Microsoft Corporation (MSFT) has “entered a long-term strategic relationship” with General Motors Company (GM) and Cruise LLC, a company developing self-driving electric vehicles that is majority-owned by GM. Cruise CEO Dan Ammann stated: “Microsoft, as the gold standard in the trustworthy democratization of technology, will be a force multiplier for us as we commercialize our fleet of self-driving, all-electric, shared vehicles.”
In addition to supplying Cruise with key technologies, Microsoft also is making an undisclosed equity investment in the venture, joining in a round of funding that will raise $2 billion in total. This round of funding will raise the total valuation of Cruise to $30 billion.
In the wake of the announcement, Cruise indicated prominently on its homepage that: “We’re teaming up with Microsoft to accelerate the commercialization of our all-electric, shared, self-driving vehicles.” This statement is under the heading, “Shifting from R&D to Commercialization.”
Microsoft states: “To unlock the potential of cloud computing for self-driving vehicles, Cruise will leverage Azure, Microsoft’s cloud and edge computing platform, to commercialize its unique autonomous vehicle solutions at scale. Microsoft, as Cruise’s preferred cloud provider, will also tap into Cruise’s deep industry expertise to enhance its customer-driven product innovation and serve transportation companies across the globe through continued investment in Azure.”
The significance of edge computing is: “At its basic level, edge computing brings computation and data storage closer to the devices where it’s being gathered, rather than relying on a central location that can be thousands of miles away. This is done so that data, especially real-time data, does not suffer latency issues [i.e., delays] that can affect an application’s performance. In addition, companies can save money by having the processing done locally, reducing the amount of data that needs to be processed in a centralized or cloud-based location.”
Microsoft also indicates that it will continue to be GM’s “preferred public cloud provider to accelerate its digitization initiatives, including collaboration, storage, artificial intelligence and machine learning capabilities.” Moreover, Microsoft plans to work with GM “to streamline operations across digital supply chains, foster productivity and bring new mobility services to customers faster.”
The announcement by Microsoft comes shortly after reports emerged that Apple Inc. (AAPL) has ambitious plans to enter the market for electric vehicles with autonomous driving capabilities. Exactly how much Microsoft’s collaboration with GM and Cruise can add to its bottom line is unclear at this point, but it probably will be modest in percentage terms, given that the tech giant reported total revenue of $143.0 billion and net income of $44.3 billion for its fiscal year 2020, which ended on June 30, 2020.
GM is making a big bet on electric and autonomous vehicles, planning to spend $27 billion on the development of 30 models to be released globally through 2025. The spending projection increased by $7 billion, or 35%, during the course of 2020. In this context, further cementing its position as a key technology partner of GM is definitely a positive for Microsoft.
