
Microsoft Pulling Even with Apple in Ranks of Biggest Companies - chollida1
https://www.bloomberg.com/news/articles/2018-11-26/microsoft-pulling-even-with-apple-in-ranks-of-biggest-companies
======
chadash
As of 1:04 pm EST, looks like MSFT has a market cap of $807B compared to
Apple's $812.

If you look at their Q2 filing [1], their business has 3 main components:

Productivity and Business Processes ($9.0B) - includes office, Microsoft
Dynamics, LinkedIn

Intelligent cloud ($7.8B) - includes server proudcts and azure

Personal computing ($12.2) - includes Windows OEM revenue, xbox, search
advertising, Surface

It seems to me that Microsoft has a much more diversified set of products than
Apple [2] with more resiliency in terms of revenue. The business world isn't
migrating away from Excel any time soon. Their cloud business is growing
strongly. And for the foreseeable future, Windows is the only OS for PCs
outside of MacOS which is more of a luxury product (I love linux, but it just
hasn't taken off for mainstream consumers).

[1] [https://www.microsoft.com/en-
us/Investor/earnings/FY-2018-Q2...](https://www.microsoft.com/en-
us/Investor/earnings/FY-2018-Q2/press-release-webcast)

[2] about 2/3 of apple's revenue comes from the iPhone. See
[https://www.apple.com/newsroom/pdfs/Q2_FY18_Data_Summary.pdf](https://www.apple.com/newsroom/pdfs/Q2_FY18_Data_Summary.pdf).

~~~
mkirklions
My experience with an iphone had me convinced Apple=AOL.

Less features, more expensive, and anti-consumer practices?

This is the example of short term profits to drive up stock prices. Squeezing
current users, spending limited money on improvements, and charging more money
will work temporarily.

That said, Nintendo has been doing this for a decade, and they somehow
survive. Marketing might be more powerful than competition...

EDIT: Due to HN whales(or apple marketing teams), Anti consumer practices-

>Intentionally slowing down old OS

>Proprietary connectors

>Luxury pricing

>Limited to App store and removal of apps

>Limited hardware

An argument could be made for 'safe apps', but the rest of that list is a hard
'No, that is bad for the user'.

~~~
malshe
"Intentionally slowing down old OS"

One of the main reasons why I am not upgrading my iPhone 7 Plus this year is
that iOS 12 has made it amazingly smooth. I have an iPhone 5S and even that's
fantastically smooth with iOS 12. This is not my experience alone btw. So I
think you are just making stuff up here.

~~~
mr_overalls
> So I think you are just making stuff up here.

Apple has admitted that they slow down older phones, due to battery issues.

[https://www.cnet.com/news/apple-slows-down-older-iphone-
batt...](https://www.cnet.com/news/apple-slows-down-older-iphone-battery-
issues/)

~~~
malshe
Older phone != older OS

------
millstone
Note that Microsoft's P/E of 43.6 is higher than Alphabet (40.7), Facebook
(20.4), Apple (14.49) though of course lower than Amazon (87.3). This is
presumably due to their incredible growth in Azure / cloud.

------
burtonator
It's because they've been making some great decisions lately.

I've been using Typescript in an Electron project I've been working on
([https://getpolarized.io/](https://getpolarized.io/)) which is a doc manager
for PDF and web content.

Typescript is awesome. It's basically Java 8/9 in terms of language design.
Supports interfaces, generics, etc.

If you add VS code and their github acquisition they're going to be in front
of a lot of developers in the next 2-5 years.

~~~
LiterallyDoge
What did you find you liked about Typescript? I considered it and opted for
pure ES6/Next because the typing didn't feel like it would actually help
sanitize my data. If I get a bad payload from the server, it's still
transpiled at that point, and that's when I really need to know what my data
type is. Otherwise I just sanitize at use (like all JS) and the overall
overhead is less. Maybe you know something that I don't?

~~~
nicoburns
It's pretty useful for libraries, as you don't have to do anything, but still
get type safety benefits. It also has _really_ good tooling. If you use
anything like ES Lint, then TypeScript does a similar job but is a step up in
quality.

------
Animats
This is Peak Phone. Everybody already has a mobile, and IPhone N+1 is only
marginally better than IPhone N. It's like GM in the 1950s trying to get
people to buy a new car every year. Then GM tried "more car per car", trying
to get people to pay more per unit.

There's no Next Big Thing in the near future, no "must-have" consumer product.
3D TV was a flop. VR goggles were a niche product. Cloud-connected
surveillance ("speakers") and computer-controlled woks (big in Asia) are just
not that big. Foxconn sees this and is cutting back.

~~~
jimmaswell
>There's no Next Big Thing in the near future

How can you know this? Is there a precedent of knowing beforehand right before
the "next big thing" is about to happen?

~~~
Animats
The Next Big Thing for volume production 3-5 years out has to be working now
in some form. What's almost here? AR goggles?

10 years out, there could be something completely new. But there is lead time.

------
dkrich
Share prices expand when revenues look to be expanding. What the price action
in MSFT and AAPL tells me is that the market sees MSFT as growing over the
next few years (at least) and AAPL not growing much from where it is now.

This story starts to make sense as you look at Apple's product portfolio.
AAPL's cash cow is the iPhone. Yes they make tons of money on other products
like laptops, tablets, and watches, but the lion's share of the revenue comes
from iPhones. This has been the case for a long time, so why now has the stock
pulled back? It's because now the ASP on the iPhone is likely topped out for a
while, especially as the economy starts to slow down. So ASP is topped out,
what about unit growth? If prices remain constant but units sold continues to
go up, wouldn't that mean increased revenue? Yes, but that too seems to be
stagnating according to the most recent earnings reports. And that's the
story, IMO. Revenues on the most important products have seemingly topped out
and probably won't increase significantly from here. That could of course
change if for example lots of Android users unexpectedly flock to iPhones.
There's no reason to believe this will happen, though.

What about other lines of revenue? Services, for instance? Apple Music and
video content are commodity businesses so likely won't see much revenue
expansion from here. Wearables are probably the main bright spot.

Let's not forget that the entire market for tech stocks is in the midst of a
huge sell-off which is probably most to blame for Apple's decline. There is
probably two-way influence here.

Apple was basically rerated over the past year or two from a stable dividend
generator to a growthier stock and is now being rerated back to stable
dividend generator. I don't think Apple has any near-term competitive threats
to its business so should bottom out sometime soon, but if the stock is to
resume its uptrend it has to show significant growth in new areas.

------
danielor
I think this is mainly a question of momentum. Microsoft is benefiting from
some good strategic decisions in recent past, and has a large number of legacy
businesses that are quite profitable. Apple in the short term is too dependent
on the iPhone, and it will take a few quarters to build a more robust product
pipeline.

~~~
nkkollaw
I think the more they build, the more they'll screw up. I've yet to see
anything good coming out of Apple in the last few years.

\- force-touch touchpads are so useless than not even them use the technology
to any meaningful extent

\- the Touchbar is completely useless, and anecdotally people stop using it
after a few days

\- their new butterfly keyboards are a nightmare to type on (albeit that's
definitely subjective), and stop functioning with dust particles, and they
haven't even acknowledged the problem before being hit with 2 class actions

\- they've removed all useful ports from their laptops, and headphone jacks
from their phones.

What a shit show.

~~~
konschubert
It's weird. It really looks like Steve Jobs kept the vision clear and what
we're seeing now are his people cargo-culting what they saw him do.

I don't know much about Steve Jobs, but I imagine he cared more about making a
great product than optimizing earnings. I also think he cared more about
making a great product than about forced innovation

And I think that's different now, and ironically that's one of the things
holding the share price back.

~~~
clubm8
>what we're seeing now are his people cargo-culting what they saw him do.

I agree 100%. Ex: Steve Jobs loved minimalism, cargo cult now insists on
eliminating all ports

~~~
nkkollaw
This sums it up perfectly.

------
grezql
good, that will teach them not to remove HDMI from macbooks and adding stupid
notches, dj touchbars and other crap.

edit: not to mention 30% app store fee for developers.

~~~
jamroom
MSFT charges 30% to developers as well:

[https://docs.microsoft.com/en-
us/legal/windows/agreements/ap...](https://docs.microsoft.com/en-
us/legal/windows/agreements/app-developer-agreement)

~~~
binarycrusader
Actually, what you linked states different amounts depending on application
type and/or other conditions:

 _The Store Fee is:

i. Thirty percent (30%) of Net Receipts for: (a) all Apps and In-App Products
made available in the Store and billed to Customers on a non-subscription
basis, and (b) all Games (and In-App Products in Games).

ii. Fifteen percent (15%) of Net Receipts for any Apps that are not Games (and
any In-App Products in such Apps) that are billed to Customers on a
subscription basis._

See also this blog post:

[https://blogs.windows.com/buildingapps/2018/05/07/a-new-
micr...](https://blogs.windows.com/buildingapps/2018/05/07/a-new-microsoft-
store-revenue-share-is-coming/)

~~~
SyneRyder
For others, the important pull quote from that link:

 _" consumer applications (not including games) sold in Microsoft Store will
deliver to developers 95% of the revenue"_

------
onetimemanytime
MSFT is more predictable to me as it has a lot more sources of revenue and
looks like they are doing very well in cloud.

~~~
partiallypro
I think this is the crux of why Apple trades at such a low P/E, sure they make
tons of money, but their product line is very concentrated and not diverse at
all. Microsoft has tons of product lines, and if one is suffering others
usually do ok, or excel. Windows has struggled for the past decade or two, and
what picked up the slack? Office 365 and Azure. I suspect when those cool off,
Windows and devices will pick back up. Microsoft is built better to handle
cyclicality. That's not to say Apple isn't a great company, or even a bad
investment, but I do understand why Apple has fallen so sharply, and
relatively speaking, Microsoft has had a marginal correction relative to its
peers.

If you assume we might head into a recession due to the trade war, Apple has
never really had to go through that with their current high end product line.
The iPhone was introduced in 2007 and was early cycle even during the
financial collapse. It will be interesting to see if the business cycle
greatly hurts their sales. I think that's what so many are worried about.
Especially when we have their vendors cutting forecast (and yes there have
been some crying wolf over the years, but eventually the wolf will show) and
Apple being less transparent about unit sales. I suspect they will see a fall
in sales when we do enter a recession, but I am encouraged that they have such
control over their supply line that they won't get stuck with inventory gluts,
like...uh Nvidia.

I mean back a few years ago Microsoft had a massive write-off from
hardware...and that's not even a fraction of their business, imagine if Apple
had to write off a ton of hardware, it would be brutal. That seems unlikely
though, as I said, they seem to have a good handle on their inventory.

------
nkkollaw
Microsoft is doing a much, much better job with hardware compared to Apple.
Microsoft's Surface Book is absolutely stunning--although a little pricey for
me--and unlike Apple's stuff it doesn't break after a month of normal use with
people having to do class actions for them to acknowledge that there's even
something wrong.

On the other end, macOS is definitely better than Microsoft in pretty much
every aspect (although that might be subjective).

Me, I'm currently on a Surface Book "clone"\--meaning a laptop that has the
exact same Chinese, awesome 3000:2000 touch screen, running an hybrid of Xfce
with Kwin and other components to make Linux look a little prettier.

~~~
Joeri
_Microsoft 's Surface Book is absolutely stunning--although a little pricey
for me--and unlike Apple's stuff it doesn't break after a month of normal use
with people having to do class actions for them to acknowledge that there's
even something wrong._

The surface book is actually known to have thermal problems, and the surface
pro 4 almost went to class action before microsoft organized a replacement
program.

[http://www.classlawdc.com/2018/02/06/microsoft-surface-
pro-4...](http://www.classlawdc.com/2018/02/06/microsoft-surface-pro-4-class-
action-investigation/)

 _On the other end, macOS is definitely better than Microsoft in pretty much
every aspect (although that might be subjective)._

As someone who hops between macOS and windows I'd have to disagree with that.
Window management on laptops is way better on windows. There's no good way to
cope with the dock on a small screen. It's difficult to resize windows (very
small targets and no "dock to resize" feature) and the window behavior when
maximized (fullscreen) is very clumsy. Also, macOS has no equivalent to the
windows timeline.

------
btilly
I am a little shocked that the market hasn't woken up to the problems that
Apple has.

Consider all the people you know well. How many have switched from Android to
OS X in the last 5 years? How many have switched from OS X to Android in the
last 5 years? In my household, 2 switched to Android, 0 switched the other
way. In my broader network I'm aware of several more switching to Android,
none switching back.

There is a good reason for that. An iPhone with equivalent specs to an Android
costs 2x as much. The user experience isn't that much better. (Many people who
switch say that the Apple experience was actually worse.)

The cheapest phone that Apple wants to sell you is an XS for about $1000. You
can get a top of the line Android for less than that - with specs that beat
the best model that Apple has.

So Apple is fighting a rearguard action - squeeze the most profit that it can
out of a clientele that is slowly disappearing on them. In this world, they
can't afford defects.

So what happens? I personally have an iPhone X because my sister gave it to me
as a present. This month the display became non-responsive (that's the bug
that has Apple's stock falling). They fixed that after most of a week without
a phone. I've now got it randomly deciding that Face ID no longer works, the
volume randomly going between off and on, and it recharges when it feels like
it wants to. I've got to wait most of a week for them to fix THAT as well.
(Have you ever had your phone decide to dial its volume to 0 in the middle of
a phone call or listening to a book on your commute? Yeah, it sucks just as
much as you would guess.) In the meantime I'm looking at my wife's phone with
a growing amount of envy.

When Apple stops being willing to fix their phone under warranty, what do you
think I'll replace it with?

~~~
penagwin
I'd disagree, I work in phone repair and have an iPhone 7+. Apples cheapest
phone isn't 1000$ it's 450$ for an iPhone 7. Which IMO is fast enough given
the tiny incremental improvements of the 8, etc.

I'd say iPhones last far longer then most (not all!) android devices. My mom
still uses a 5S. It still gets security updates (and feature updates and
optimizations!) how many android devices can say that? Even Google's nexus
series can't say that anymore.

That said the 6 and 6p have been dying a lot recently from cellular/wifi
issues or some other weird things - things we can't replace or fix (sadly our
store is unequiped to do motherboard level repairs, but IMO only 2 employees
would even have a chance at attempting something like that). I think this
comes back to the bending issue they had. iPhone 6 phones are still aplenty in
the wild though.

~~~
btilly
I said "that they want you to buy".

The ones that they want you to buy are listed at
[https://www.apple.com/iphone/compare/](https://www.apple.com/iphone/compare/).
Go there and look at the phones that they list.

Can you find the cheaper phone? Yes. Its specs don't compare to the
[https://www.samsung.com/us/mobile/phones/galaxy-s/galaxy-s8-...](https://www.samsung.com/us/mobile/phones/galaxy-s/galaxy-s8-64gb
--unlocked--
sm-g950uzkaxaa/?cid=us_pla_google-8875160598-cam=US_IMECOM_PLA_Buy_MobilePhones&gclid=EAIaIQobChMIt8KD6eXy3gIVD1mGCh3eeQijEAQYAiABEgJ93_D_BwE&gclsrc=aw.ds)
for the same price.

As for iPhones lasting longer, it certainly used to be true. I went out of my
way to buy Apple products for close to 20 years, in large part because of the
reliability that they gave. However reliability of Apple devices seems like it
has gone downhill in the last few years. Look at
[https://ifixit.org/blog/10229/macbook-pro-
keyboard/](https://ifixit.org/blog/10229/macbook-pro-keyboard/) for example.

My anecdotal experience fits. In the last 5 years I personally bought 3 new
phones. One died 3 days out of warranty, one is the phone I described above,
and the other is still being used by my son. My wife switched after her phone
had reliability problems, and my step-son's switch came after his phone just
died.

