Microsoft (NASDAQ:MSFT) is once again the most valuable company in the world, by a large margin. MSFT stock is currently trading with a market cap of $1.02 trillion.
How Microsoft has done this, without drawing the ire of the antitrust police? Partnerships. One example is yesterday’s Microsoft news announcing a cloud interoperability partnership with Oracle (NASDAQ:ORCL). This is being presented as a win for customers who want to use multiple clouds.
Those looking to make snark points can note how Oracle board member Leon Panetta has been making big money at Oracle. But since he joined the board, in 2016, Panetta would have been better off in an S&P 500 index fund. It’s Microsoft stock that’s ridden to glory, recently gaining nearly $84 billion in market cap in just five trading sessions.
Going Along by Getting Along
Microsoft CEO Satya Nadella has accomplished all this growth in MSFT stock reversing the course set by predecessor Steve Ballmer, and even by co-founder Bill Gates.
Instead of buying or burying competitors, Nadella has embraced them. He has built a cloud in Azure that’s neutral in terms of technology and globe-girdling in its reach, with operations on every continent.
This has provided a lifeline to Oracle, whose cloud has become an also-ran.
And Oracle has bigger problems than cloud. Salesforce (NASDAQ:CRM) and other software as a service companies — some, like Salesforce, built with Oracle software — continue to grab market share. Even Oracle’s database niche continues to face new fast-growing competitors.
What, Me Monopoly?
Oracle moved toward Microsoft, ironically, because it has seen how Microsoft treated open source. Oracle went to war with open source for two decades. Most notably it bought Sun Microsystems in 2010 and made its open source crown jewels – Java, mySQL and Open Office — de-facto proprietary. It may have won its point in court but it seems a pyrrhic victory.
Microsoft, once as opposed to open source as Oracle itself, is now a member in good standing of all major open source groups. It even owns the largest open source code repository, Github.
Neutrality has been very, very good for Microsoft. The shares are up 242% since Nadella took over in 2014 while Oracle is up just 36%. This hasn’t come at a sacrifice in the dividend, which has nearly doubled in that time. Microsoft continues to make acquisitions. It made 15 in 2018 alone. But most are small, bolt-on deals for units like LinkedIn or Xbox.
Speaking of Xbox, Microsoft now has a partnership with Sony (NYSE:SNE) in cloud gaming. The two leaders in console gaming have teamed up because, they note, Amazon and Google are threatening to run away with the cloud market.
This may be the key point. Every announcement Microsoft makes to extend Azure, or to partner with former foes, is portrayed as a defensive move, necessary because some other company threatens to monopolize a market.
Microsoft has no monopolies. Microsoft has its hands in every key market — operating systems, gaming, applications, enterprise software, social — but controls none.
The Bottom Line for MSFT Stock
Once a company becomes the world’s most valuable there is a target on its back.
MSFT stock now has that target on its back, as the target was once on the back of Apple, Amazon, and others. But it has been here before.
Of course, Microsoft was a monopoly then, as Oracle once tried to be.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear, available now at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT, AMZN and AAPL.