Microsoft Stock Today: Five Ways Satya Nadella Woke a Laggard

Microsoft stock todayMicrosoft stock today is up 14.5% from where it was exactly one year ago when Satya Nadella took over as chief executive officer of the tech giant. But that actually understates the impact Nadella has had on Microsoft Corp. (Nasdaq: MSFT) stock in his rookie year...

Microsoft stock was up more than 36% in mid-November. Then last week Wall Street chopped 11% from MSFT stock after a mildly disappointing Q2 earnings report. Still, Microsoft stock today, on Nadella's one-year anniversary, remains comfortably in positive territory.

The fact is, Nadella has breathed new life into a moribund company that had lost its way under CEO Steve Ballmer.

Under Ballmer's 14-year tenure Microsoft stock became a laggard, with returns consistently lagging the market.

"Under the leadership of Satya Nadella, the company has dramatically changed not only its tune, but its course as well," Box Inc. (NYSE: BOX) Chief Executive Aaron Levie told The Wall Street Journal. "This is a case study in corporate reinvention."

Nadella still faces stiff challenges. But in his first year he has shown an ability to break with the Redmond, Wash.-based company's past and test bold approaches.

Microsoft Stock Today Has Satya Nadella to Thank

Here are five keys that not only explain Nadella's early success, but why his leadership will keep MSFT stock moving higher:

Microsoft stockReason No. 1: Nadella is not Steve Ballmer.

Yes, it's obvious. But the contrast between these two CEOs has made a huge difference. Over the years, Ballmer's oafish public image merged with Microsoft's public image - a company that kept tripping over its own feet. Nadella is thoughtful, serious, and seeks cooperation rather than confrontation. And he's a listener. Ballmer lacked respect among his own employees as well as among his peers in Silicon Valley. He was also known for doggedly sticking to strategies even when they were obviously failing. Nadella arrived with a clean slate.

From there, it was a matter of Nadella changing several bad policies...

Reason No. 2: Nadella plays well with others.

Microsoft's habit of using its market power against rivals came back to haunt it after mobile came along. Ballmer's distaste for cooperation with Apple Inc. (Nasdaq: AAPL) and Google Inc. (Nasdaq: GOOGL, GOOG) was a bad strategy for a company with less than 5% of the mobile market. Nadella shed that thinking. He's released Office for the iPad and Android devices, as well as a free Outlook app for both rival platforms. He killed the mean-spirited "Scroogled" ad campaign. Nadella ended long-running feuds with two other companies, Salesforce.com Inc. (NYSE: CRM) and Oracle Corp. (NYSE: ORCL), forging partnerships with them instead.

Reason No. 3: Nadella has a long-term vision.

Nadella surprised many last month when he announced that Windows 10, historically one of Microsoft's biggest cash cows, would be given away as a free upgrade to users of Windows 7 and Windows 8. The strategy won't cost Microsoft that much money. It will still get paid for copies of Windows on new PCs, and relatively few PC users these days bother to upgrade to new versions of Windows. But making Windows 10 free will drive more people to upgrade and help create critical mass for the new version. You see, Microsoft has made the mobile version of Windows 10 compatible with the desktop version. And last year Nadella made Windows free for mobile devices with screens of 9 inches or smaller. This broad base of Windows 10 users is designed to appeal to software developers. Their Windows 10 apps will be able to run on a Lumia phone, a Surface Pro 3, or a Dell laptop. It's a long-range plan to fortify the Windows ecosystem in a world dominated by Android and Apple's iOS. Down the road, Microsoft plans to offer more Windows-based cloud services to these customers - for a fee.

Reason No. 4: Nadella is fixing Microsoft's broken culture.

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As Microsoft grew into a behemoth, its various divisions became more insulated from each other. Turf wars were common, cooperation wasn't. Promising new ideas could get squashed if a powerful division saw it as a threat. Nadella started attacking this self-defeating culture even before he became CEO. He told a resistant SQL group that Microsoft needed to launch a cloud-computing business, arguing that the cloud was the future. He won. As CEO Nadella has found ways to restructure the company to break down the old walls. At the same time, he's pushed for ways to increase inter-divisional cooperation. One of the early fruits of these changes was Skype Translator, which can translate spoken language in real time. The project required the Skype team, the Azure team, and the Office team to work together. It was a huge break with the old way of doing things.

Reason No. 5: Nadella is graceful under fire.

While not given to Ballmer's histrionics, Nadella did manage to implant his foot firmly in mouth last October. At the Grace Hopper Celebration of Women in Computing conference, he was asked to give advice to women who felt uncomfortable asking for a raise. "It's not really about asking for a raise, but knowing and having faith that the system will give you the right raise ... It's good karma. It will come back," he said. Many women felt the comment implied sexism. Nadella apologized multiple times over the next several weeks. But instead of the generic apology "to anyone who might have been offended" Nadella made a sincere effort to clarify his remarks and emphasize his stance on equal pay as well as ethnic and gender equality in general. "I certainly learned a valuable lesson," he wrote in a letter posted to Microsoft's web site. All CEOs should be so humble.

The Bottom Line: Microsoft stock today is 14.5% higher thanks to a terrific first-year performance by CEO Satya Nadella. And it wasn't just luck. He took several specific steps to break with Microsoft's past that made the difference. This will keep MSFT rising in 2015.

 

MSFT Has More than Nadella Pushing It Higher... Much of what Nadella did in his first year was intended to shake off Microsoft's decade-long malaise. Now the tech giant is seeking growth in several new areas, including the cloud and wearable tech. Here's everything Microsoft has at stake in 2015...

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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