Seventeen years is a long time to wait to regain one’s glory, yet that’s exactly what Microsoft has done. With its solid quarterly earnings report, released Thursday, the software giant’s shares traded up after regular market hours, for the first time exceeding their 1999 peak levels.
This is quite an achievement, and quite a satisfying one for anyone who likes a riches-to-not-so-many-riches redemption story. Like many legitimate companies of the dot-com era—and a whole slew of fakers—Microsoft’s shares raced to astronomical highs just before the turn of the century. It was pumping out prodigious amounts of cash, a growing economy needed its productivity software, and the dreaded Y2K computer meltdown was a glorious opportunity to sell upgraded server software. Oh, and Microsoft was a monopoly, controlling the market for the Windows operating system for PCs and the Office applications that ran on top of it.
At the time Apple was an after-thought, Google a toddler, and Facebook not yet a glimmer in Mark Zuckerberg’s high school eye.
Then came the bust, competition for desktop prominence from Google, the second coming of Steve Jobs, lousy investments and myriad other problems. It long irked former Microsoft CEO Steve Ballmer that his company remained profitable but wasn’t rewarded for it by investors. Microsoft had lost its sheen and its growth, and the stock petered along the length of time it took a child born when the bubble burst to get her driver’s license.
Happily for Microsoft, and those who like competition, the no longer feared or hated monopolist is back, along with its market value. New CEO Satya Nadella has moved aggressively into cloud infrastructure services, where Microsoft is second only to Amazon. And he has winnowed Microsoft’s product lines, killing off everything from most of its phones to a fitness tracker nobody wanted.
Microsoft’s core business remains an unexciting yet steady contributor. Even there, the online Office365 is a winner, the preferred email/word-processing program for corporations that value consistency, service, and security.
Tech industry comebacks are rare, but when they happen, they’re a cause for celebration because consumers benefit along with partners, shareholders, and employees. And we get to ask: What will a rejuvenated Microsoft do next?
| Adam Lashinsky | |
| @adamlashinsky | |
| adam_lashinsky@fortune.com |
BITS AND BYTES
AT&T eyes Time Warner. AT&T and Time Warner have been chatting about the possibility of a merger, according to unnamed sources who spoke to Bloomberg. The telecom giant has been looking for ways to add more original content and programming to its network, so tying the knot with a media conglomerate might be a solution. So far, the talks are informal. (Bloomberg, Fortune)
PayPal ticks up; AMD sags. The payment service PayPal reported a solid quarter with active customer accounts rising 11% to 192 million. The company posted revenues of $2.67 billion, which beat analyst expectations of $2.65 billion, and led its stock price to rise 3% in after hours trading. Meanwhile, chip designer AMD posted revenues of $1.31 billion, beating analyst expectations of $1.21 billion. AMD also forecast an 18% decline in revenue for the following quarter, causing the share price to drop 4%. (Fortune, Fortune)
Tesla plans for the future. The electric automaker said it plans to reveal details about the launch of its own ride-hailing service next year. The company is also currently jostling with competitors—like Google, Ford, Uber, Toyota, and GM—on the best way to deploy self-driving car tech. Read Fortune's Kirsten Korosec's report for more on why Tesla's latest hardware update matters. (Fortune, Fortune, Fortune)
Internet attacked. The east coast of the United States suffered massive Internet outages this morning when a distributed denial of service attack—an overwhelming barrage of Internet traffic—stampeded over the domain name service infrastructure, which routes Internet traffic, managed by Dyn, an Internet performance company. The firm said the attack had been resolved as of 9:20 a.m. EDT. (Dyn, Fortune)
By the way, there's another keyboard hiding in your iPhone.
THE DOWNLOAD
Fortune's Clifton Leaf chats with David Kenney, boss at IBM Watson. David Kenny took the helm of IBM’s Watson Group in February after Big Blue acquired The Weather Company, where Kenny had served as CEO. In the months since then, the Watson business has grown dramatically, with well over 100,000 developers worldwide now working with more than three dozen Watson application program interfaces (APIs). Fortune Deputy Editor Clifton Leaf caught up with Kenny in mid-October, when IBM Watson’s general manager was in San Francisco, getting ready to open Watson West—the AI system’s newest business outpost—and to launch the company’s second World of Watson conference, a gathering of its burgeoning ecosystem of partners and users, in Las Vegas on October 24. Read (and watch) more on Fortune.com.
IN CASE YOU MISSED IT
Google's Cable TV Replacement Just Got a Lot Closer to Reality, by Mathew Ingram
Venmo Is on Track to Process $20 Billion in Payments Per Year, by Leena Rao
Microsoft's Cloud Results Just Blew Its Stock Price Through the Roof, by Jonathan Vanian
Lyft's Executive Ranks Get a Major Reshuffling, by Kia Kokalitcheva
Why Mark Zuckerberg's 'Diversity' Defense of Peter Thiel Doesn't Hold Water, by Ellen McGirt
ONE MORE THING
What's next for Twitter? After potential corporate suitors such as Salesforce and Disney have fled, Twitter must once again pursue a strategy as an independent company. Smart money puts the microblogging service's most likely game plan on jobs cuts—especially in sales and marketing—and reformed stock compensation plans. Otherwise, expect activist investors to get involved. (Fortune)
This edition of Data Sheet was curated by Robert Hackett.
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