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Microsoft ups the search engine stakes

After 2022 selloff shares rebound on Chat GPT news

If 2022 was the year share prices came back to earth, Microsoft Corp., landed with a thud. It has rebounded this year as investors digest its plans to take on Google in the search engine wars.

Here’s an update:  

Microsoft (NDQ: MSFT) Recent price $271.  (All figures in US dollars.)

Background: Microsoft is the world’s largest software company. Its Windows operating system runs in about 90% of the world’s personal computers. Microsoft also owns LinkedIn and markets the Xbox gaming system.

Performance: The shares lost 28.5% of their value in 2022, but have rebounded up 13% year-to-date.

Developments & discussion: Microsoft had a tough 2022 amid the general tech retreat and worries about its $68.7 billion takeover of video game maker Activision Blizzard. The deal is facing close scrutiny by regulators.


As a result, Microsoft’s stock fell 28.5% last year, though its financial performance has held up. In its latest quarter, reported Jan. 23, Azure cloud revenue grew by 31% and overall revenue rose 2% to $52.7 billion, beating estimates. Net income of $16.4 billion fell 12%.

Azure has a 30% share of the cloud computing market, up from 20% in 2018, according to estimates from Bank of America Global Research. It has steadily grabbed share from Amazon Web Services, the market leader, whose share has fallen to 55% from 71% during the same period.  

Regulators continue to examine the Activision Blizzard deal. The UK Competition and Markets Authority is expected to signal imminently whether it aims to block the deal or clear it with specific remedies such as selloffs. That could influence the US Federal Trade Commission, which is suing to block the transaction arguing that it is anti-competitive. Gaming is almost 11% of Microsoft’s revenue and would grow considerably with the acquisition.

Meanwhile, Microsoft’s shares have reacted positively to a $10 billion investment in OpenAI, a company that makes ChatGPT.  ChatGPT is an artificial intelligence (AI) technology that could power a new search engine able to disrupt the dominance of Google. GPT was integrated with Microsoft’s search engine Bing in 2019 and is used by its Azure cloud services. It unveiled an enhanced version of Bing last week, which can answer complex questions.

Dividend: Microsoft raised its dividend with the September 2022 payment. The $0.68 per share quarterly payment yields 1.1% at current prices. 

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This article appeared in the Internet Wealth Builder on Feb 13, 2023.  For information on how to reprint this article please view this page.

Adam Mayers writes about investing and personal finance. He is a contributor to the Globe & Mail’s Globe Advisor and a contributing editor to Gordon Pape's Internet Wealth Builder newsletter. Adam was Business Editor and investment columnist at The Toronto Star and is the author of six books.

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