This is how Microsoft and Google attack each other

This is exactly where Microsoft comes in. Its CEO Satya Nadella recognized artificial intelligence (AI) as a disruptive technology and presented a new version of his search engine Bing in February. Microsoft has a lot to gain from Internet search, and Google has a lot to lose.

Parallel to the announcement of the Google figures, Microsoft also opened its books. Nadella faced the analysts in a conference call at the same time as Pichai. And there a different picture prevailed: there were hardly any critical inquiries about the rival Google. Instead, a lot of interest in Microsoft’s AI applications.

There are already a lot of them in Nadella’s universe. As of today, the Redmond-based company is ahead in the AI ​​race, observers believe.

Microsoft relies on corporate customers

At the analysts’ conference, Microsoft CEO Nadella emphasized the group’s “strong development”: “We continue to focus on our three priorities.” In addition to our own cloud offerings and software solutions, this primarily included investments in the AI ​​infrastructure.

Microsoft recently entered into a partnership with the AI ​​provider OpenAI, invested 13 billion dollars in the company and built its AI application ChatGPT into its Bing search engine, which has been ailing for many years. This not only caused a real hype about the topic of AI. If one follows Nadella’s presentation from Tuesday evening, then Microsoft’s business is already benefiting.

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“We run the most advanced AI models using ChatGPT and Nvidia,” said the CEO. Now they want to make the AI ​​skills available to their own cloud customers. As a result, Nadella rattled off the names of new partners, almost breathlessly.

Mercedes-Benz, Shell and Shopify were among the first users to use “Azure AI”, the AI-enhanced cloud service. The new Office 365 tool Copilot, which is based on ChatGPT-4, is also a success. “Within 3 months since we made Copilot available to businesses, over 10,000 companies have signed up,” Nadella announced, including well-known names such as Coca-Cola and General Motors.

Another example is the first AI-supported management of hospital documents that Dragon Medical One offers. The service already had 550,000 users shortly after it was launched.

Nadella is now also an excellent salesman in his own right. But experts like Chirag Dekate from the Gartner consultancy actually see generative AI as a “top topic” for corporate customers. Companies are not only curious about generative AI, but also develop their own applications based on it.

A problem for Google, believes Dekate: “In view of the aggressive generative AI strategies of Microsoft Azure and Amazon Web Services, Google faces increasing pressure on its AI leadership” – and thus on an area in which the group “traditionally was strong.”

Pichai is being questioned as Google CEO

For Google CEO Pichai, there is a lot at stake. In 2019, Google founders Larry Page and Sergey Brin put the fate of the company in his hands. He took over a company that was a leader in many areas – and was also considered a dominant player in AI. Now his role is fundamentally questioned.

The well-known Silicon Valley consultant Om Malik has already suggested that Pichai resign as Google boss. “Sundar is a very powerful entrepreneur, but not so much a strategic thinker and visionary,” Nimrit Kang, co-chief investment officer at Northstar Asset Management, which owns about $20 million in Alphabet stock, told Forbes magazine.

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Earlier this year, Pichai decided to take a radical step. He laid off 12,000 employees, which corresponded to around six percent of the total workforce. Almost all major tech companies had already made layoffs in the past few months – including Microsoft. Under Pichai, however, the downsizing was particularly chaotic, as several insiders reported to the Handelsblatt. A number of teams lost important specialist knowledge.

Within the organization it was not clear for weeks who was still working for the company and who was not. Central positions remain vacant to this day. “The wave of layoffs was a catastrophe for which Pichai is responsible,” said a Google employee who did not want to give his name publicly.

However, Google’s lag in the struggle for AI supremacy is much more serious. When the search engine operator wanted to react to Microsoft’s new Bing with its own presentation, the idea of ​​glitches and errors was overshadowed. While Nadella has AI features built into almost all of the company’s products, Google’s flagship text robot, Bard, continues to ail and gets poor reviews from experts.

Morning air for Bing search?

Nadella, on the other hand, like Pichai of Indian descent and trained in the USA, is much more firmly in the saddle. He has been Microsoft CEO since 2014. He, too, announced the layoff of 10,000 employees in early 2023, but managed the cuts better. Thanks to new AI applications, Nadella now also senses the upper hand in the private customer sector – and hopes to finally attack Google in its core business, internet search.

More and more private customers are also taking advantage of the new offers, Nadella said on Tuesday. “OpenAI is one of the fastest growing consumer apps ever.” And: Two months after the launch of the new, improved search engine Bing, the number of users had quadrupled. Microsoft feels “very encouraged” by the success. The “most important software category”, the search, is facing a “generational change” thanks to AI.

Hargreaves Lansdown analyst Sophie Lund-Yates sees Microsoft successfully “riding the AI ​​wave.” The group is playing “at the forefront in the potential monetization of this phenomenal technology. The fact of the matter is that artificial intelligence can be built into most existing Microsoft products.”

Google recognizes the danger – and argues about the right reaction. There is a lack of understanding within the Google workforce as to how the gap to Microsoft could have come about.

Google had always seen itself as the innovative attacker. With products such as Google Workspace, the company had challenged Microsoft’s Office products, such as Word or Excel, which had been established for many years. The Chrome browser replaced Microsoft’s Internet Explorer. The Windows group had even withdrawn entirely from the business with operating systems for smartphones after Google had established a dominant position with Android.

Now the successes seem to be in question. Mainly because Internet search is being attacked as a core product of Google. According to initial reports, the world’s largest smartphone manufacturer Samsung is considering using Bing instead of Google as the default search on its end devices.

optimistic investors

Nadella could succeed in breaking up Google’s more than $160 billion search business. He is also expanding Microsoft’s Azure cloud offering, strengthening the company’s business network LinkedIn and pairing the Microsoft programming platform Github with skills based on artificial intelligence.

Analyst Dan Ives from Wedbush praises Microsoft for its “robust performance in the face of macroeconomic headwinds.” Even if the group grew more slowly than usual in the first quarter – and competitors to the partner OpenAI are already in the starting blocks.

Nadella clearly did not contest this on Tuesday. He preferred to keep rattling off the many possibilities in the new Microsoft AI universe. In the future, corporate customers would use their own AI services to automate their workflows in factories. Office people could “unleash their creativity”. And agents are finally using “natural language” in chat.

One thing is clear: Many of the announced uses are still in test mode, the new Microsoft services are too young. But Nadella’s visions are arriving at least on the stock market.

Meanwhile, Microsoft shares rose by a whopping 8.5 percent in after-hours trading. Google had a much smaller plus: 1.6 percent.