How Microsoft Emerged from the Darkness To Embrace the Cloud

The winter of 2010 brought some of Microsoft's darkest days. Bing, the search engine Microsoft built to challenge Google, was burning cash with little to show for it. Smartphones for the first time surpassed the personal computer, Microsoft's comfort zone, as the world's most popular computing device. The must-have tech gadget that holiday season was Apple's new iPad.

Microsoft, a company at the center of the technology world for decades, watched the future pass it by.

Steve Ballmer, Microsoft's chief executive, couldn't afford for that to happen to the company's sprawling business-software empire.

In a surprise move, Ballmer removed Bob Muglia, the leader of the company's fast-growing Server & Tools division. Muglia's departure in 2011 was the last in a string of exits that saw much of Microsoft's brain trust depart.

"It was really dreary," Muglia said of the mood at Microsoft then. "You basically saw a complete self-destruction of the senior leadership team."

But out of that chaos, the nadir of Microsoft's lost decade, the company found a rebirth in cloud computing.

Six years later, Satya Nadella [pictured here], the man Ballmer tapped to succeed Muglia, is the chief executive of a reinvigorated Microsoft that is reaping the rewards of a bet-the-company push toward web-based software and services.

Microsoft stock hit all-time highs this week, a reflection of investor confidence in Nadella's pivot away from flagging consumer services like smartphones and toward business software delivered on the web. A company that for much of the 2000s tried in vain to fashion itself in the model of Apple or Google found a better target in its back yard in Amazon.com.

Seattle-based Amazon grew up as an online retailer, but the company a decade ago pioneered the business of renting computer power and other technology infrastructure over the internet. Its Amazon Web Services unit, with sales of $11 billion...

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