Microsoft Proves Big Tech Can Weather the Storms
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whelan at The Wall Street Journal in New York.
What market context explains big-tech losses and Microsoft's resilience?
The big names in the tech sector have taken a beating on Wall Street over the past two months, but Microsoft has been able to stay pretty much above the fray. We'll explain why in a moment. First, these money and market stories you should know. that burning feeling in your pocket might be some extra cash personal income which is essentially Americans pre-tax earnings from wages and salaries and investments rose 0.5 percent in October that's the best gain since January and Americans weren't afraid to open their wallets either
How did recent consumer income and spending trends affect markets?
Household spending increased a seasonally adjusted 0.6% in October from the prior month. That's good enough to be the largest monthly increase since March. And more good news for consumers is the fact that inflation seems to be cooling off. That could give the Federal Reserve reason to back off the number of planned interest rate increases next year, and that would benefit the housing market. Meanwhile, the Federal Reserve says that millennials aren't all that different from their parents with regard to tastes and consumption, and has a lot to do with last decade's recession. The Fed says that millennials' tastes seem to deviate from their parents, but that was in the years following the economic downturn.
What did the Federal Reserve find about millennials' spending and assets?
Since then, for example, their interest in buying cars, which had waned, is now not much different from their parents, and the same is true for food and housing. The Fed also says that millennials have lower real incomes than members of earlier generations at similar ages. They also appear to have accumulated fewer assets. In the Wall Street Journal, Real Estate Bureau reports that Boston Red Sox owner John Henry is asking $25 million for his Florida estate. It's about five miles from Boca Raton with the main home on the property located. measuring nearly 28,000 square feet. It's got seven bedrooms, 19 bathrooms, along with 30-foot-high ceilings. You also get a wood-burning pizza oven and a wine cellar that can hold 1,000 bottles.
There's even a guest wing with separate entrance and parking spaces for your friends and relatives who want to come and go as they please.
October's stock market sell-off was driven in large part by investors shedding their positions in big tech companies. Apple and Google, Facebook and Amazon lost about half a trillion dollars in value. But one tech company that didn't take it on the chin as much is Microsoft.
Why did Wall Street's tech sell-off in October hit Apple, Google, Facebook and Amazon hard?
So how has Microsoft stayed somewhat unscathed? We've got Heard on the Street columnist Dan Gallagher on the line with us with some answers. Dan, how's it going?
Good. How are you doing?
Good, good. So among the tech sector heavy hitters, Microsoft is the good son.
How has Microsoft's strategy and leadership pivoted to strengthen its business?
It's more or less kept itself out of trouble.
Yeah, which is kind of ironic because, you know, they've had plenty of struggles through their history. Where they benefit is they have a long history. So a lot of what... You know, some of the current, you know, especially like Google and Facebook are dealing with now a lot of the political pressure. Microsoft has kind of already been there, done that. They're not really in anybody's sights anymore. And when you combine that with the fact that their business, they made, you know, several significant improvements to their business over the last few years. So their stock has kind of made a steady rise. None of these others have have fallen by quite a bit. And that's allowed them to essentially catch essentially catch up to Apple.
They're pretty much neck and neck right now.
Yeah, that's a really good point.
Why does scale give Microsoft and other big tech firms staying power?
Microsoft has done a lot of proactivity to help itself. It's not just them fiddling while Rome burns. They've done a lot to bolster their business and win Wall Street's good graces.
They have. I mean, they've done this pivot to a cloud business. What they realized when they got a new CEO about four years ago, the shift was realizing they missed the mobile revolution. They totally missed smartphones. and they spent several years kind of stumbling around trying to make attempts at that.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:05–0:09
2
What market context explains big-tech losses and Microsoft's resilience?
0:09–0:37
3
How did recent consumer income and spending trends affect markets?
0:37–1:14
4
What did the Federal Reserve find about millennials' spending and assets?
1:14–2:27
5
Why did Wall Street's tech sell-off in October hit Apple, Google, Facebook and Amazon hard?
2:27–2:42
6
How has Microsoft's strategy and leadership pivoted to strengthen its business?
2:42–3:23
7
Why does scale give Microsoft and other big tech firms staying power?
3:23–4:16
8
What are the final conclusions from Dan Gallagher about big tech's future?
4:16–6:41
Speakers
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