What are tech companies?

A technology company is an electronics-based business that includes, digital devices, software, and
internet-related services such as e-commerce. It focuses largely on the development and
manufacture of technology and offers or substantially relies on a digital technical
service/product/platform/hardware as its major source of income.

When tech is the product

This means when a tech company is in the business of selling technology. That is, the product— the
item that the tech company sells to generate revenue comprises of applied scientific knowledge that
addresses specific problems and supports other pursuits.

Reliance on technology

A tech company is one that would not survive if the technology it had created did not exist. This
however does not consider the technology that has been bought or borrowed from someone else.
The company must have developed technology that distinguishes it from its competitors.

Selling technology as a service

Sometimes, technology might potentially become a service, similar to how Uber has transformed the
taxi business with its software platform and infrastructure. "A real technology business invents new
technologies." It does not always sell it to other people. It may include technology into a product,
such as Uber, which both utilises and develops technology to help users book minicabs. Or it might
be like Google, which constantly develops new search algorithms.

Tech-driven companies

A technology company uses technology to gain a competitive edge. Tech firms are those who not
only employ technology to create fantastic experiences, but also have a persistent emphasis on
meeting their users' and customers' demands.

To summarize, in order to qualify as a tech firm, a company must create new technology (whether or
not it is sold to an end user), utilise it to differentiate itself, and be driven by the ideas of innovation
and cooperation.

How do tech companies earn?

The Big Five tech giants: Apple, Amazon, Google, Alphabet, and Microsoft produced $1.4 trillion in
sales in 2021.

Most internet users currently communicate with at least one. They all have so many various goods,
services, and investments that it's not always apparent what their primary source of revenue is, or
how a firm benefit from "free" services like search, email, gaming, social networking, or instant
messaging.

However, there are broadly two ways through which tech companies generate revenue:

1. when you are a customer: Apple, Microsoft, and Amazon come into the first group; these
companies, like most traditional businesses, provide consumers with a tangible (or digital) product in
return for money.

2. when you are a product: Google and Facebook both create billions of dollars in income, but they
do so through advertising. Since their platforms enable marketers to target audiences at scale with
great precision, they dominate the internet ad business.
Case studies

APPLE

HOW DOES APPLE EARN?

Apple Inc. is a Cupertino, California-based multinational technology business that designs, develops,
and sells consumer gadgets, computer software, and internet services.

The company's hardware offerings include the iPhone smartphone, iPad tablet computer, Mac
personal computer, iPod portable media player, Apple Watch smartwatch, Apple TV digital media
player, AirPods wireless earbuds, and HomePod smart speaker.

The macOS, iOS, iPad, watchOS, and tvOS operating systems, as well as the iTunes media player,
Safari web browser, Shazam acoustic fingerprint utility, and the iLife and iWork creativity and
productivity suites, as well as professional applications like Final Cut Pro, Logic Pro, and XCode, are
all part of Apple's software portfolio.

Moreover, the iTunes Store, iOS App Store, Mac App Store, Apple Music, Apple TV+, iMessage, and
iCloud are among the company's online services. Apple Store, Genius Bar, AppleCare, Apple Pay,
Apple Pay Cash, and Apple Card are among the other services available.

In FY 2021, Apple Inc. (AAPL) reported its highest earnings and revenue growth in recent history,
owing to its significant product sales growth. However, Apple's overall growth is slowing, and the
corporation is once again leaning on its services division for leadership.

Analysts predict that services revenue will expand at twice the rate of overall revenue this fiscal
year. Because advertising, the App Store, Apple TV+, and other services produce significantly higher
margins than Apple's products, growth in services revenue has a significant impact on Apple's
profits. It's no surprise that Apple is developing a subscription service for its iPhone and other
devices. Apple wants to sell customers subscriptions for stuff they can do on their phones more than
ever before.

How does apple invest?

Apple is a money-making machine, with revenue rising 11% in a year from $39.2 billion to $43.6
billion, allowing the company to boost its cash pile to historic levels. Apple just stated that it will
more than treble its capital return programme, following widespread criticism of its large cash
hoard. Because this tech behemoth can return value to shareholders because of its strong balance
sheet, it decided to keep the majority of the cash overseas and invest it in other assets.

The majority of Apple's recent investment has been ascribed to the purchase of marketable
securities. Debts that can be sold or repaid within a year are known as marketable securities.

Non-marketable securities are debt instruments issued by the government. These investments
totalled 109.56 billion dollars in the company's fiscal year 2021.

Apple has made a total of 25 investments. Their most recent investment was one made on 5 May
2022 in Cnote that has raised a revenue of $25M.

Additionally, Apple has made 3 diversity investments in CNote (5 May 2022), Vamos Ventures (26
August 2021), Sweet Bio (26 August 2021).

MICROSOFT
How does Microsoft earn money?

Since the famous Bill Gates started Microsoft 45 years ago, it has become one of the most successful
technology firms in the world. It is also the third largest publicly traded firm in the United States (as
of 2 September 2020).

Microsoft is the most powerful technology firm on the planet. Microsoft provides a diverse set of
software, services, and gadgets.

• Software products, such as operating systems for computers, servers, phones, and other intelligent
devices; Server applications for distributed computing environments; Cross-device productivity apps;
Business solutions apps; Desktop and server management tools; Software development tools; Video
games; and Online advertising

• Computers, tablets, gaming and entertainment consoles, phones, other intelligent gadgets, and
related accessories

• Cloud-based services

• Product solution support and consulting services.

• Certification and training services

Microsoft is a technology company that sells software and services to its customers.  Microsoft's
business is divided into three reportable divisions, with results broken down by revenue and
operating income: productivity and business processes, intelligent cloud, and more personal
computing. These divisions are divided into two categories: product type and client demography.

1. Business Processes and Productivity

The productivity and business processes division of Microsoft's business covers a range of products
aimed at improving corporate productivity, communication, and information services. Microsoft's
Office software suite, which includes both commercial and consumer divisions, is one of its most
important products. Business solutions products such as dynamics, as well as the professional
networking site LinkedIn, are included in this area.

Productivity and business processes earned $15.9 billion in sales in Q2 FY 2022, accounting for 31%
of Microsoft's total revenue.

• Office Commercial/Consumer – Users who subscribe to Microsoft's Office software suite generate
revenue. The services in this category are designed to boost personal and organisational
productivity. In Microsoft's business segment, this segment is a major revenue generator.
Outlook.com, OneDrive, and consumer Skype are examples of Office consumer services. Office
advertising include Microsoft Office, Exchange, SharePoint, and Skype for Business, as well as the
CALs that go with them.

• LinkedIn is a one-of-a-kind and essential tool for HR professionals around the world. Talent
solutions, marketing solutions, and premium subscriptions are the three types of monetised
solutions offered by the professional social network. There's a reason why Microsoft paid $26.2
billion to acquire LinkedIn in 2016.

• Dynamics — This company offers cloud-based and on-premises business solutions for enterprise
resource planning (ERP) and customer relationship management software (CRM). The number of
users licenced and the increase in average revenue per user boost Dynamics revenue. With the
move to Dynamics 365, the cloud-based version of Dynamics.
Intelligent Cloud

All of Microsoft's public, private, and hybrid server products, as well as cloud services for businesses,
are included in the intelligent cloud sector. Microsoft Azure, SQL Server, Windows Server, GitHub,
Enterprise Services, and others are among them. 5

Intelligent Cloud generated $18.3 billion in revenue in Q2 FY 2022, accounting for nearly 35% of total
revenue. In the company's fiscal second quarter, Intelligent Cloud was the fastest-growing revenue
division. In terms of operating income, it was also the fastest-growing segment. Intelligent Cloud
operating income accounts for little under 37% of Microsoft's overall operating income, making it
the company's most profitable business.

• Server Products and Cloud Services — Microsoft's server software combines server architecture
and middleware to support Windows-based software applications. SQL Server and Windows Server
are two server software from Microsoft. Volume licencing programmes, licences sold to original
equipment manufacturers, and retail packaged goods all contribute to server product revenue.
Through Microsoft Azure, Microsoft also offers a full collection of cloud services. This is in line with
the long-term trend of cloud computing over on-premises hardware and software management.
Azure makes money by charging users for its services.

• Enterprise Services, such as Microsoft Consulting Services, are project-based engagements that
assist customers in planning and implementing Microsoft products so that they can get the most out
of them.

More personal computing

Microsoft's more personal computing category is made up of products and services that attempt to
place "customers at the heart of our technological experience." This section includes the Windows
operating system, Surface devices, gaming items, and search and news advertising. 5

More personal computing contributed $17.5 billion in revenue in Q2 FY 2022, accounting for nearly
34% of total revenue. More personal computing generates around 29% of the company's total
operational revenue. It comprises primarily of products and services aimed at enhancing the user
experience:

• Windows — the most popular desktop operating system in the world. Original equipment
manufacturers (OEMs) earn money by purchasing Windows licences and pre-installing them on the
devices they sell.

• Microsoft intelligent devices, such as Surface, PC, and other Microsoft smart devices. The selling of
these devices generates revenue for this segment.

• Gaming — Xbox hardware and Xbox Live are included. Transactions, memberships, and advertising
are how Microsoft makes money from Xbox Live. Microsoft also makes money through selling first-
party video games and royalties from third-party video games.

• Bing, Microsoft's search engine, makes money through advertising.