In tech, only Microsoft’s valuation greater than Apple
Forget Dell and Google, the only company standing between the Cupertino, California-based Mac, iPod and iPhone maker and the top tech company valuation is Microsoft. Steve Jobs’ fortunes and those of his company have skyrocketed over the last year, whereas the rest of the industry, including Redmond, have declined.
Bloomberg reports that Apple’s 131 percent surge in 2009 has made it the second most-valuable tech firm in America second only to Microsoft, which has seen its revenues decline and share price stagnate. Whereas many tech companies have preserved profitability by slashing costs and pushing higher unit volume most on the back of low-priced, low-margin netbooks, which have ravaged revenues, Apple has largely maintained its high average selling price (ASP) and margins, while boosting unit volume and, of course, profits.
“The iPhone is really the growth driver,” said David Pearl, co-chief investment officer, Epoch Investment Partners, which owns shares of both companies. “It’s the most profitable product by Apple, more so even than the Mac, and has the biggest growth opportunity.”
Microsoft and its OEM partners saw Windows PC sales decline by 39 percent this year. Likewise, Microsoft’s Windows Mobile has also experienced a marked decline, largely at the hands of the iPhone.
Compare this to Apple’s surging smartphone, up 7 percent, and Mac, up 17 percent, sales, which helped produce a robust 32 percent operating profit in the most recent quarter.
“It’s been a rocket ship,” said Roger Kay, an analyst at Endpoint Technologies Associates. “Apple thinks it can pry loose more buyers during this transition, and Microsoft thinks it can staunch the flow of users away from them and toward Macs. Everyone’s girding for battle.”
Driving out profit
This juxtaposition of fortunes is all the more interesting because of the two companies respective market shares — roughly 90 percent for Microsoft and 8 percent for Apple in operating systems. Yes, the Wintel duopoly still accounts for the overwhelming volume, but Microsoft and its OEM cohorts’ ability to generate profit has withered precipitously.
Although Microsoft’s valuation is still $52.3 billion higher, Apple’s holiday quarter is already shaping up to be another barn burner with the Mac and iPhone still rapidly gaining share, while the iPod continues to dominate.
How long before even Microsoft falls to Steve Jobs Mac, iPod and iPhone juggernaut? Perhaps it’s just a matter of months…
What’s your take?
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October 29th, 2009
“Although Microsoft’s valuation is still $52.3 billion higher”
This sounds HUGE, until one looks at the two valuations. What are they now? I don’t know. I think Apple is somewhere around three-quarters of the value of MS. Suddenly, the very silly number most people like to throw around – market share – doesn’t look very important.
October 29th, 2009
MARKET SHARE IS NOT IMPORTANT. PROFIT IS.
Apple, for its small marketshare, makes more shear profit than Microsoft.
It’s Apple Stores make much more per square foot than Tiffany’s.
Marketshare is not important. Profit is KING.
October 29th, 2009
MSFT will get a small bump from Win 7 next quarter, but Win 7 is no game changer for them; it’s basically a tune-up for Vista. Apple COULD see competition over time from the Android phones, but I’m not worried. The Motorola Droid phone looks like a loser.
October 29th, 2009
Apple’s vertical integration business model is in good shape. Lots of new customers being introduced to Apple through its iPhone.
October 30th, 2009
That gap is ultra-huge. Even if Microsoft share price goes up a little, bit, Apple has to really get it’s share price up a lot. Apple would now have to go up to about $270 to pass Microsoft in market cap. But will Apple ever get up above $250 is a big question. People keep saying that the stock is overbought and has just about run out of headroom. The ChiPhone isn’t likely to sell well at all due to its high initial cost.
I have my hopes pinned on the rumored tablet to sell to higher education and possibly corporations and maybe that’s all that will be necessary for that extra boost. I’ve practically given up on desktop Macs getting into the corporations. Those no-risk old-guard IT people just love Microsoft Windows so damn much, they’ll never give it up no matter what employees are asking for.
October 30th, 2009
@Constable Odo
“That gap is ultra-huge. Even if Microsoft share price goes up a little, bit, Apple has to really get it’s share price up a lot.”
It works the other way around as well…. MSFT has to only go down a little bit for Apple’s market cap to exceed Microsoft’s.
Apple still has some major profit drivers:
Macs, iPod, iPhone, iTMS/App Store
Whereas Microsoft has…
Windows7(VistaSP3), Windows Mobile 6.5/7, Zune, XBox/360