Acquisitions, Investments, and Cuts Suggest Strategy Realignment

• Two acquired hardware companies could accelerate Azure datacenter operations.
• A substantial investment in OpenAI highlights generative AI systems like ChatGPT as possible growth areas.
• Recent cuts and layoffs show less forbearance for legacy technologies and a retreat from virtual reality.

Recent investments and layoffs suggest changes in Microsoft’s long-term technology development priorities and send a near-term warning to customers of unprofitable and legacy technologies.

Accelerating Azure

In Dec. 2022 and Jan. 2023 Microsoft quietly concluded two acquisitions, both of which put Microsoft deeper into hardware development to accelerate Azure datacenter operations. In particular, bulk data transfer hardware can be important for data analytics, reporting, and machine learning applications.

Lumenisity, a British start-up spun out of the University of Southampton’s Optoelectronics Research Center, has developed a new form of optical fiber, called “hollow-core,” which can raise long-distance data transfer speeds (for example, between datacenters) by 37-50%, according to reports; the U.S. Internet service provider Comcast announced deployment of Lumenisity-based fiber optics in May 2022. Thus, for example, communications between Availability Zones or regions can be made faster, and datacenters can potentially be spaced farther apart. This acquisition was announced on Dec. 9, 2022.