Microsoft's abacus is very obvious: Either all OpenAI employees will be merged into Microsoft and become Microsoft's inhouseAI department, or the governance structure will be reorganized to prevent similar things from happening in the future. Although the OpenAI court battle has not yet ended, looking back at Microsoft CEO Satya Nadella's actions over the past two days, he is indeed known as the master of market value management.
Last Friday, the OpenAI board of directors suddenly fired CEO Sam Altman without warning, and President Brockman announced his resignation in protest.
After the crisis broke out unexpectedly, Microsoft was actually confused. Nadella himself only received the news a few minutes before the dismissal announcement was issued. After Microsoft immediately issued a bland statement indicating that it would continue to cooperate with OpneAI, Microsoft's market value evaporated by nearly 2% last Friday, almost losing one JD.com.
Throughout the weekend, investors around the world were focusing on how OpenAI’s court battle would end, and Nadella’s actions could be said to turn the tide—she hired Sam Altman and Greg Brockman before the start of the U.S. stock market’s night trading, without letting them go out to set up a separate business, nor let them be poached by competitors such as Google.
Microsoft finally closed up 2% on Monday, completely recovering the losses caused by the palace dispute and hitting a record high. The stock price continued to rise after the market closed.
Looking back at the entire incident, Microsoft is definitely a blessing in disguise, and Nadella has demonstrated his extraordinary ability to protect shareholder value.
Now 95% of OpenAI employees have signed a joint letter threatening to join Microsoft, and Nadella has almost acquired OpenAI at a very small cost. In the words of analyst Ben Thompson, "There is no risk of antitrust litigation."
But what is more important for Microsoft right now is to completely eradicate future troubles.
The follow-up direction of the palace fight is uncertain. Altman may still return to Microsoft and is determined to "eliminate future troubles."
On Monday local time, Nadella said in a media interview that OpenAI’s key artificial intelligence research is continuing, and the partnership with Microsoft is also continuing. OpenAI employees can choose to stay in their current positions or switch to Microsoft. He is "open to both options" and stressed that Microsoft will prepare "conditions for continuing independent innovation" for incoming new colleagues.
However, his statements in the interview also hinted that Altman's final whereabouts may still be unclear. If the board member who initiated the coup resigns and OpenAI's management structure is reorganized, Altman still seems to be expected to return.
Microsoft's abacus is very obvious: Either all OpenAI employees will be merged into Microsoft and become Microsoft's inhouseAI department, or the governance structure will be reorganized to prevent similar things from happening in the future.
But no matter which outcome, Microsoft is the winner - considering that OpenAI still needs Microsoft's financial support and computing backbone to develop its technology, it is also a good thing for Microsoft to let Altman return to OpenAI under a different organizational structure.
OpenAI's major investors, including Microsoft, Tiger Global, Thrive Capital, and Sequoia, tried to overturn the decision of the OpenAI board of directors over the weekend and let the expelled Altman return to the helm, but the negotiations ultimately failed.
Nadella emphasized in Monday's interview:
"I think it's very clear that there have to be some changes around management."
He added that Microsoft "will have friendly conversations with OpenAI's board of directors about this."
In addition, Nadella also said that Microsoft respects OpenAI’s non-profit roots and shares its beliefs about AI safety:
“We want to make sure that from day one, we’re dealing not only with the benefits of technology, but also with the unintended consequences of technology, rather than waiting for things to happen.”
The palace fight also exposed Microsoft's weaknesses
Although the situation has been effectively controlled, it must be emphasized that the occurrence of this palace farce has highlighted the instability of the Microsoft-OpenAI relationship.
As the world's second largest company by market value, Microsoft's investment of more than $13 billion in OpenAI did not buy enough influence. Microsoft has no board seat and no control over OpenAI.
Although it continues to launch profitable products and services, OpenAI is still a non-profit organization in terms of organizational structure. Three independent directors who have nothing to do with the company's interests control more than half of the seats.
NewStreetResearch analysts wrote in a report on Sunday:
"Because OpenAI's board of directors controls both nonprofit and for-profit entities, it controls its collaboration with Microsoft and therefore its future."
Since its additional investment in OpenAI in January this year, Microsoft's market value has increased by nearly $1 trillion during this period, leading the technology giants by a wide margin. This technology giant, which missed the mobile transformation, is not lagging behind in the emerging technology competition for the first time in more than two decades. According to Wall Street analysts' expectations, although revenue has approached US$300 billion, AI will still create significant new growth space, and Microsoft's revenue is expected to grow at an average annual rate of 14% in the next three years.
Microsoft needs an OpenAI with more stable management, or it can cultivate its own inhouseAI department by absorbing OpenAI talents. Nadella must let Microsoft's big customers know that Microsoft's important code and competitive advantages will not be disrupted by Silicon Valley soap operas.
Reversal, reversal, reversal
The drama of the OpenAI palace fight has reached a jaw-dropping level.
Yesterday, the OpenAI board of directors withstood the tremendous pressure from investors and employees and hired someone from outside the company to take over the CEO position. Negotiations for the return of former CEO Sam Altman and former president Greg Brockman, who were fired by the board of directors, have completely broken down.
At the same time, Microsoft, OpenAI’s largest funder, announced that Altman and Brockman will join Microsoft to lead the AI department.
But the matter was not over yet. OpenAI employees who learned that their old leader would not return began to write a joint letter threatening that if Sam Altman and Greg Brockman could not return to OpenAI, they would also resign and join Microsoft.
As of press time, according to the latest statistics from X netizens, 734 of OpenAI's more than 770 employees have signed a joint letter, and the entire OpenAI can basically be disbanded on the spot.
The most outrageous thing is that the chief scientist Ilya Sutskever, who was previously regarded as the "coup mastermind", also signed the joint letter and tweeted to express his regret for participating in the coup, which means that he has completely shifted to the Altman camp.