Yesterday Microsoft announced that they had won a contract to supply the US military with 120 000 augmented reality (AR) headsets. Management estimate that the contract could be worth as much as $22 billion over the next decade. This is another example of where the Tech Titans are able to make significant money off of non-core operations.
For a company to survive over many decades, it needs to innovate continually, which is very costly and difficult. The tech companies seem to be very good at constantly creating new revenue streams though. I think it has to do with the huge profit margins that they have on their core businesses. When a company prints money, executives are happy to spend a little money on side bets to see if they pay off.
Looking back at Microsoft's history, the company was very innovative under Gates. It then stalled under Ballmer, becoming bureaucratic. The focus was on cutting costs instead of innovating, something I like to call "management by spreadsheet". Satya Nadella worked very hard to break down the bureaucratic barriers and bring back a spirit of innovation.
Due to all these side bets starting to pay off for the tech titans, coupled with their very strong balance sheets, it is a reason that you have to have them in your portfolio.
http://www.vestact.com/images/ar_msft_apr_21.png