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Thursday, June 20, 2024

How Much Is Microsoft Net Worth and How Do They Make Their Money?

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We sometimes all wonder about this tech giant that what is the net worth of Microsoft? Stay tight, we are just going to reveal everything in this article about Microsoft net worth.

So basically, this venture was born in Albuquerque garage in late 1975. Co-founder Paul Allen and Bill Gates wanted to create a software to make a personal computer run known as the Altair 8800. It actually rose to operate personal operating computers back then, which later followed by Microsoft Windows in late 1980s.

The name was actually the duo of “microprocessor” and “software”. Unlike any other technology company, Microsoft’s growth was pretty much fast and furious.

In 1980, both the founders had a deal with IBM computers to provide them with operating system required to run their computers. After this deal, Microsoft released Windows on November 20th as a graphical extension of MS-DOS in 1985, creating a dent in the tech industry and shaping to what Microsoft is today.

At that time Microsoft moved its main office from Bellevue to Redmond, Washington on Feb 26, 1986 and went listed on stocks by March 13.

Microsoft introduced MS Office in 1990, which was a pack of different office tools like Word, Excel, PowerPoint, featuring a smooth UI and easy-to-use interface.

Bill Gates handed over the CEO position to Steve Ballmer on January 13, 2000. He was an old college friend of Bill and one of the earliest employees of the company since 1980, while creating himself a new opportunity entitling as Chief Software Architect Officer.

Not to forget, Microsoft was an uncrowned player in the market as the world’s largest computer-software selling company.

Now the firm is competing with Apple to be the world’s most valuable company, which is quite tough, but not impossible.

Now let’s take a deeper look at the current state of the company, along with some briefs on its history, valuation and future goals.

Microsoft Reaches $2 Trillion

The organization set a record high value being at $1 trillion for the first time on April 25th 2019. By October 4th,2019, its value became $1.043 trillion, and now it has rose to over @2 trillion. But what does it mean to have that much value? Market gurus use capitalization method to determine Microsoft net worth.

The formula of calculating the net worth of Microsoft is simple whereby one calculates number of outstanding stocks a firm has issued in the market times its current price.

Let’s take a simple example – if a company has issued 10 million of stocks and its share price is $100, the business has market capitalization of $100 million. Microsoft currently has 7.52 billion shares times $323.34, its closing stock price on Oct. 29th, equals about $2.43 trillion.

This simple calculation is useful to do apples-to-apples or androids-to-android’s comparisons for various size of companies.

Let’s take another example – Berkshire Hathaway had a closing price of $436,251 per share on October, 28th. Its market capitalization was only $655.21 billion, despite having an enormous per-share price.

Market cap helps investors evaluate the company’s earning to foresee their investment growth, regardless of their per-share-price.

Every method has some pros and cons, to this market cap method is not out of it. For starters, market cap changes quite often and is closely bonded with per-share price. It does not account for and other direct financial derivative/metrics of the business, such as growth rate, book value or earnings per share.

Price per earnings ratio is another method to do a company’s valuation and its also tied to business’s market share price. This valuation method heavily relies on company’s earnings. Microsoft’s P/E ratio is 36.27.

Microsoft’s Market Capitalization

Microsoft’s marketing cap can differentiate at any time because of its share price. Although an increase or decrease can be expected in outstanding shares that can result in increase or decrease its market capitalization.

This type of change is not sudden and does not happen often as compared to the share price, which can change in a blink of an eye.

This unpredictable graph of ups and downs for Microsoft can result in wide valuation rage based on the share price for the company.

This is also how investor use to evaluate certain metrics for companies, but specifically for market capitalization – which is a famous method – it is safe to say that Microsoft is currently the second most valuable company on earth. With its latest valuation reaching to $2 trillion, this company is really humungous, regardless of any metric.

As of Oct. 28, Microsoft has a market capitalization of $2.434 trillion.

Microsoft’s Net Worth Is Approximately $456.132 Billion

The simple formula to see net worth is company’s assets minus its liabilities. This is also called as shareholders equity, Microsoft net worth as of Dec 30, 2021 was 145.785 billion.

Since the valuation methods might vary, each might have their own metrics and blind spots.

Microsoft’s net worth is a calculation based solely on concrete, measurable figures like liabilities, assets and revenue.

So far through our calculations, Microsoft net worth is currently $456,133,323,232.

About the Founders: Bill Gates and Paul Allen

Microsoft co-founders Paul Allen and Bill Gates became teenager friends in late 1960s in Seattle.

Computers at that time were very expensive and hard to afford. When a computer arrived at their school, it was an honorary occasion for them. Soon, both the friends started working in and on computer whenever they get their free time.

Microsoft co-founders Bill Gates and Paul Allen met in Seattle as teenagers in the late 1960s. When they saw computer at their school, it was a momentous occasion, as computers were rare and expensive in those days. Soon, Gates and Allen were spending all of their free time working on and with computers.

In an interview, Bill admitted that he looked up to Allen, who was a year older had a obsession with computers. One day, Allen showed Bill a newspaper article on how Altair 8800 had just released and would change the world. They both felt they were already behind of the schedule.

Bill took himself out of the university immediately and co-founded Microsoft with Allen.

Key Product Lines Contributing to Revenue

Microsoft is big and we know that, so we have breakdown its sources of revenue into three broad categories. Productivity, Intelligent Cloud and more personal computing.

Microsoft office products and LinkedIn are among the top revenue generation sources in the productivity segment while intelligent cloud encompasses more on server side like, Azure and enterprise services. Microsoft surface, Xbox and all windows operating system-related revenues.

Here is the revenue breakdown as of fiscal year 2021, ended 30th June, 2021:

  • Productivity and Business Processes: $14.6 billion, up to 25% of the total
  • Intelligent Cloud: $17.4 billion, up to 30%
  • More Personal Computing: $14.23 billion, up 9.4%

All in all, the company reported annual revenue of approximately $167.94 billion, an increase of 18.23% from 2020.

Current Top Shareholders

The top 10 shareholders are all asset management or mutual fund companies. And in total, the shareholders own a larger sum of 71.23% of all Microsoft shares.

  1. The Vanguard Group, for up to 8.14% of shares
  2. Blackrock Inc, for up to 6.74% of shares
  3. State Street Corp., 3.93% of shares
  4. Capital Research & Management, for up to 3.98% of shares
  5. FMR LLC, 2.90% of shares
  6. T. Rowe Price Associates, for up to 2.56% of shares
  7. Geode Capital Management, 1.64% of shares
  8. Capital World Investors, for up to 1.48% of shares
  9. Capital Research Global Investors, 1.26% of shares
  10. Capital International Investors, for up to 1.24% of shares

If you have invested on a mutual fund, you likely own a piece of Microsoft yourself.

Here’s a look at what percentage of the company is owned by those mutual funds:

  1. Vanguard Total Stock Market Index, for up to 2.84% of shares
  2. Vanguard 500 Index Fund, 2.07% of shares
  3. SPDR S&P 500 exchange-traded fund, for up to 1.05% of shares
  4. Fidelity 500 Index Fund, for up to 0.94% of shares
  5. Invesco QQQ Trust, 0.86% of shares
  6. Vanguard Institutional Fund, for up to 0.78% of shares
  7. iShares Core S&P 500 ETF, for up to 0.79% of shares
  8. Vanguard Index Fund, for up to 0.77% of shares
  9. Fund of America Inc., 0.71% of shares
  10. Vanguard Information Technology Index Fund, for up to 0.42% of shares

All of the investment done by the shareholders might be changed at any time – even brining down to 0%. But since Microsoft is a huge tech company – these percentages are not likely to fluctuate by a large number however; a slight shift could be expected.

Should Investing in Microsoft be a Good Decision?

If you are about to invest in a stock – this involves much more analysis than just seeing the profits of the company. Your own financial stability tells you whether to go with stock market or not and/or selecting the type of shares for you to gain profitability.

Working with a financial advisor is a good way to gain market knowledge, trends and shifts that could be expected while investing in stocks and seeing if those are a good match for you.

If you want to invest in Microsoft, the firm seems to have a good character and market reputation like a good bet a s part of your diverse portfolio. Based on our calculations, it will continue to grow, and Wall Street analyst’s seller the stock as a strong buy, targeting 12-month price gains of about 5.5%.

How Does the Future Look for Microsoft?

Microsoft is arguably one of the largest companies in the world. Clearly, there are no as such loses attached based on the current and historic data. It is no doubt a profitable company. If you have worked on computer, it is highly likely that you must have used Microsoft office products.

Market leading stocks often tend to continue to lead, and as the famous saying goes, the rich tend to get richer. But what are the odds when it comes to the future of Microsoft?

The current scenarios for Microsoft tend to be more promising. Despite there are supply chain and chip shortage issues, still the company is making profits. Not to forget about how pandemic hit the entire world and surges shortage for circuits and other items essential for the company, still it manages through the hard times.

Having said that, 27 out of 34 analysts on Yahoo Finance gave “buy” or “strong buy” rating to the company and six of the remaining seven rated it “hold.” Just one rated the stock a “sell”, based on his assumption. The current average target price is $349.26, about 5.3% above its current price.

Kate Brown
Kate Brown
I am a writer and journalist based in New York. Since the start of my career, I have been in Content Marketing and have proven record by featuring businesses, products and technology on various news outlets like Forbes, entrepreneur.com, magzica.com, inc.com, businessinsider.com

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