Date:31/05/18

Microsoft surpasses Google’s Alphabet to become 3rd most valuable company

Microsoft surpassed Google's parent company Alphabet in market value Tuesday, becoming the third most valuable company in the world.
 
As trading continued early Wednesday afternoon, Microsoft's market value reached $760 billion, holding off Google's parent company Alphabet, whose market value was $745 billion. Only Apple and Amazon.com are worth more, at $920 billion and $785 billion, respectively. The ballooning valuations have fueled speculation as to which U.S. tech company will be the first to reach a $1 trillion-market cap. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
 
Microsoft's stock price is more than double what it was when Satya Nadella became chief executive in 2014. Analysts attribute the Nadella-era success to strategic decisions he made to compete with Amazon in the cloud storage business and a continued emphasis on maintaining diverse sources of revenue.
 
"Microsoft Azure has become a strong number-two player in the cloud wars to AWS," Rishi Jaluria, an analyst at D.A. Davidson, a financial services firm, said, referring to Amazon's cloud business. For some sectors, like retail, Azure's cloud service presents an appealing alternative to doing business with Amazon, whose e-commerce business directly competes against retailers, he said.
 
Compared to tech giants such as Amazon and Apple, Microsoft is less reliant on one particular business to generate income. In the company's most recent earnings report, Microsoft disclosed that its $24.5 billion in revenue is split across three categories: about 33 percent comes from productivity services including Office and LinkedIn; 28 percent is server products and cloud services; and 38 percent is personal computing and gaming. In contrast, about 86 percent of Alphabet's revenue comes from Google ads. And about 70 percent of Apple's business is selling iPhones.
 
"The diversity that Microsoft has is really helpful to continue that march to the trillion-dollar market cap," Jaluria said. "Whether it will happen before Apple or Amazon is a different story."
 
While the stock prices of tech titans often track one another through dips and climbs, Microsoft's shares began to pull away in March. Morgan Stanley software analyst Keith Weiss told investors at the time that he expects Microsoft to reach $1 trillion in market cap within the next year, owing to the growth of its cloud storage unit and the company's existing Office customer base that will likely upgrade to its cloud subscription service.
 
Alphabet and Microsoft have traded places before; the first time occurred in 2012, when Google surpassed the Redmond, Wash., company, signaling the transition from desktop-based software to Web platforms and mobile computing.

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