Microsoft sees a revenue in C3.ai investments concurrently the IPO

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Satya Nadella, CEO of Microsoft Corp., speaks during the Viva Technology conference in Paris, France, on Thursday, May 24, 2018. Viva Tech, a three year old event for startups, gathers global technology leaders and entrepreneurs as The French Establishment advocates more tech investment in Paris.

Marlene Awaad | Bloomberg | Getty Images

Microsoft already made a profit on its investment in artificial intelligence software maker C3.ai when C3 debuted on the New York Stock Exchange.

The deal shows how being one of the few major cloud infrastructure providers can open up financial opportunities.

On Wednesday, C3 shares started trading at $ 100 per share. That’s up 138% from $ 42 where the stocks were originally valued. C3 announced in an updated prospectus on Nov. 30th that Microsoft would buy C3 shares worth $ 50 million, which means that Microsoft has raised 1.19 million shares. The stock ended its first day of trading up 120% at $ 92.49 per share.

With C3, business users can build custom applications that run AI models without writing any code, or they can use pre-built tools tailored to the needs of different industries, such as: B. Helping banks to spend less time on loan applications, or helping manufacturing companies with predictive maintenance.

Microsoft rival Salesforce has made it a practice to buy shares in relevant technology companies that are about to go public. These deals, known as concurrent private investments, have been made with companies like Dropbox, Zoom, and most recently Snowflake. Microsoft is now using this strategy and is relying on a company with which it has been working more closely since 2018.

C3 and Microsoft have announced that they will jointly market and sell C3’s AI software, which runs in Microsoft’s Azure cloud. In October, the two companies went a step further and said they would partner with Adobe to sell intelligent customer tracking software to companies in a variety of industries.

Despite its Microsoft relationship, C3 announces in its prospectus that companies can use their software in the Amazon, Google or IBM clouds or run the software in their own existing data centers.

C3 underlined the point that its software was cloud independent at the time of the IPO filing, writing that it “can run on any cloud platform without any changes, creating additional effort and costs for the application redesign when moving to another cloud -Provider omitted “.

Tom Siebel, CEO of C3, who sold his customer tracking software company Siebel Systems to Oracle for $ 6.1 billion in 2006, founded C3 in 2009. C3 posted a net loss of $ for the quarter ended October $ 14.9 million on revenue of $ 41.3 million. 31, with sales up 6% over the previous year. Energy companies Baker Hughes and Engie account for more than 20% of sales.

Microsoft agreed to hold C3 shares for at least 365 days. Microsoft declined to comment on the investment.

In 2017, Microsoft invested $ 45 million in healthcare company Adaptive Technologies, long before Adaptive’s 2019 Nasdaq debut. Adaptive relied heavily on Azure. In addition to receiving cloud revenue from Adaptive, Microsoft gained part of a company whose stock is now five times as valuable as what Microsoft originally paid. Adaptive didn’t respond to a request for comment on whether Microsoft continues to be an Adaptive investor.

At the end of October, Microsoft had $ 301 billion in assets on its balance sheet, more than 96% of the companies in the S&P 500 index. Around 1% of those assets, or $ 3.1 billion, are in equity investments. The value of Microsoft’s holdings rose by around 5% compared to the previous quarter and remained slightly behind the S&P in the same period.

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