Apple recently passed up Microsoft in market capitalization to become the world’s most valuable technology company. Check out this nice New York Times chart, which tracks the two companies’ market caps since 1990. Cursor over the little “i” flags to see company-history milestones.
Source link: http://archive.mises.org/12853/apple-and-microsoft/
Apple and Microsoft
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I wonder if Microsoft regrets bailing out Apple in the late 90s (when it bought $150 million USD worth of shares).
Two comments: J.K. Galbraith, were he still alive, would have been able to write a humorous, biting essay about how Bill Gates’s outrageously huge mansion figured into this, both as one reason for why Microsoft stock has declined and also as a reason not to bemoan the firm’s fall from its perch. Serves Gates right for his conspicuous consumption! My other comment is that this dynamic chart with very interesting live milestones is a wonderful example of how and why the electronic medium is leaving the NYT print edition in its dust. I used to be a newspaper aficionado; today, I rarely hold one in my hands.
Well lets just see if Apple is able to maintain it, their products are based on market hypes, that can ensure anything but market stability.
This is comparing Apple and oranges, so to speak. Apple may once have been a competitor to Microsoft, but now they are going after completely different markets. Apple; consumer electronics. Microsoft; PC software, search engines and media.
Not completely true. My wife’s first apple product was an iphone, and she later graduated to a MacBook – employer provided. Employers are willing to provide their employees with MacBooks if they prefer that over a laptop running MS windows.
If you look at the smartphone market, it was once dominated by devices running Windows Mobile and Palm OS. Now they both are essentially non-existent. Tablets were first introduced by MS, but now popularized by Apple.
Anyway you slice, one can’t deny the onslaught that Apple(and Google) is making on MS. My prediction is that Bill Gates will return to run the show at MS in the not so distant future.
Agreed! For years Mac and Apple were names that to me represented the preferences of designers and graphic artists on the one hand, or of those, on the other hand, who either wanted to express their individuality or make a political statement against mighty Microsoft. I was a PC man with no interest in Apple. Then my assistant talked me into trading my Blackberry for an iPhone. That act, and that device, converted me. I now have a MAC at home, and I use a powerful MAC laptop (with a separate keyboard and huge monitor) as my desktop in my office. A good friend and entrepreneur has dumped his laptop and carries only his iPad. There is no question about the influence of the iPhone in converting dinosaurs like me to the MAC “culture” and OS.
To me it is very clear why Mister Softie is slipping. They are so big that they can no longer really serve their customers.
They have so many customers that whenever they want to produce something new there are too many voices telling them what the new product should contain. Their customers are so dissimilar that nobody could produce a single operating system, application, etc. which satisfies, for example, both an old lady who only uses her computer for email and a Fortune 500 company whose computers are chock-full of mission-critical apps.
Internally, once a company like MS achieves a certain size then most of their workers no longer have contact with customers any more, in any meaningful way. Practically everyone in the company has layers and layers of bureaucracy, committees, regulations, standards, bosses, underlings, etc. standing between them and the people who actually buy the product. So even if MS had customers were speaking with a single voice, MS couldn’t hear them anyways because their workers ears and minds are tuned in to internal customers instead.
From here on, economies of scale break down and anyone who was worried about MS getting too big can get a lemonade, sit down and watch them slip and fall. Apple will have their time to slip and fall too (again).
Anybody remember a few years ago when people were afraid that Microsoft had a ‘monopoly’ on the PC/software market?
What do you mean “few years ago?” EFF-types are still crying about it. They’ve just added Apple and Google to the mix as well.
Notice the the NYTimes did not include the attacks by the Justice Department.
I remember the big fight 20+ years ago that featured a NY CEO tossing Jobs from the company Jobs founded. Jobs’ triumphant return gave me some measure of satisfaction. That he later crushed Microsoft gives me the goosebumps. Peter Klein should do a write-up on Jobs. Also, Pixar is simply beyond a great company – why it didn’t buy Disney and fire everyone instead of letting Disney brass save its collective ass by buying Pixar is beyond me. Pixar is a gift to mankind – as is, I guess, all the other cool Apple stuff.
I will be on the Apple bandwagon by the end of the year. Good bye Dell. Good bye Microsoft. Hello Hippie Liberation.
I seem to recall that Pixar remained pretty independent as part of the purchase deal, making Disney more of a patron than an owner. Then there’s the fact that Disney was about to do Toy Story 3 in house…
I’ve been using various systems nearly my entire life, and I still don’t quite understand why people ever used Windows.
I think it has a lot to do with marketing. Not to end-users who are saddled with problems that MicroSoft couldn’t be bothered to solve, but rather to middle managers and bureaucrats, who were given a sense of superiority by having a special relationship with MicroSoft’s expensive IT support staff. MicroSoft plays on the pride of overpaid suits to push their crapware and ‘solutions’ to problems which are mostly of their own making.
The web is going to end all that, however. Fewer and fewer people “need” MicroSoft’s crap as there are more solutions to get around bureaus that require broken Office file formats. Heck, files are becoming less important as more data ends up in the cloud. MicroSoft keeps bumbling with alternative technologies, but ultimately the only reason anyone uses them is because worthless higher-ups tell them to.
Apple, whom I find many faults with as well, at least try to make a product people actually like to use.
Apple, in the past, didn’t have the productivity applications demanded by business and universities. Now that those productivity tools are available on a range of platforms (open office, office for Mac, et cetera), the choice between the two comes down to OS preference and value. My Mac experience was chocked full of returns to the “genius bar” for a logic controller that persistently went out. Mac provided a report for the logic controller’s faulty performance, but continued to replace the defective controllers with more of the same. So, when my warranty ran out I still had a logic controller that, as one might predict, would soon fail… and it did.
This is why I went back to a PC… where I can actually buy replacement parts from a variety of vendors and do the work myself. The Mac was far superior in performance… but the price of parts and service was greater than I was willing to offer up. Cheers!
“I’ve been using various systems nearly my entire life, and I still don’t quite understand why people ever used Windows.”
In my case, it’s because AutoCAD and 3D Studio ran in Windows, while the Macintosh port-over (for the former — they didn’t even try the latter) was a complete disaster. I could not run money-making apps in Macintosh. To hell with ‘em. There were for kids.
It was an ancillary bonus to me that I was able to rub these “art” peoples’ noses in graphics work that was completely impossible for them to do, all while they were handing me their attitude. I just loved that. Some of the best laughs of my whole life.
Apple is mostly entertainment oriented and entertainment is usually a luxury good mostly consumed during boom times.
MS on the other hand produces both entertainment and productivity goods.
In the long run, when this quasi boom ends and recession returns, I would imagine Apple would be hit harder and the trend would reverse.
Actually shorting Apple and going long on MS at the same time, with the same amount of money would be good move.
Well, for quite some time the only two Microsoft products that have been profitable in a meaningful way are Windows and Office (and, to a lesser extent, IIS/SQL Server/Exchange). Just look at their published reports:
Q1/2010:
Windows: 3B$ profit
Server: 1.2B$ profit
Online: 0.7B$ loss
Business (i.e. Office): 2.6B$ profit
Entertainment: 0.1B$ profit
Other: 1.2B$ loss
So, you could also say that when the boom of Office and Windows ends, MS will be hit quite hard. It depends on how successful Microsoft’s vendor lock in strategy will be in the long run. They haven’t had significant success in online services or entertainment sector. XBox might be a success from a consumer point of view but financially not so much.
Apple however managed to create a distinguishable brand and have a better control of market segmentation. Google on the other hand is mastering mass data processing. If Microsoft can’t counter Apple’s penetration into consumer market and Google’s into the business services, they are screwed, and it will be a slow and painful death.
I am looking at this from the entertainment vs productivity point of view.
Apple makes profits off of toys. Ipods, iphones, ipads and on service like itunes. Even most of their computers are entertainment PC’s other than a few exceptions in design business.
So when the boom ends, they will get hit hard because people don’t buy toys in hard times.
MS makes profit off of business’. Business will still have to be productive so they will need MS products. Maybe MS profits may also fall because there would be less business’, but not as much as Apple.
Google is better situated than Apple but their core profits are from advertising, and that is an industry that is always hit hard during recessions, so they would be hit harder than MS.
The distinction between entertainment and productivity is not as clear-cut as you’d like to have it. There is no productivity benefit per se in using Microsoft’s products. In fact, you are probably much more productive with an iPad than with Windows Mobile. What shifts the scales towards Microsoft’s solutions is the vendor lock in. That allows Microsoft’s solutions to be more expensive and creates a bubble industry around support. If Apple and Google can overcome the vendor lock-in (probably Apple on the client and Google on the server side), the bubble bursts, and not only will Microsoft be in trouble but the whole IT support industry would need to restructure. It’s kind of like what IBM went through when they didn’t react quickly enough to the market changes in the 80s-90s and Microsoft took away big chunks of their business.
Google might have their core revenue in advertising, but their penetration into the mobile and online business services markets looks quite successful. That is one less option for Microsoft’s vendor lock-in to work. The point is that the ways people are doing business are changing, away from isolated businesses towards interoperability and mass data processing on the backend, and from one size fits all towards aesthetics and usability on the frontend. Microsoft’s progress in both areas has been stagnating. They had a quasi-monopoly position, and without pressure from competition, they overexpanded and atrophied.
Even though I personally don’t use Apple’s products, I’m not worried about them. That’s where the progress is happening now, Microsoft lost the lead.
Oh and of course a summary for the impatient:
http://pollycoke.net/wp-content/uploads/2009/05/linux-mac-pc-perceptions.jpg
I think the funny thing is that some people really don’t understand that there is no such thing as “most valuable company”. Market capitalization is not equal to value. Shares don’t represent value, they are a simple right to vote (there are non voting shares as well, but I don’t want to complicate things right now) and right to a share of a profit. And multiplying share prices with total share numbers would violate the marginal theory of value in a heartbeat. Stock-market is a place where we trade with shares, not companies therefore there is no such thing as company value.
The market price of Apple shares are now higher than Microsoft’s but what does that mean? People want Apple shares more than Microsoft’s because they expect that they will have higher profit from Apple than from Microsoft. This is of course an expectation, and as such it can be true or it can be false as well (time will tell). Microsoft is a way bigger and more capable company, but because they have to deal with a way more complex “world” a way more complex market than Apple does, the market think that they will make more mistakes and that they would be in no position to be as profitable for the same amount of capital invested as Apple will be. Hence the market is willing to buy Apple’s shares a little more than Microsoft’s and the supply/demand of shares drive Apple share prices up faster than Microsoft’s. But the funny thing is that while Microsoft shares are clearly “normal” or in other words the market doesn’t expect from them miracles, they are fairly stable. Apple’s shares are in a point where there is clearly not much space for growing anymore (the law of large numbers) and they made a rally way out of proportion to their market success, so the only way from here is clearly down.
The situation with Apple is the same as the situation with Microsoft some 10 years ago. It has a market capitalization of 500 billion and that was as much a hype as Apple’s 200 billion, so I expect that Apple’s market capitalization will go back to its “normal” level very soon. Probably in the next couple of months, when all companies shares will start to fall again, Apple’s will fall a little more than the average, Microsoft’s will fall more or less an average or because of the importance of Microsoft in the real world economy it would fall a little less than the average.
Anyway I just wanted to say, that market capitalization is just a fancy Keynesian number and it has nothing to do with value or size or capability or importance.
Let me get this straight: There’s no such thing as “company value,” and there’s no such thing as one company being worth more than another due the market price of its shares? And the term “market capitalization” is just a fancy Keynesian number that means nothing? And those who invested in an effort to gain equity in their portfolio have no reason to be happy that the stock of Apple has gone up because it will go down very soon?
“Let me get this straight: There’s no such thing as “company value,” and there’s no such thing as one company being worth more than another due the market price of its shares? And the term “market capitalization” is just a fancy Keynesian number that means nothing?”
Almost right, the only place where market capitalization mean something is in a negotiation process with financial organizations about getting a large loan (a complete unimportant thing in a case of Apple and Microsoft with huge cash reserves and mostly self financed development). Anyway how can you talk about “company value” based on a price of it’s shares especially when only a very small volume of it’s shares are in day-to-day trading? Try to increase the volume of shares offered for sale just by 20% for example (that would be still only a small percentage of all the shares) and I bet my life the share prices will plummet like crazy. What would be the “company value” that day?
Do you honestly believe that the “value” of Apple went up 40 billion dollars in a week just because it shares went up? Common man, we are Austrians here, we know that value is first of all subjective and second of all, value is marginal. How the hell can, you talk about marginal value by multiplying all the shares with an individual shares price? How the hell can you talk about “company value” when there is no company market? The stock-market deals with share prices, people trade shares there and not companies. A company can have a subjective value to you or me, but it can’t be determined by multiplying shares with share price. That is a Keynesian style nonsense.
“And those who invested in an effort to gain equity in their portfolio have no reason to be happy that the stock of Apple has gone up because it will go down very soon?”
Well… that depends, if they sell soon they will be happy, otherwise they will not… name one stock in history which wasn’t go down after it has hit a historic high so fast as Apple did? Ask Warren Buffett… he would tell, you if a stock is high it is time to sell if a stock is low… usually it’s time to buy.
http://www.google.com/finance?chdnp=1&chfdeh=0&chdet=1262293200000&chddm=1295679&cmpto=NASDAQ:AAPL;NASDAQ:MSFT&cmptdms=0;0&q=aapl It get’s interesting if you bring the graph back to when both corporations started.
Yes stock evolution is higher for Apple but what does that mean? Microsoft still has the slight advantage of having a little hold in a variety of markets not only IT, Apple I fear will start getting the same treatment as all the other “big ones”: anti-trusts, fines for anti-competitive behaviour, etc, etc.
Lets see if they can handle them without losing momentum, because there is a lot more to pick from them now than from any other company in terms of “harmful” business practices.
Apple has done it’s marketing really well. You can not take that way from them. You get a good feeling when you see any of their ads. The whole think different thing was pretty cool too. But the thing is, they make their products look great. You just want to have them in your hand.
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