Microsoft Corporation is one of the world’s largest suppliers of information technology. The company dominates the PC software market, occupying more than 80% of the operating system market. This paper is devoted to the quantitative analysis of Microsoft, namely the company’s financial performance in the period from 2019 to 2021. In addition, the strategy of the company’s activities during the peak of the pandemic will be considered.
The corporation successfully conducts financial transactions, as it does not have large debts, and at the beginning of the year, the company had $134 billion of free cash on its accounts. Investors believe in Microsoft because the value of the company’s assets has grown by 50% over the year (Appendix A). Over the past year, Microsoft has successfully sold many software subscriptions (Satish). In addition, the company has received large government orders, for example, from the Pentagon: a $ 10 billion contract for the development of cloud infrastructure for data storage (Warner). The products of tech companies, including Microsoft, are in demand, especially now during the pandemic.
As for the pandemic period, in March, Microsoft shares fell in price along with the rest large companies. Nevertheless, its shares quickly returned to their normal state. The reason for such a rapid recovery is trivial – people have to spend a lot of time at home, so they need high-tech solutions to communicate, exchange information, and work (Barrantes and Leach). Microsoft has proposed the following:
- Microsoft Teams communication platform – the number of calls increased by 1000% in March.
- Skype – analytics recorded a 220% increase in call time, and the daily number of users increased by 70%.
- Microsoft Azure cloud platform — in the regions of America in March, the use of Azure increased by 775% (Barrantes and Leach).
There are no prospects for reducing user interest in the company’s products with the decline of the pandemic.
Now it is necessary to turn directly to the financial indicators for the designated years. In the fiscal year 2019, Microsoft earned $125.8 billion, an increase of 14% compared to 2018 (Appendix B). The cloud business remains the primary catalyst for the company’s financial growth. The Intelligent Cloud division registered a turnover of $39 billion for the 12-month reporting period that ended June 30, 2019, compared to $32.2 billion a year earlier (Appendix B). Microsoft’s net profit in fiscal 2019 was $39.2 billion, which is 137% more than a year ago (Appendix B). Thus, there was a significant increase in the income of all production sectors of the company.
The same can be observed in the next year, 2020, when the company’s profit continued to grow. In 2020, Microsoft earned more than $10 billion in revenue in the information security market, 40% higher than a year ago (Appendix C). Microsoft’s revenue for the 2020 fiscal year, which ended at the end of June 2020, reached $143.02 billion, 14% more than a year ago (Appendix C). The company attributed this growth to a surge in cyber threats in the context of the COVID-19 coronavirus pandemic. Many companies were forced to reconfigure their computer systems for remote work.
Even despite the accompanying difficulties, the company continued to increase its revenue and profit. According to the 2021 fiscal year results, Microsoft earned $168.09 billion against $143.02 billion a year earlier (Appendix D). Most of the sales came from the Microsoft Intelligent Cloud division, which earned $60.08 billion in revenue over the year, while in 2020, it was $48.37 billion (Appendix D). Revenues in Productivity and Business Processes increased from $46.4 billion to $53.92 billion; in the More Personal Computing division, the figure increased from $48.25 billion to $54.09 billion (Appendix D). The negative impact of the pandemic was manifested in Microsoft’s gaming business. Still, in other markets, for example, in the cloud, that factor, on the contrary, turned out to be positive.
Microsoft’s net profit in 2021 was $61.27 billion, which is significantly more than a year ago, which is about $44.28 billion. Thus, it becomes evident that Microsoft has impressive financial statistics, excellent capitalization, a significant amount of free money, and only minor debts. Microsoft has a large base of corporate clients, and in-demand products, and there are no difficulties with supply channels. These factors help it to resist even the current difficult situation.
Barrantes, Romina, and Thomas Leach. “The Impact of the COVID-19 Pandemic on One of the Biggest Technology Giant Shares: A Financial Analysis on Microsoft Corporation.” Journal of Student Research 10.3 (2021). Web.
Satish, Ksheeraja. “Embracing Environmental Sustainability: The Case of Microsoft Corporation.” Available at SSRN 3882786 (2021). Web.
Warner, Jacob Paul. “Microsoft: A Strategic Audit.” (2019).