In Defense of Chris Capossela (Premium)

After marketing itself as the kinder, gentler Big Tech corporation under Satya Nadella, Microsoft has stumbled in recent months, and badly.

And I’m always here to be critical when the situation demands it, just as I’m always here to point out when Microsoft or its executives get something right. The problem is that the problems I’ve complained about in recent years have been localized to the increasingly less important parts of the company that I care about, like Windows. But Microsoft has been making major PR gaffs and strategy mistakes left and right this past year. It’s like a sports game where everything keeps going wrong for one team.

Activision Blizzard and other antitrust concerns around Teams and Azure have led onlookers to wonder if we’re not experiencing the return of the “Bad old Microsoft” from the 1990s. The software giant is releasing AI at scale before it is ready only to have the CEO of the company they licensed it from, OpenAI, testify to the U.S. Congress that the technology is dangerous and needs to be regulated. Microsoft CEO Satya Nadella flew back and forth to Davos on a private plane just before announcing massive layoffs of tens of thousands of employees. And then he just revealed to those employees who are left that no one was getting a raise this year. What is this, a season of Succession?

It keeps happening.

This week, Fortune got its dirty little mitts on an internal memo penned by Microsoft CMO Chris Capossela in which he explains to employees that their best strategy for pay raises in the wake of this year’s pay freeze is to do something that positively impacts Microsoft’s stock price.

“Great quarterly results contribute to making the stock attractive which in turn drives everyone’s total compensation up,” he writes in the memo. “We are still investing heavily in our people as well as in our data center capacity to hopefully position us well for the Al transformation.”

That may seem insensitive at first blush, but Fortune stacked the deck against him further by starting the story off by mentioning that Capossela “just cashed out $4.4 million worth of stock,” drawing an image of the haves once again feasting while the have-nots suffer. It’s vaguely reminiscent of the Nadella private plane story.

Except that it’s unfair.

Capossela isn’t the CEO of Microsoft, and he has nothing to do with corporate compensation decisions. And his decision to sell stock may be a bad look, but it’s part of his assets and it’s his to sell. And he presumably won’t be getting a raise this year either, along with the rest of Microsoft’s employees.

What Capossela is, is the CMO, the chief marketing officer, and his spin on the situation is nothing less than consistent with the clear-headed discussions he’s had with Mary Jo Foley and me on what used to be our annual Windows Weekly holiday special. Chris, as I think of him, has never been anything other than honest and forthright. And his response to employees who are (understandably) upset about not getting raises in a year in which Microsoft is trying to spend $69 billion on Activision Blizzard and is spending billions more on AI investments should be viewed in the same light.

Let me step back for a moment.

This is going to come off as me congratulating myself, and that’s not my intention, but I will point out that I recently made the case that Microsoft’s curiously timed AI release explosion can be explained by its stock price, and thus these stories may be—almost certainly are—related. That is, after Microsoft’s stock price stagnated at the $30 level for over a decade under Steve Ballmer, it has exploded in recent years under Satya Nadella because of the promise of cloud computing. As I write this, Microsoft stock is priced north of $318, and the value of all of its outstanding stock—its market capitalization (or market cap)—is almost $2.4 trillion, making the software giant the second biggest company in the world after only Apple.

But here’s the thing: Microsoft’s stock price didn’t skyrocket because of any major real-world successes, and as I keep reminding everyone, the company’s current strategy of focusing on the cloud was set in place by Steve Ballmer, not Nadella. No, Microsoft’s stock price skyrocketed because of the promise of cloud computing, and the speculation that Microsoft might actually remake itself in this post-Windows world. More specifically, it skyrocketed because its biggest cloud play, Azure, experienced 70 percent growth for so many quarters in a row. And Wall Street responded with cheers.

But growth at that level usually only comes when a business is small, and it is not sustainable regardless. And so, in recent quarters, Azure growth has slowed dramatically, falling lower and lower each quarter. In Microsoft’s most recent fiscal quarter, Azure growth was “only” 27 percent. And not wanting a repeat of the Ballmer years or, worse, a decline, Microsoft—in my estimation—took a bet that AI would be explosive enough to drive a new era of stock, and thus market cap, growth. It would be the fuel needed to make Microsoft seem like the company of the future yet again.

Capossela’s comments to employees seem to verify my theory: AI is the type of initiative that Bill Gates would have called a “bet the company” strategy, and while the current CEO lacks that clearness, Capossela does not. Indeed, speaking clearly is his superpower.

Yes, I get the pushback. After all, it’s cheap and easy to feel slighted by a C-level executive that’s richer than the rank-and-file employees. But all Capossela did was speak the truth. And that’s not the type of thing one expects from marketing. We should celebrate that and thank him, not vilify him. After all, he’s right.