Despite its success under CEO Satya Nadella, Microsoft Corporation (NASDAQ:MSFT) is still losing the “great game” of technology.
A market cap of nearly $530 billion sounds great, but the company’s sales peaked in 2015, and it will be hard-pressed to match that performance in 2017.
Apple Inc. (NASDAQ:AAPL) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) are now both bigger by market cap, while Amazon.com, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) are coming up fast on the outside.
MSFT stock is up over 80% since Nadella’s ascendance in 2014, but Facebook is up 133% and Amazon a whopping 162%. Windows and Office no longer dominate as they once did. Microsoft’s Azure cloud still trails Amazon’s, by a lot. Facebook and Google are both bigger in media.
Microsoft’s annual developer conference last week, called Build, offered another chance to turn things around.
The new strategy is to become glue.
The Glue Strategy for Microsoft
By that I mean Microsoft will now try to connect the islands of technology built by its rivals, with developer tools that make it essential. Nadella detailed this in his conference keynote.
Microsoft OneDrive, for instance, will now offer Offline Folders that can be saved to Apple iOS or Google Android devices. OneDrive for iMessage will let iPhone owners share files, folders and messages, and its Project Rome will allow iOS to work with Microsoft Graph.
MSFT stock wants its Fluent Design to be a new “language” for user interfaces, based on concepts from art rather than engineering. This will let it link the worlds of artificial intelligence, virtual reality and holographic interfaces, a form of software glue linking video gaming, business computing, voice interfaces and virtual worlds.
The Microsoft Cognitive Services suite, and its Bot Framework, are designed to let developers bring vision, speech and search services into new applications. An app might visually identify a plant leaf, and software built into Azure would then learn what is in a user’s garden or field, providing a crop-management service.
The glue strategy not only seeks to get Microsoft back onto the bleeding edge of technology, but unite products as disparate as Windows, Office, the Xbox video game platform, the HoloLens VR goggles and the Cortana voice interface. Of these only the Xbox is now dominant, and that only in the U.S.