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When the New England Patriots fell behind early on during Super Bowl LI, I told my wife not to worry.
That's because Tom Brady reminded me so much of my favorite quarterback of all time – Joe Montana of the San Francisco 49ers.
Both these players prove how you can stun the world by staying calm, sticking with a good game plan, and focusing on winning. It's all about leadership and teamwork.
I bring this up because there's an emerging tech CEO whose performance reminds me a lot of Brady's. And when you find a CEO like that – you know you can crush the market.
When a once-struggling tech giant appointed this CEO three years ago last week, I pegged him as a winner – even if he hadn't won big like Brady… yet.
With this brilliant executive at the helm, I knew this firm met the mandate of Rule No. 1 of our tech wealth-building system – "great companies have great operations."
Since then, the stock has gone on to defeat all comers – beating the broader market by more than 140%.
But this guy is going to be the "Tom Brady of High Tech" – and so this company will keep beating the competition for years to come.
Not So Soft Anymore
When Satya Nadella became CEO of Microsoft Corp. (Nasdaq: MSFT) back on Feb. 4, 2014, "Mr. Softy" was on the ropes. Its flagging stock price reflected Wall Street's worries about the steady decline in PC sales.
On paper that analysis rang true. Microsoft's fortunes appeared tied to the slowly dying PC market. What Wall Street missed was just how big a role a great leader – someone who stays calm, sticks with a good game plan, and focuses on winning – can play in turning a laggard into a leader once again.
Before Nadella took the reins, Microsoft had veered far off course. His predecessor, Steve Ballmer, had a 44% approval rating among current and former Microsoft employees, according to GeekWire.
It's hard to inspire the troops when you command little respect. Ballmer may have been brash and passionate, but he was unable to refocus this once-dominant tech giant on the most important emerging trends in tech.
Microsoft basically was a no-show in the hyper-growth worlds of mobile and cloud computing.
And don't forget that staff morale at a place like Microsoft can be reflected in its stock price. In the 13 years in which Ballmer served as CEO, Microsoft's stock declined by more than 36%, trailing the S&P 500 by more than 50 percentage points.
From Day 1, Nadella set a strong tone by demanding better results in key metrics such as market share and profits. He also pushed Microsoft to build leadership in newer areas like the cloud, virtual and augmented reality, and Big Data.
Now that they're working on such exciting new tech platforms, employees are bursting with the kind of energy you rarely find outside of startups. The clear proof of change: Nadella's approval ratings have been sharply rising since he began and now stand at 93%.
In other words, Nadella is a visionary leader backed up by the kind of team spirit that can beat tough rivals.
He's Tom Brady in business casual.
Send in the Clouds
Three years ago, Nadella promised to break the strong grip Amazon.com Inc. (Nasdaq: AMZN) had the cloud-computing market. Back then, with less than $100 million in yearly sales, many thought Microsoft's belated push with its Azure cloud platform would be too little, too late.
Azure raked in $1.2 billion last year, up 93% from the previous year – well ahead of the 69% growth rate for Amazon Web Services (AWS). Amazon is still the industry leader, but it doesn't seem like Nadella will let up until Microsoft garners the top spot.
Merrill Lynch analysts predict the Azure platform will bring in around $4.8 billion in sales in the fiscal year that ends in June. That would be up 300% from last year.
And by 2019? They see Azure's sales topping $11 billion.
You can understand why Nadella is pushing hard in cloud computing. Market Research Media forecasts annual compound growth of 30% through 2020, when the overall sector will be worth some $270 billion.
Nadella and Microsoft are also succeeding on other fronts. The firm's Business Intelligence/Data Analytics (BI) division had suffered from a lack of focus.
But a broad series of upgrades have helped the Microsoft BI platform become the first choice among more than 20% of all IT buyers – the highest percentage in recent memory. Research and Markets thinks the BI industry will grow from $4.08 billion in 2016 to $11.13 billion by 2021.
Also, keep your eye on Microsoft's stunning new HoloLens technology. This system, which pairs the best of virtual reality (VR) and augmented reality (AR) into a field known as mixed reality, is getting rave reviews.
HoloLens could emerge as the hottest business collaboration tool of the next half-decade or so. With it, team members spread across the globe can hold virtual face-to-face meetings. It also should appeal to video gamers, video- and audiophiles, and other consumers.
Of course, Microsoft didn't abandon its core franchises. Back in 2014, Nadella knew that longtime users of the Microsoft Windows system had grown frustrated by too many bugs and clunky interfaces.
He held up the release of Windows 10 to ensure that all of the complaints with Windows 8 were fully addressed. It worked like a charm – more than 400 million users have now adopted Windows 10, pushing Microsoft well on its way toward its goal of 1 billion users by June 2018.
Taking a cue from Joe Montana, this may be the firm's "West Coast offense."
If Nadella finds a way to gain a mere $5 in new sales from each Windows 10 user, that's $5 billion in "found money."
Suit Up – You're on the Team, Too
Meanwhile, Microsoft's 2016 $22 billion purchase of LinkedIn is another savvy move. This global business social network should drive more sales to Azure as Microsoft builds its brand in the social media landscape.
Make no mistake. Nadella considers shareholders part of his team.
The company bought back more than $6 billion in stock last year and has boosted its dividend at a 15% rate over the past four years, to roughly 2.5%.
No wonder the stock recently hit a record high. That's a very bullish sign of more gains ahead, because what was once resistance is now support.
The stock trades at about $64, giving it a $501.8 billion market cap.
I still see up to another 50% upside over roughly the next three years.
That's because profits are expected to grow around 10% this year, 15% next year, and as much as 25% in fiscal 2019 at a time of rising dividends and share buybacks.
Add it all up and you can see that with Nadella's Brady-style game plan, Microsoft has turned from a stodgy old-guard tech firm to one with cutting-edge tech – and plenty of exciting growth ahead.
- Strategic Tech Investor Special Report: Your Tech Wealth Blueprint
- Strategic Tech Investor Video: The Verdict Is In: Microsoft's Satya Nadella Is a Superstar
The post This Guy Is Going to Be the Tom Brady of High Tech appeared first on Strategic Tech Investor.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.