Business Description:

Microsoft Corp. develops and supports software, services, and devices. It has three business segments: Productivity and Cloud, Intelligent Cloud, and More Personal Computing. Productivity and Business Processes include a range of platforms and devices, including Office Commercial and Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment includes the company’s public, private, hybrid, and hybrid cloud products and services that can power modern businesses.

The More Personal Computing segment includes products and services geared toward end users, developers, IT professionals, and all other devices. It also provides operating systems, cross-device productivity applications, server apps, business solutions applications, desktop management tools, software development tools, and video games. LinkedIn Corporation, an American online service provider company that focuses on business and employment, operates through websites and mobile apps. It is a Microsoft Corporation subsidiary. It was established in 1975 by Paul Gardner Allen, William Henry Gates III, and has its headquarters in Redmond WA.

Key Financials:

Revenue (US$ Mn):

• US$ 1,68,088 Mn was the annual revenue generated by Microsoft Corp in 2021
• Microsoft Corp’s annual revenue for 2020 was US$ 1,43,015 Mn, a 13.65% increase from 2019
• From 2018’s annual revenues, Microsoft Corp registered a 14.03% increase in 2019, amounting to US$ 1,25,843 Mn
• Total revenue of US$ 1,10,360 Mn was generated in 2018 by Microsoft Corp

Operating Income (US$ Mn):

• Microsoft Corp’s operating income for 2021 was US$ 69,916 Mn, a 32.02% increase from 2020
• The operating income generated by Microsoft Corp in 2020 was US$ 52,959 Mn
• At a 22.54% increase, Microsoft Corp’s operating income of US$ 42,959 Mn was indexed in 2019
• Microsoft Corp generated an operating income of US$ 35,058 Mn in 2018

Net Income (US$ Mn):

• US$ 61,271 Mn was Microsoft Corp’s net income in 2021, a 38.37% increase from 2020 figures
• Microsoft Corp indexed a 12.85% increase in net incomes from 2019, amounting to US$ 44,281 Mn in 2020
• Microsoft Corp generated a net income of US$ 39,240 Mn in 2019
• A net income of US$ 16,571 Mn was indexed by Microsoft Corporation in 2018

Operating Margin %:

• 42% was the operating margin generated by Microsoft Corp in 2021
• Microsoft Corp’s operating margin for 2020 was 37%, an 8.5% increase from 2019
• From 2018’s operating margins, Microsoft Corp registered a 7.23% increase in 2019, amounting to 34%
• An operating margin of 32% was generated in 2018 by Microsoft Corp

Gross Margin %:

• Microsoft Corp’s gross margin for 2021 was 69%, a 1.62% increase from 2020
• The gross margin generated by Microsoft Corp in 2020 was 68%
• At a 1.07% increase, Microsoft Corp’s gross margin of 66% was indexed in 2019
• Microsoft Corp generated a gross margin of 65% in 2018

Swot Analysis:

Strengths:-

Strong research and development capabilities lead to efficient outputs

Microsoft has a strong focus on research and development (R&D). The company commits significant resources to develop technologies, tools, and platforms spanning digital work and life experiences, cloud computing, and device operating systems and hardware. The conducts R&D at its facilities in the US, India, China, the UK, Canada, Czech Republic, Ireland, and Israel. Microsoft operates Microsoft Research, a computer science research organization that works in close collaboration with top universities around the world. In FY2021, the company incurred an R&D expense of US$20,716 million, which as a percentage of revenue, stood at 12.3%.

The company’s strong R&D has enabled it to add a number of patents. As of June 2021, the company had a patent portfolio of more than 65,000 issued patents in the US and internationally, and 21,000 pending patents. Extensive R&D capabilities allow Microsoft to attain a competitive advantage over its peers, maintain a technological edge over its competitors, and stay ahead of industry trends. It also allows the company to differentiate its products from its competitors.

An integrated model of distributions tends to enhance the distribution channels and productivity

Microsoft has a broad distribution channel through which it markets and distributes the products through three major channels which include Original Equipment Manufacturers (OEMs), direct, and distributors, and resellers. The OEMs offer their software on PCs, tablets, servers, smartphones, and other intelligent devices and sell directly to end-user. The OEMs also market hardware installed with Microsoft products, including servers, embedded operating systems, and applications.

The company’s major OEM clients include Hewlett-Packard (HP), Dell, and Lenovo. Microsoft licenses its products and services through Value-Added Resellers (VARs), retailers, distributors, Licensing Solution Partners (LSPs), and system builder channels. LSPs serve large organizations, distributors resell to VARs and small and medium-sized organizations. It distributes retail packaged products to authorized replicators, independent non-exclusive distributors, resellers, and retail outlets. The company licenses its products and services directly to organizations through enterprise agreements which helps the organizations to be efficient across all operations.

Increased financial performance tends to achieve adequate funds for future growth

Growth in revenue enhances the company’s ability to allocate adequate funds for its future growth and expansion plans. In FY2021, Microsoft reported revenue of US$168,088 million as compared to US$143,015 million in FY2020, an annual growth of 17.5%. Revenue growth was due to an increase of 24% in the sales of the Intelligent Cloud segment, 16% in the sales of the Productivity and Business Processes segment, and 12% in the sales of the More Personal Computing segment.

In FY2021, the company’s operating margin was 41.6%, compared to an operating margin of 36.9% in FY2020. Strong financial performance enables the company to provide higher returns to its shareholders, thereby attracting investments. In FY2021 the company reported a net profit margin of 36.5% as compared to 31% in FY2020.

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