In what Unwin, manager of the Neptune’s Global Technology Fund, called a ‘hidden turnaround story’, Microsoft has increased revenue while cutting costs, all while investing billions
of dollars in its Azure service which provides public cloud computing.
By the end of 2016, the software company’s cloud service was reporting revenue growth of 100% and Unwin believes it still has much further to go as cloud technology booms.
Microsoft’s fortunes are attributed by Unwin to the new CEO Satya Nadella and “incredible” new CFO Amy Hood who has efficiently slashed its cost base.
Unwin said: “This is a monopolist that generates huge amounts of cash and historically pays quite a good dividend.
“We believe there’s actually a hidden turnaround story here. Satya Nadella came in as CEO in 2013, taking over from the fairly ghastly Steve Bulmer, and he initiated a massive culture change all about moving business to the cloud.”
While the Windows franchise is still incredibly successful, the firm looks set to cash in on its heavy investment into cloud technology which it is “only just beginning to monetise”, with Unwin adding its only real competition in the market is Amazon Web Services.
“They invested really heavily, billions and billions of dollars of capital expenditure, to build out the global cloud network that they are only just beginning to monetise. And they’re doing that a good rate, it was growing at nearly 100% a year at the last quarter and we believe Microsoft is the only game in town apart from Amazon web services,” Unwin said.
He added: “We expect there to be a lot more to go for here, we’re in the very early stages of cloud deployment, something like 10% of IT workloads take place in the cloud – we think that gets to 70% or 80% in time, and Microsoft will be one of the two major beneficiaries alongside Amazon.”
