microsoft’s main revenue drivers come from its cloud computing business and Office productivity software subscriptions. That’s not exciting, it’s boring. It’s also very profitable and reliable as a source of revenue, two things that are very important to investors.
Microsoft has also done a brilliant job of tying together its ecosystem to create lock-in, similar to what Apple has done with services on the iPhone. In Microsoft’s case, it isn’t music subscriptions, iCloud, and iMessages. It’s Microsoft Word, Azure, and Teams.
Sure, Microsoft makes hardware products as well. I happen to think the Surface Pro 8 is really good. And, as a premium Windows device, the Surface Laptop 4 is a great option. But no one got excited about those devices the way they were when Apple introduced a new MacBook Pro a few weeks ago.