Jul 22, 2024 · 4h 51m · acquired
Microsoft Volume II: The Complete History and Strategy of the Ballmer Years (Audio) · Acquired
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this comprehensive deep dive, Acquired hosts Ben Gilbert and David Rosenthal re-examine Microsoft's history from 1995 to 2014 under Steve Ballmer, challenging the conventional narrative of corporate decline by demonstrating how the company built an unstoppable enterprise and cloud engine that laid the foundation for its modern multi-trillion-dollar renaissance.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ben and David hold 99.8% of the talking time here. How this is scored →
Ben and David as informed peer 7.5 Guest teaching 1.8 Guest disagreement 1.1 Ben and David pushing back 1.3
speaking balance: gold is Ben and David, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:45 Ben refuting David's Spyglass licensing narrative
Ben playfully pushes back on David's traditional narrative about Spyglass source code being the direct foundation of Internet Explorer, explaining the internal Windows networking work that preceded it.
Hardest push from Ben and David ▶ 3:43:40 Ben pushing back on whether Azure was a true bet-the-company moveBen challenges David's claim that Azure was a bet-the-company gamble, arguing cash was never a scarce resource and initial Azure did not threaten core Windows licensing.
Biggest teaching moment ▶ 2:47:00 David revealing the 40% Alibaba stake inside YahooDavid breaks down the financial components of the $47B Yahoo bid, showing how the Alibaba and Yahoo Japan stakes made the underlying search deal far cheaper than conventional wisdom assumed.
Ben and David hold their own ▶ 4:11:30 Ben presenting Ballmer's multi-decade financial scorecardBen lays out detailed historical earnings figures demonstrating that Ballmer grew revenue from $23B to $84B while absorbing an unavoidable post-dot-com P/E compression.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ben and David as informed peer | Guest teaching | Guest disagreement | Ben and David pushing back | Why |
|---|---|---|---|---|---|---|
| Challenging the Ballmer Era Narrative and the Windows 95 Launch | 8 | 2 | 1 | 2 | The hosts reframe the common historical narrative surrounding Microsoft between 1995 and 2014, showing deep historical research on pre-internet online walled gardens like CompuServe and project Marvel. | |
| The Internal Internet Awakening and Netscape's Founding | 8 | 2 | 1 | 1 | The hosts detail internal Microsoft memos by J Allard and Steven Sinofsky identifying the web as an exponential phenomenon, cross-referencing Netscape's founding by Marc Andreessen and Jim Clark. | |
| The Codebase Origins and Architecture of Internet Explorer | 9 | 3 | 2 | 2 | Ben challenges the simplistic narrative that Internet Explorer was merely licensed NCSA Mosaic code via Spyglass, explaining the architectural vision to deeply integrate HTTP and HTML rendering into the Windows shell. | |
| The Browser Wars, Bundling Strategy, and Apple's Lifeline | 8 | 2 | 1 | 1 | Detailed strategic analysis of Gates's internet tidal wave memo, the zero-price bundling of IE with Windows 95, and the 1997 Apple investment saving Apple while installing IE as default. | |
| Sponsor: JPMorgan Payments Developer Platform | 1 | 0 | 0 | 0 | Sponsor segment covering JPMorgan Payments developer portal and enterprise API solutions. | |
| The DOJ Antitrust Trial and the Standard Oil Breakup Ruling | 9 | 2 | 2 | 2 | Extensive legal analysis of the DOJ antitrust case, Gates's combative 20-hour video deposition with David Boies, and Judge Jackson's unprecedented order to split Microsoft into two companies. | |
| Antitrust Resolution, Cultural Toll, and Ballmer's Leadership Reset | 8 | 2 | 1 | 1 | Exploration of the psychological and cultural toll of the trial, Brad Smith's conciliation strategy, and Ballmer stepping up to provide emotional leadership during the breakup threat. | |
| Sponsor: ServiceNow AI Platform and Microsoft Integration | 1 | 0 | 0 | 0 | Sponsor read discussing ServiceNow AI integration with Microsoft Copilot. | |
| The Enterprise Machine: SQL Server, Active Directory, and EAs | 9 | 2 | 1 | 1 | Deep dive into the architecture of Microsoft's enterprise business, explaining how SQL Server, Exchange, Active Directory, and Enterprise Agreements (EAs) created massive financial annuities. | |
| Windows XP: Unifying the NT Architecture in a Post-9/11 Launch | 8 | 1 | 1 | 1 | Discussion on Windows XP unifying consumer 9x and enterprise NT architectures, released in the immediate aftermath of 9/11 with Mayor Giuliani. | |
| The Xbox Strategic Dilemma and Cloud Capabilities | 8 | 2 | 2 | 2 | The hosts debate Xbox's true strategic value, pointing out that while it consumed top engineering talent for minimal net profit, it built critical distributed online service DNA via Xbox Live. | |
| The Longhorn Crisis, Windows Vista, and Developer Disillusionment | 9 | 2 | 1 | 2 | Detailed breakdown of the Longhorn and Vista engineering catastrophe, including the failure of WinFS and how feature bloat sidelined core systems engineers. | |
| Sponsor: Pilot Financial and Accounting Stack | 1 | 0 | 0 | 0 | Sponsor segment highlighting Pilot's accounting and CFO services for high-growth startups. | |
| The Search Battle, The Aborted Yahoo Bid, and Cloud DNA | 9 | 3 | 1 | 2 | Analysis of the $47B Yahoo bid, unpacking the hidden value of Yahoo Japan and the 40% Alibaba stake, alongside the infrastructure scaling lessons that shaped Bing and Azure. | |
| Microsoft's 2007 Investment in Facebook | 8 | 2 | 1 | 1 | Overview of Microsoft's 2007 $240M investment in Facebook at a $15B valuation, giving them international ad sales rights and establishing key developer connections. | |
| The Origins of Windows Mobile | 8 | 2 | 1 | 1 | Historical review of Windows Mobile, enterprise PDA roots, and the acquisition of Danger before the smartphone paradigm shifted. | |
| Windows Phone vs. Google's Free Android Model | 9 | 2 | 2 | 2 | Deep economic comparison between Microsoft's per-license OS model and Google's zero/subsidized Android strategy funded by search ad monetization. | |
| The iPad Threat and the Windows 8 Gamble | 8 | 2 | 2 | 2 | Examination of the panic caused by the iPad launch, Steven Sinofsky's Windows 7 turnaround, and the controversial touch-first dual UI design of Windows 8. | |
| Dark Years and the Search for Gates's Successor | 9 | 2 | 1 | 1 | Detailed narrative on the creation of Project Red Dog (Azure), driven by Ray Ozzie, Dave Cutler, and Amitabh Srivastava outside existing corporate divisions. | |
| The Scale and Secular Tailwind of Azure | 9 | 2 | 1 | 1 | Ben and David recount how Ballmer bet big on cloud computing, moving Satya Nadella to run Server and Tools and building Azure into a dominant enterprise force. | |
| The Nokia Acquisition and Ballmer's Exit | 8 | 2 | 2 | 2 | Review of the controversial $7B Nokia acquisition, internal boardroom friction, Ballmer's announced departure, and the February 2014 appointment of Satya Nadella. | |
| Analyzing Ballmer's Financial Record and Multiple Compression | 9 | 2 | 1 | 1 | Financial analysis of Ballmer's 14-year tenure, illustrating how 3.5x revenue growth was masked by multiple compression from 75x P/E down to 14x. | |
| Playbook Lessons: Culture, Timing, and Bracketing | 8 | 2 | 1 | 1 | Synthesis of strategic playbook lessons: stack ranking, positive-sum leadership pairing between Gates and Ballmer, and the risks of partner dependency. | |
| Landing the Plane: Narrative Failure vs. Long-Term Foundation | 8 | 2 | 1 | 1 | Concluding takeaways framing Microsoft's apparent lost decade as a communication failure rather than a business failure, since Azure and the enterprise engine laid the foundation for today's market leadership. |
Statements from this episode (103)
Gilbert: Microsoft had right ideas but poor execution on Zune and Bing
“And in this era, Microsoft had a lot of the right ideas, with a lot of the wrong timing and execution on everything from the Zune to Bing.”
Gilbert: Microsoft grew annual revenue from $6B to $80B between 1995 and 2014
“From 1995, where we start our story, To 2014, where we will end this episode, Microsoft grew their annual revenue from six billion to eighty billion.”
Rosenthal: Windows 95 lacked an internet browser at launch
“There was one thing. That was missing from Windows 95 at launch. That if you were a consumer user of technology, of software, of products, of operating systems, maybe you kind of wanted to have. And that was an internet browser.”
Gilbert: Windows 95's true significance was becoming the internet's launchpad
“But in retrospect, the thing that mattered about Windows 95 all these years later is that's the platform that everyone started using the Internet on. And everything that we talked about in the last episode, yeah, it's all important, but it's not nearly as impo…”
Gilbert: Microsoft navigates technological uncertainty by placing multiple exploratory bets
“You're already getting this picture of Microsoft's business strategy, which is until we know exactly what the future looks like, start placing bets that approximate
So that we're sort of in the mix, even though we don't know exactly what the future is.”
Rosenthal: Gates' 'The Road Ahead' expanded from three Internet mentions to a full index page
“In the hardcover version, there are three portions of the book where it is discussed. In the softcover version, the index for the internet takes up an entire page.”
Rosenthal: J Allard's 1994 memo coined Microsoft's 'embrace, extend, innovate' strategy
“In January, 1994, when a young Windows networking engineer named James Allard, or J as he goes by, writes a memo to Bill Gates and to the senior leadership At Microsoft entitled Windows, the next killer application for the internet. And in this memo, he points…”
Gilbert: 'Embrace and extend' removes product-market fit risk by adopting proven behaviors
“The embrace and extend thing is actually a brilliant business strategy. There's already a whole bunch of people who love this thing. We want to embrace that new behavior. There's sort of no product market fit risk because we can clearly already see it happenin…”
AOL bought browser maker Booklink for $30M during Microsoft licensing talks
“They start negotiating. They're talking about a, call it, two million dollar license deal. And all of a sudden, AOL comes in and buys the whole company of Booklink for thirty million dollars.”
Rosenthal: Microsoft licensed Spyglass Mosaic code for $2M for Internet Explorer
“They license the source code for Marc Andreessen's original Mosaic browser from... Spyglass software for two million dollars, and that code base becomes the base upon which Microsoft builds Internet Explorer.”
Netscape expanded from one million to fifteen million users in one year
“Netscape, we should say, goes from one million to fifteen million users in one year.”
Gilbert: Competing with your own distribution channel quickly kills your business
“If your distribution decides to compete with you, and decides to make that a priority, your business is over in a minute.”
Internet Explorer grew from 20% share in 1996 to near-total dominance by 2000
“And by the end of that year in 96, Internet Explorer passes 20% market share. 97 it passes 40% market share. 98 it passes 60% market share. And then by the year 2000, Internet Explorer basically has, for all intents and purposes, a hundred percent worldwide Br…”
Gilbert: Microsoft's 1997 Office commitment and investment saved Apple from bankruptcy
“Which, by the way, saved Apple. The company would have been completely out of business because it was so existentially important to anyone using an Apple computer to use Office that if Office, you know, Microsoft decides, oh, we're gonna stop developing Office…”
Microsoft in Late-1990s Was the Peak Consumer Tech Company
“And this moment here, Is just the absolute peak of Microsoft as a consumer technology company. I mean, I think maybe the absolute peak of any consumer technology company ever.”
Rosenthal: FTC deadlocked 2-2 on Microsoft antitrust penalties in 1993
“So in July, 1993, the FTC commissioners vote on whether Microsoft is a monopoly that deserves further action and penalties, and they deadlock at two to two, which means essentially a win for Microsoft. No action would be taken against the company.”
Rosenthal: 1994 Microsoft consent decree banned tying but allowed feature integration
“The next year, in July, 1994, Microsoft just settles with them, rather than going to trial. They're like, alright, look, we just wanna be done, we're gonna settle with you DOJ, we're gonna be done with the US federal government here, and in that settlement, th…”
Rosenthal: Appellate court permitted Microsoft to bundle IE into Windows in 1998
“Microsoft appeals Judge Jackson's order, and in early May, 1998, the appellate court rules that Microsoft can continue shipping Windows with IE bundled into it, and also continue to bundle any other features that they want as part of Windows, as long as it ben…”
Gilbert: Microsoft held over 90% share of PC operating system sales
“The fact is that they had over 90% of PC operating system sales.”
Gilbert: David Boies deposed Bill Gates for 20 hours in August 1998
“So on August 27th, Bill Gates is deposed by the DOJ's appointed prosecutor, David Boies, for 20 hours.”
Judge Jackson Ordered Microsoft Broken Up Into Two Companies in June 2000
“On June seventh, 2000, Judge Jackson issues the final judgment in the case, and he rules that Microsoft did indeed abuse its monopoly power, and as a remedy for having done so, he orders that Microsoft be broken up. Into at least two separate companies. Separa…”
DOJ Remedy Mandated Gates and Ballmer Work at Separate Breakup Entities
“Steve Ballmer had to work at one company, and Bill Gates had to work at the other. They could not work at the same company. Each of those two, after they picked their companies, had to divest all of their shares From the one that was not their employer, so the…”
Microsoft Market Cap Dropped 55% in 12 Months Following Antitrust Findings
“From late 19 99, when the findings of Fact came out, over the next 12 months, Microsoft's market cap dropped from six hundred billion to two hundred and seventy billion. Which was a 55% drop.”
Gilbert: Internet Explorer held roughly 90% market share in November 2001
“At this moment in time, Internet Explorer has right around 90% market share.”
Rosenthal: Windows XP sold over 500 million copies across its lifetime
“XP was a huge success. Sells over half a billion copies. Gets used over its lifetime on probably a billion PCs.”
Rosenthal: Ballmer's famous 2000 stage dance occurred during breakup threat
“The crazy dancing on stage. I love this company. That was in September of 2000. When they thought they were gonna get broken up.”
Gilbert: Microsoft is the only Big Tech giant without federal antitrust probe
“The only one that's not under active antitrust investigation today by the federal government.”
Rosenthal: Bulk of Microsoft's Enterprise Juggernaut Was Built Post-DOJ
“And Microsoft, the entire enterprise juggernaut that it builds, the bulk of it really is post DOJ. It is like new business and new markets that they are getting into.”
Rosenthal: Ballmer-era server products all became multi-billion-dollar revenue businesses
“These are All, every single one of those names I just mentioned become multi-billion dollar revenue enterprise IT server products that are built and sold during the Steve Ballmer era of Microsoft.”
Gilbert: Controlling enterprise directory services creates unmatched software bundle stickiness
“In doing all this research, it seemed to me that once a enterprise adopted Active Directory, They were gonna tip, and they were gonna buy the rest of the software, too, because whoever manages the source of truth for who are all the people and what are all the…”
Gilbert: Guaranteed backward compatibility matters far more to enterprise buyers than innovation
“The key to enterprise is backward compatibility. Saying, look, we don't necessarily need to promise you anything too groundbreaking. We need to meet your needs today and be the most cost efficient, you know, total cost of ownership driven system that meets you…”
Rosenthal: Multi-year enterprise agreements were 40% of Microsoft's 2007 revenue
“By 2007, analysts estimated that 40%, four zero, of all of Microsoft's revenue, which I think was about fifty one billion dollars that year. So 40% of fifty one billion dollars Came from multi-year enterprise agreements.”
Rosenthal: Single-year enterprise agreements drove 15% of Microsoft's 2007 revenue
“40% of all dollars were flowing from multi-year EAs, and then another 15% of all dollars that Microsoft was earning as revenue were flowing from single-year EAs.”
Gilbert: Microsoft gross margin on retail boxed Windows was 29% in the 1990s
“In the nineties, the box software that Microsoft would use to sell Windows Their gross margin on a copy of Windows was 29%.”
Gilbert: Microsoft achieved 75% gross margins selling Windows via OEM channels
“But when they're selling through an OEM channel, their gross margin was 75%, because you just ship the bits to the OS once, and then the PC manufacturer takes it from there.”
Rosenthal: Selling to IT lowers the priority of user-facing software quality
“When IT becomes your customer, when you become an enterprise business, the quality of the software, especially the user-facing software, is no longer priority number one.”
Gilbert: US PC Household Penetration Grew From 10% in 1986 to 62% in 2003
“The US household penetration of personal computers, again, flashing back pre-IPO, was only eight percent. So that whole doubling year over year over year, By Microsoft's IPO, they still only got to around 10% of penetrating the U.S. By 1997, 13 years later, it…”
Gilbert: Xbox is culturally significant but insignificant to Microsoft's business
“Xbox has become an important part of our world. But not an important part of Microsoft's business.”
Microsoft's Entertainment & Devices lost $1.4B on $4B revenue in 2006
“If you look at the E&D reporting over time, let's start back in 2006. They generated four billion dollars in revenue, lost 1.4 billion dollars operating loss.”
Rosenthal: For mega-cap tech, talent and focus are scarce, not capital
“Money is not the scarce resource. The scarce resource is time and talent and focus.”
Gilbert: Xbox Live achieved 40 million subscribers by 2012
“This is a group of people that went and created Xbox Live that by 20 12 had forty million subscribers.”
Gilbert: Three-Quarters of Corporate PCs Still Ran XP in 2009
“Even as late as 2009, so three and a half years after launch, something like that, three quarters of corporate PCs are still running XP and had never upgraded to Vista.”
Rosenthal: Microsoft Extended XP OEM Sales Two Years Post-Vista
“Microsoft OEMs were so unhappy because consumers didn't want to buy Vista machines. Microsoft had to extend the ability for their OEM partners to keep selling XP machines to consumers for another two years after this.”
Rosenthal: Mac Accounts for 8% of the PC Market in 2024
“Even today, in twenty-twenty-four, Mac sales are eight percent of the market.”
Vista Marked the Permanent End of Microsoft's Consumer Leadership
“The death of Microsoft as a relevant consumer technology company. They never recovered from this as a leader.”
Ben Gilbert: Windows Vista killed developer excitement for Microsoft platforms
“I also think this is the death of Microsoft as an interesting platform for developers. Who is writing Vista apps? The Win-Thirty-Two API as a potential target for my new, interesting, innovative application, it's just not a thing anymore.”
Rosenthal: Steve Ballmer called Vista the worst moment of his CEO tenure
“In that conversation that we had with Steve, where he, you know, made the comment about my acquisitions, my mistakes, we just lost money on the bad ones, the genesis of that conversation was about Vista. You know, he was reflecting, he said, that probably was …”
Rosenthal: Microsoft pulled Brian Valentine from Exchange to rescue Vista
“Taking Brian Valentine off of Exchange. Exchange was freaking killing it in the enterprise. And he goes and spends two years getting Vista out the door and then goes to Amazon.”
Gilbert: Apple makes around $20 billion annually from Google default search
“The rumors are that Apple makes something on the order of twenty billion dollars a year today in 2024 from Google as being the front door to Google, sending all of the iPhone search traffic to Google.”
Gilbert: Free ad-supported search makes 3x to 5x more per user than software
“If I could take seven billion people in the world and sell them Windows, or I can take seven billion people in the world and have them use my search engine for free and then make the money from the advertisers, I'm gonna make three to five X more money from th…”
Gilbert: Google monetizes browser traffic better than Microsoft monetized software licenses
“Eventually, Google comes along and creates a browser. They also don't sell that browser, but they monetize all the traffic coming through that browser, and they do it way better than Microsoft does at monetizing selling licenses.”
Gilbert: Microsoft used its browser for defense, while Google used Chrome for offense
“Microsoft built a browser, had a bunch of share, and then kind of looked around and said, we don't really know what to do with it. I guess we'll use it for defense? And Google built a browser and said, we know exactly what to do with this, and they used it for…”
Gilbert: Microsoft offered $24B to acquire Facebook in 2007
“Microsoft puts an offer on the table. It's a very complex deal structure, but effectively what it does is it lets Facebook shareholders cash out over a long period of time as the company's value grew. So you're not taking all your money off the table today. An…”
Gilbert: Microsoft invested $240M in Facebook at $15B valuation in 2007
“So the terms of the deal are, in October, 2007, Microsoft invests two hundred and forty million dollars for 1.6% of Facebook. So for those trying to do the math at home, that is a fifteen billion dollar valuation on the deal. Microsoft will get the exclusive r…”
Gilbert: Consumer platform excitement requires developer excitement
“You need developer excitement if you're going to have consumer excitement. I mean, Or you need to develop every interesting app on your platform yourself, but that's just not how it goes, so that consumer and developer excitement goes hand in hand.”
The iPhone Broke Microsoft's Enterprise Lock-In Through BYOD
“All of the huge advantages in lock-in that Microsoft had built up, the iPhone changed that calculus because the iPhone kicked off shadow IT and bring your own device, and it kicked off the user revolt against IT.”
Gilbert: Microsoft killed new products because of Windows-centric DNA
“You look at Courier, you look at Kin in mobile, you look at all these things that they would let them get so far, and then they'd be like, ah, you guys don't get it. Windows is the center of everything, and if it doesn't make Windows look great or it competes …”
Gilbert: Gates Promoted Mobile and Tablet Computing in 2001 Windows XP Launch
“One of which was Bill Gates was always talking about mobile computing, so much so that in the key slide in the Windows XP presentation, one of the big bullet points is mobile computing. All the way back in 2001, and Gates thought natural user interfaces was go…”
Gilbert: Windows Mobile Permitted Handset Makers to Modify Operating System Code
“The handset makers could modify the code of Windows Mobile. So, when you bought a handset, first and foremost, you were trusting the product quality of the people at the handset maker, and they had several OS's that they could buy and effectively start from.”
Rosenthal: Microsoft acquired Danger, maker of the T-Mobile Sidekick
“Microsoft buys Danger, the company that made the T-Mobile sidekick.”
Gilbert: Android destroyed Microsoft's mobile business
“Which would be the very thing that would sort of destroy their mobile business.”
Gilbert: iPhone launch was the most spectacular demo since Engelbart
“The iPhone comes out. It's the most spectacular technology demo since The mother of all demos, the old Doug Engelbart one way back in the day.”
Gilbert: iPhone shifted mobile from cheap embedded systems to full computers
“The mobile industry to this point had been, how do I make the cheapest possible phone? It's certainly not a scaled down version of a Mac, which is what the iPhone was. So that was a completely different paradigm. This is a tiny computer, not a kind of crappy e…”
Gilbert: Windows Phone's Metro UI Design Originated from Microsoft Zune
“We're defining a really breakthrough new user interface called Metro that actually came from the Zune, which is funny that that's its lineage.”
Rosenthal: Microsoft's Real Mobile Competitor Was Android, Not Apple's iPhone
“Microsoft's competitor was not Apple and the iPhone, it was Android.”
Gilbert: Windows Phone Lost When Verizon Backed Motorola Droid Over Microsoft
“I think the biggest moment when the door really shut is when Verizon freaked out after the Apple and AT&T deal and said, we need an answer, and they decided that answer was Droid, and they put like a gajillion dollars behind the Droid advertising campaign.”
Google Sheets Users Are in the Global Minority Compared to Excel
“Excel is still the main way that spreadsheets are done around the world. I bet a lot of listeners use Google Sheets. We do, too. We love it. Also use Excel, but if you do use Google Sheets, you are in the minority.”
Gilbert: Companies struggle to enter businesses with lower profit margins
“There's this great general rule that it's really hard for any business to enter a lower margin business than the one they are currently in.”
Gilbert: Sinofsky's Office division set ship dates three years ahead for 6,000 people
“Three years in advance a date is set and then 6000 people ship on that date no matter what.”
Rosenthal: Windows 7 succeeded by being a reliable 'Toyota Camry' rather than ambitious
“Windows at this point in time didn't need technical vision. It was trying to be the Dodge Viper. That's what Longhorn was. It needed to be the Toyota Camry. And he comes in, and he makes Windows Seven the Toyota Camry of PC operating systems.”
Gilbert: iPads failed to replace PCs, whereas smartphones largely succeeded
“The iPad was not the PC of the future. It had its place, but it did not in any way replace PCs And it turns out that Apple scaling up the iPhone metaphor was good for tablets, but that never was gonna take over most PC use cases today. In fact, the phone has f…”
Gilbert: Windows 8 touch interface was originally planned only for tablets
“What ended up happening was the original vision for the Windows eight touch thing that we're all talking about, these live tiles, that was supposed to only ship for tablets as it was originally dreamed up, and there was a version of Windows eight that did not …”
Microsoft's Enterprise Business Has Never Had a Down Year Except 2008
“The enterprise motion of Microsoft has basically never had a down year. I mean, 2008 in the Great Recession. But other than that, like, chug, chug, chug, chug, chug, even through the bad Windows releases.”
Gilbert: Popular belief that Nadella originated Azure is historically inaccurate
“As the general public is concerned, Steve Ballmer was obsessed with Windows. He built the enterprise business. He left. Satya Nadella came in and launched Azure, and Azure has been great. Like, not exactly. That's not really what happened.”
Rosenthal: Ray Ozzie built Lotus Notes independently with Lotus as publisher
“Ray, of course, being the author of Lotus Notes, Ray is a legendary developer, and he has great relationships within Microsoft, because Ray built Lotus Notes not at Lotus, but at his own software studio startup, and Lotus was just his publisher.”
Rosenthal: Ray Ozzie named Microsoft Chief Software Architect in June 2006
“So in June, 2006, when Bill announces his coming retirement, Ray gets named as his successor in the official chief software architect role.”
Rosenthal: Ray Ozzie began recruiting for Project Red Dog in January 2006
“And so in January, 2006, Ray with Steve Bomber's full blessing goes and starts recruiting for a secret project within Microsoft incubated outside any of the existing divisions.”
Rosenthal: Dave Cutler built Azure's original hypervisor from scratch
“Cutler builds a new hypervisor that Azure runs on from scratch without using open source like himself.”
Gilbert: Initial Azure launch did not threaten Microsoft's Windows-centric model
“In its initial incarnation, Azure did not threaten The Windows-centric approach. If you remember, when Azure launched, it was Windows Azure, and it ran Windows Server, and it was Platform as a Service, and Microsoft in no way changed its tune on open source.”
Gilbert: Microsoft resisted open source until around 2014 to 2015
“They never at all wanted to be a part of anything that open source developers were doing until a couple of years into Azure. Not until, 20, 1415.”
Rosenthal: Ballmer declared Microsoft 'all in' on cloud at UW in 2010
“In 2010, Ray Ozzie actually leaves the company, but as he's doing, he and Steve roll Red Dog, by this point in time renamed Azure, back into the server and tools business, and the two of them go to the University of Washington, and Steve gives a speech at the …”
Rosenthal: Ballmer replaced Muglia despite Server & Tools making $12B and growing fast
“Bob was crushing it as Head of server and tools. Revenue was growing, I don't know, 30, 40% a year. It's a twelve billion dollar business. But the reason that Steve made the change was he said, we need a new leader who's going to come in and change this organi…”
Rosenthal: Ballmer positioned Nadella in Server & Tools to become CEO
“It was, let's get this guy the right exposure to the right important things that he could be CEO of this company someday in the not very distant future.”
Rosenthal: Microsoft Intelligent Cloud generated $88B in fiscal 2023 revenue
“In fiscal, twenty-twenty-three, Intelligent Cloud did eighty-eight billion dollars in revenue.”
Gilbert: Cloud computing represents a 30- to 40-year secular growth wave
“It's probably a 3040 year wave that they get to keep riding.”
Rosenthal: Steve Ballmer and Ray Ozzie deserve all credit for Azure's vision
“I kind of think all of the credit for the vision for it and the championing it for the initial seven years within Microsoft goes to Steve and to Ray.”
Gilbert: Microsoft shelved finished Office for iPad project in 2013
“And absolutely, 100% something that happened is all 200 of us worked for multiple years to get these things ready. We had a ship date. Well, we had what we thought was a ship date. Actually, what happened was we were told that actually we're gonna shelve it. A…”
Gilbert: Releasing Office for iPad was among Nadella's first CEO moves
“The year later, we did ship it actually right after Satya became CEO. That was one of the first things he did.”
Rosenthal: Microsoft generated $27 billion in operating income in 2013
“Microsoft's operating income in 2013 was twenty seven billion dollars.”
Gilbert: Acquisitions costing only idle cash should be evaluated like venture bets
“When it doesn't cost you focus or your best people or whatever the scarce resources are and it only costs you cash, then you should totally think about it as, am I willing to bet 2.3% of my company or whatever percent of the cash that I'm not getting any credi…”
Rosenthal: Majority of Microsoft leadership and Satya Nadella opposed Nokia acquisition
“At one point, as Satya talks about in the book, there's a straw poll taken of all the division heads, all the top leaders in the company, whether they're for or against the acquisition. The majority are against the acquisition. Satya is against the acquisition…”
Rosenthal: Azure represents at least half of Microsoft's $3.5T market cap
“Probably, like, I don't know, I haven't done a sum of the parts analysis, but I think you can say probably at least half is Azure, propping up that market cap.”
Gilbert: Microsoft revenue grew 3.5x to $84B during Ballmer's CEO tenure
“Revenue went from twenty three billion to eighty four billion. That's a three and a half X over 14 years. Operating income went from twelve billion to thirty billion. So almost a three X.”
Gilbert: Microsoft P/E multiple compressed from 75x to 14x under Ballmer
“The P.E. Multiple went from 75 X to 14 X. The market cap when he was announced went from six hundred billion to when he left at three hundred and thirty billion.”
Gilbert: Windows and Office franchises generate more revenue today than ever
“Windows and Office have proven to be these ridiculously durable franchises generating more revenue today than ever.”
Gilbert: Company leaders must repeat core messaging 10x more than expected
“Anyone who's listening who's a leader at a company right now knows that the right amount of repeating yourself to do is about 10 times more than you think it is. You need to just keep Delivering the same message over and over and over again, and that wins.”
Rosenthal: Microsoft counter-positioned against AWS by offering hybrid cloud
“Actually, I would say they had some of it in the development of Azure, because they could say to Fortune 500, we will do hybrid cloud with you, and we can be your trusted partner in a way that AWS couldn't.”
Rosenthal: Microsoft lost process power during the Ballmer era
“I think process power, I would argue, they actually lost during this era. I mean, the Blackcomb Longhorn Vista thing illustrates that.”
Gilbert: More profits accrued to Microsoft's partner ecosystem than to Microsoft
“There are far more profits who have accrued to Microsoft's independent software vendors, resellers, retail partners, than just to Microsoft itself.”
Gilbert: Large external ecosystem dependencies make technology resets much harder
“The more externalities you have depending on you, the more difficult it is to reset, and usually a next generation technology requires you to hit a big reset button.”
Rosenthal: Microsoft's flat stock under Ballmer stemmed from failing to tell its narrative
“And I think what I realized a few minutes ago as we were talking is, this was the biggest failure of the company during this period. They did not tell their story, right? And so much of what we think of as the losses from this timeframe, and certainly everythi…”
Gilbert: Microsoft would have missed mobile regardless of the DOJ antitrust case
“Even without the whole DOJ thing, Microsoft probably would have visted themselves. Microsoft almost certainly would have missed mobile because there's no chance they would have realized that the business model that Google had Meant that they were gonna win in …”