Gurley explains Microsoft's OpenAI deal involves cashless revenue through cloud credits for equity.
“So you get equity for credits and then those credits are used to run workloads on Azure. That is cashless revenue for Microsoft.”
Gurley cites Dan Gilbert who became more known for side hustles than core jobs, creating Microsoft Garage as example.
“In almost every case, he ended up becoming known more for the side hustle than the core job.”
Gurley warns Microsoft and Google's AI investments may repeat IBM's mistake of empowering a future competitor.
“I don't think they're dependent on the partner anymore, and it harkens back in my brain to IBM letting Microsoft put the OS inside their PC.”
Gurley says Nadella diagnosed Microsoft as a know-it-all culture and transformed it into a learn-it-all culture.
“And he said, he told everyone we're gonna change it from a know it all culture to a learn it all culture.”
Gurley argues Microsoft's in-kind OpenAI investment creates cashless revenue on income statements, which is not economically ideal.
“That's a rev that's a cashless transaction. Like, there's no cash, but it becomes an income statement revenue item for Microsoft. And I don't think that's ideal from an economic standpoint.”
Gurley calls the Microsoft-OpenAI deal one of the most complex deals of all time.
“The deal between Microsoft and OpenAI, as it's been reported, once again, I've never seen it. Sounds like one of the more complex deals of all time.”
Gurley says the Microsoft-OpenAI deal with $90 billion profit rights is one of the most complex ever.
“The deal between Microsoft and OpenAI, as it's been reported, once again, I've never seen it. Sounds like one of the more complex deals of all time. They have profit rights up to, like, $90,000,000,000.”
Gurley notes Microsoft has profit rights up to $90 billion, unprecedented in any prior deal.
“They have profit rights up to, like, $90,000,000,000. No one's ever signed a piece of paper like that before.”
Gurley notes uncertainty around whether Microsoft will convert OpenAI profit rights to equity.
“And so they also we don't know. You know, it it sounds like OpenEye wants them to convert to equity, and we have no idea whether they're willing to do that or not.”
Gurley calls Nadella possibly the best CEO hire of all time, citing trillion-dollar value creation.
“I think that it's definitive that you may be the best CEO hire of all time. I mean, trillion is unmatched.”
Gurley questions whether AI-first products could make existing infrastructure like Excel spreadsheets obsolete.
“Do you worry that someone might think kind of first principles AI from ground up and that some of the infrastructure say in an Excel spreadsheet isn't necessary to know if you did an AI first product.”
Gurley notes Microsoft hands out $11 billion annually in RSUs, giving them advantage in recruiting AI talent.
“So that's over 11,000,000,000 a year. And this morning we woke up and read about them taking some employees from a hot AI company in the valley.”
Gurley believes Microsoft antitrust restrictions enabled Facebook, Google, and Amazon to emerge as dominant platforms.
“I actually believe in my heart of hearts that the government restricting Microsoft's ability to leverage their way through the browser, open the door for Facebook, Google, Amazon.”
Gurley believes government restricting Microsoft opened the door for Facebook, Google, and Amazon.
“If they had been able to tie the browser to search the way they did, the way they went after Netscape aggressively, I think they would have succeeded. They're really good at that stuff.”