3 Lessons for Investors from Microsoft’s Impressive Turnaround

Microsoft is now known as the most valuable publicly traded company in the world since its market cap surpassed Apple’s according to the MSFT – Get , Report and AAPL – Get Report publications.

Although Microsoft’s market positioning for the moment is no guarantee that it will surpass Apple or anyone one else in fiscal worth like Amazon for example a year from now, its ‘comeback’ represents a remarkable milestone when at one time it was referred to as ‘irrelevant’ or just a ‘legacy’ tech giant.

Since early 2014, when Satya Nadella was named CEO of Microsoft, the software giant’s stock has increased three-fold and it is expected to grow another 14% this fiscal year.

There are some valuable lessons to be taken from Microsoft’s turnaround for investors and there are three big one:

First, stay away from focusing only on what the Tech Press likes to write about such as businesses and trends of consumer products and services which influenced popular beliefs that Microsoft was a tech giant has-been because of its decline in the PC market due to its Windows franchise. Microsoft overlooked major opportunities in the mobile operating systems and consumer internet services.

Instead it focused on its solid competitive and meaningful growth opportunities which it had in “enterprise tech markets such as public cloud services, server operating systems, databases and business apps,” according to MSFT – Get Report.

Secondly, leadership matters. Nadella has had a major impact since he replaced Steve Ballmer who was with Microsoft for 14 years and since then Microsoft’s stock is now trading above $100, Eric Johnsa of Real Money writes.

“Nadella’s efforts to restructure Microsoft’s product engineering teams, use M&A to obtain useful technology assets and prioritize investments in areas such as public cloud apps and services, mobile apps and machine learning arguably have much to do with the current competitiveness of platforms such as Office 365, Azure, SQL Server (database) and Dynamics 365 (business apps).” Also, Nadella’s singing off on “strategic decisions such as building feature-rich Office apps for iOS and Android and avidly embracing open-source software” have also added to Microsofts competitiveness once again, says Johnsa.

Thirdly, past ‘legacy’ tech platforms can act as springboards for newer platforms. Such is the case with Office 365. And Johnsa, writes, Azure, too, “has benefited a lot from Microsoft’s ability to integrate the platform’s cloud services with traditional data center software platforms such as its Windows Server OS and System Center management software, as well as from the bundling of Azure service credits with broader enterprise software agreements.”

“And Microsoft’s Windows cash-cow helped enable the creation of its Surface PC/tablet line, as well as (more recently) the launch of MiMicrosoft 365 subscriptions for businesses, which bundle Windows, Office 365 and security and mobile management software.”