Cloud sales on the rise - Windows is now just a sideline for Microsoft

In the past year, software giant Microsoft saw its growth decline significantly for the first time in six years in an environment characterized by inflation and fear of recession. While revenue in the fourth quarter of 2022 increased by two percent to 52.7 billion dollars compared to the fourth quarter of the previous year, net profit fell by 12 % to 16.4 billion dollars. Microsoft's share price fell by 10 % in the meantime, which corresponded to a loss in value of the company of a whopping 160 billion dollars.

It is particularly noticeable that the traditional business with the Windows operating system continues to decline. Computer manufacturers in particular are ordering fewer and fewer licenses. Many companies that invested heavily in their IT infrastructure during the pandemic have become more cautious and are ordering significantly less new equipment. The motto is to get more out of the IT investments already made and only order new equipment where it is really necessary. As a result, almost 39 % fewer licenses were sold in 2022. Business with Surface devices also declined significantly.

The same applies to the Microsoft Game Pass for video games, Microsoft's fourth pillar. Sales here fell by 13 %. More and more players are turning to other platforms such as Steam or games for real money such as online casinos. Here is an overview of the best Online casinos in the year 2023 with additional information on the current bonus offer.

Only the cloud business is and remains a stable growth driver and was able to prevent a significantly higher decline in profits at Microsoft.

Focus on the cloud business

In view of recent economic developments, Microsoft's management under CEO Satya Nadella is increasingly focusing on the cloud business. The Windows operating systemSurface and Game Pass are becoming more and more of a side business.

Nadella said when announcing the latest quarterly figures at the annual press conference: press conference. "The next big wave of computing is emerging". With ever new AI models, the Microsoft cloud would also transform into a new computing platform. Only recently, the company's management announced that it intends to invest several billion dollars in the AI start-up OpenAI. The deep learning models, such as the GPT language model and the DALL-E image generator, are to be integrated into Microsoft's Azure cloud, which could lead to a new era of AI.

Tough cost-cutting measures and mass redundancies

Microsoft has also announced its intention to lay off up to 10,000 employees by the end of the quarter at the end of March in order to reduce the company's costs. That is just under 5 % of the total workforce. In 2022, the number of employees had risen to 221,000, although some redundancies had already been made in the fall.

Nadella said: "We need to bring our cost structure in line with our revenues" and added that there will also be new hires and investments in areas of key strategic importance such as the cloud business. The specific business areas and departments that will be affected by the job cuts were not named. However, the redundancies are to be made "transparently and considerately".

In concrete terms, this means that many employees will receive severance pay, which will have a significant negative impact on earnings in the first and second quarters. There is talk of up to 1.2 billion dollars having to be spent on severance payments. The effects of the salary savings will therefore not be fully felt until 2023 and beyond.

The Layoffs at Microsoft are part of a whole wave of redundancies in the tech industry. Amazon, Google, Apple, Twitter and Meta are also currently shedding a considerable number of employees. At Meta, 11,000 employees, i.e. 13 % of the workforce, were made redundant. At Twitter, half of the 14,000 employees had to leave their desks. Amazon plans to cut 18,000 jobs worldwide and the SAP competitor is laying off 8,000 employees. The job boom in the tech sector in recent years has thus come to an abrupt end.

Further facts about Microsoft

The company, founded by Bill Gates and Paul Allen and based in Redmond near Seattle in the state of Washington, is now one of the three most valuable companies after Apple and Saudi Aramco with a market value of around 1.6 trillion dollars. Apple has already been knocked off the throne of the most valuable tech companies several times in recent years. Microsoft's great success began in 1981 when it developed the MS-DOS operating system as the successor to Microsoft Basic on behalf of IBM. In the 1990s, the Office operating system with a graphical user interface and mouse operation and the Microsoft Office package were introduced. In one fell swoop, the company became the world market leader in operating systems and office software.

With the development of the Internet, the company also entered the browser business, which paid off in the long term due to Google's triumphant advance. could not prevail. In 2013, Microsoft experienced the biggest crisis in the company's history. Some experts were already calling for Microsoft's demise due to the high losses. Long-time CEO Steve Ballmer had to leave the company. The new upswing at Microsoft came in 2014 with his successor Satya Nadella, who drove forward the cloud business and scrapped many business areas such as cell phones, mobile browsers and numerous Microsoft devices. He also introduced the switch to selling time-limited licenses that have to be paid for each year, which is a real goldmine for Microsoft alongside the cloud business.