Filing shows where Microsoft is really making its money; reveals M&A spending; adds Netflix, Hulu and Tencent to list of rivals
Microsoft CEO Satya Nadella has led a resurgence in the company’s business. (GeekWire File Photo / Kevin Lisota) Microsoft may be toying with the idea of buying Tik-Tok , but more than ever, its bread-and-butter is basic cloud services and server software for businesses.
Speaking of M&A, Microsoft was relatively active on the acquisition front but also pretty thrifty with its spending in its recently completed fiscal year.
The company’s list of officially recognized competitors is growing, with the addition of Netflix, Hulu and Tencent for the first time.
And Microsoft now sees restrictions on marketplaces operated by competitors (i.e., Apple’s App Store) as a material risk to its business.
Those are some of our takeaways from the Redmond company’s new Form 10-K filing with the Securities and Exchange Commission , an annual treasure trove of tidbits about the tech giant. In addition to reading the latest filing, we used the Compare Documents feature in Microsoft Word to help us spot significant changes since last year’s filing .
The biggest additions this year are long passages about COVID-19 and the company’s response to the pandemic, plus its racial justice, environmental sustainability and digital skills initiatives, largely reiterating Microsoft’s past public statements and announcements on each of those fronts.
Most notable on the business front is a section that breaks down Microsoft’s revenue into categories associated with its traditional product lines: Office, Windows, Xbox, etc. This is in contrast with the company’s quarterly financial reports. Those use a broad-based and somewhat ambiguous divisional structure — Productivity and Business Processes, Intelligent Cloud, and More Personal Computing — that mix different businesses and products in such a way that it’s not always easy to discern clear trends by product line.
The alternative categories in the 10-K filing show a clear trend: Microsoft’s back-end server products and cloud services are booming. Revenue grew by nearly 27% to $41.4 billion in the product category of Server and Cloud Services in the fiscal year ended June 30.
Office and Cloud Services revenue was the second-fastest growing category, at 11%, reaching $35.3 billion in revenue for the year. Windows grew by 9% to $22.3 billion.
Microsoft made 15 acquisitions for a total amount of $2.4 billion in its 2020 fiscal year, according to the filing. That was down from 20 acquisitions for a total of $9 billion the year before, which included the $7.5 billion acquisition of GitHub.
The company’s biggest acquisition on record was its $26.2 billion purchase of LinkedIn in December 2016, in Microsoft’s 2017 fiscal year.
Microsoft’s official list of rivals is growing. It’s always interesting to see which competitors the company considers worthy of mentioning in the filing, as an indication of where its business is...