
Apple is Officially Worth More than Microsoft - fusionman
http://techcrunch.com/2010/05/26/apple-microsoft-market-cap-2/
======
moron4hire
Consider that Apple's P/E is 24.5 and Microsoft's P/E is 13.4. Basically,
while Apple may be in demand right now, Microsoft is earning almost twice as
much.

Also, Microsoft pays a (albeit small) dividend, whereas Apple does not.

~~~
sh1mmer
Is it just me that thinks it's insane that companies can permanently plan to
not pay (or pay small) dividends?

If market trading is solely based on the ability to resell stock at a higher
price how is the market expected to select companies that deliver real value
to the economy?

Surely the ability of a company to consistently and stably deliver dividends
to the stock holders would be the best measure of success, re-investment cases
aside.

Unless I misunderstand the only shareholder value in this context is the
ability to flip the stock or get a piece of the action if the company is sold.

~~~
jakarta
You don't need to pay dividends to increase shareholder value. It just depends
on how good management is with allocating capital.

Buybacks can work just as well if you are buying back at the right price. A
lot of management teams are bad at capital allocation and buyback stock at 52
week highs - that is almost always incredibly stupid.

But sometimes the business is trading at irrationally low levels and it makes
a lot of sense to just buyback stock, especially if the fundamentals are in
tact. I saw a company doing this and it is a great decision, their business
earns a 50% return on invested capital and they have an earnings yield around
20%. It is a slam dunk strategy. When it is overvalued, you can issue stock
and use it for acquisitions.

Look at Henry Singleton who ran Teledyne and used that strategy. Teledyne went
from $100,000 in profits in 1960 to $238 million in 1986. Shareholders’ equity
grew from $2.5 million to over $1.6 billion. Teledyne trounced the market by
4x over that period.

Using excess capital to fund accretive acquisitions, internal growth, or to
invest outside of the company can work if you are disciplined in the process
(most aren't). Warren Buffett became one of the richest people in the world,
simply by doing this (it sure wasn't his $100K salary).

~~~
eru
> Buybacks can work just as well if you are buying back at the right price. A
> lot of management teams are bad at capital allocation and buyback stock at
> 52 week highs - that is almost always incredibly stupid.

The stock price for buybacks doesn't matter, if you only care about getting
money back into investors' hands.

~~~
jakarta
Incorrect. If your stock is overvalued, a buyback is an inefficient and
destructive method for getting money back into shareholders hands. You would
be better off giving a special dividend instead.

~~~
eru
Please explain.

~~~
jakarta
If you spend $100M buying back stock at the top of the market and then the
next year, the bubble pops and your stock is down 50% was that really good
capital allocation?

For every dollar you spent, you have effectively lost 50 cents. Sears admitted
as much back in 2007 when they were buying back stock at $180 only to watch it
drop to $90 a few months later. Remember, the idea with buybacks is to reduce
overall share count so that you boost EPS and in turn your share price.

The amount you can retire might double if you simply wait out a bubble period.
That's why dividends and buybacks need to be looked at relative to where the
stock valuation is. When your stock is trading at a peak valuation, if you
want to release value to shareholders, you are much better off using a
dividend than a buyback.

~~~
eru
You can play the stock market, and you can put money back into investors
pockets.

If you want managers to play the stock market, your comments are spot on--but
you shouldn't restrict them to buying only shares of their own company. If
they are good at predicting when valuations are high and going lower, or the
other way round, you should open an investment fund and profit from their
expertise.

Most companies aren't in the business of playing the stock market.

If you just want to transfer money from the company to the stock holders, you
can either issue dividends or buy back shares at any time there's excess cash.
Apart from taxation issues, there's no difference between share buy-backs and
dividends in terms of getting money back to the investors.

------
jedberg
I think the more interesting news here is that Apple is now the second largest
company in America (about $50 billion behind Exxon).

~~~
dcurtis
This is kind of pedantic, but I think the word _valuable_ might be better here
than _largest_.

Apple is relatively small when compared to companies like Walmart, which has
2.1 million employees and almost 8x revenue.

~~~
KERMIT
Where is the value in Apple? Its ability to trick Americans into buying very
expensive, yet very restrictive, products that most of the time they really
don't need? That's actually a very harmful thing, from an economic
perspective.

~~~
jackowayed
iPods and iPhones are competitively priced.

Sure, the Macs are expensive, but the hardware is very high quality, and when
you compare them to Thinkpads and Vaios--other high-end computers--it's pretty
reasonable.

I'm no Apple fanboy (as of now, the only money I've ever given Apple is 30% of
app purchases I've made for my hand-me-down iPhone 2G), but in a couple of
days, I'm buying a MacBook Pro because it's a high quality unix system that
Just Works. Given that I'm a programmer who will use it constantly, the time
it will save me should cover the extra few hundred dollars by the end of
summer.

~~~
nitrogen
My experience with my first Mac has not been one of it "Just Working." I get
periodic whole-screen graphics corruption (I took a photo of the screen with
my digital camera I was so surprised), infinite loops when connecting to
shared folders if I type the URI wrong, and other issues. Plus, its UI is a
lot slower than the custom PC I paid the same price for. It mostly sits unused
now.

~~~
loewenskind
Then you should have taken advantage of the other thing Mac does extremely
well: support. There is obviously something wrong with your machine. Or did
you think we're all just suffering through this, embarrased that we paid so
much for a machine that doesn't run?

------
melling
Some would argue that they were always worth more. :-)

It's interesting that this happened without breaking Microsoft's 90% desktop
monopoly. Apple got bigger but it wasn't to the detriment of Microsoft. They
just grew into new markets.

~~~
noarchy
I suspect that this was just a sound bite in 1997, but Jobs himself said it:
"We have to let go of a few things here. We have to let go of the notion that
for Apple to win, Microsoft has to lose."

~~~
10ren
I was amazed when he said "we lost, they won" with no sense of rancor, nor of
defeat of self. Very growthful and in-reality. Say what you will about Jobs,
he's not dogmatic; he's far from an apple fanboy.

He's doing what a recent article on disruption
(<http://news.ycombinator.com/item?id=1375141>) reminded me of: don't confront
entrenched competition, it will "invoke a competitive response" and they'll
win (or "never attack a fortified hill", from _crossing the chasm_ ). Instead,
do something else.

~~~
elblanco
> he's far from an apple fanboy.

I agree.

In order to make great things, and then to sustain that, I really truly
believe you have to grow to dislike what you made before. It's the only way to
take a critical eye one what you have done and learn from it.

Lots of people think Jobs is a tyrant inside of Apple (and I agree with that
sentiment), but I think the motivation for that is that he simply wants to
create something he doesn't hate _right now_. It might be bootup time, or
interface delays, or screen pixel density etc. That kind of thinking, a
critical review of your own likes/dislikes is healthy I think in order to
grow.

Fanboyism, by definition, is not a process of critical thought.

------
fusionman
If you consider the PEG ratio of both, you'll actually see that when taking
growth rate into consideration, Apple is still cheaper than
Microsoft...barely. So, if you put faith in PEG ratios, Apple is still a
better buy. If you don't know what a PEG ratio is, check it out here
<http://en.wikipedia.org/wiki/PEG_ratio>

------
louislouis
If APPL, MSFT or GOOG disappeared tomorrow. Which one would cause the least
damage? Which one could we live without?

~~~
ssp
Would everything they ever made disappear too? If so, the loss of Windows and
Office would create much more chaos than the loss of Google. The disappearance
of all Apple products would not cause that much damage in comparison.

~~~
whatusername
Not to mention Windows Server / MS-SQL.

------
evo_9
The thing that's most interesting about all this is the predicament that
Microsoft now finds itself in. They just lost two top guys - J. Allard &
Robbie Bach - and you have to wonder just how rudderless Microsoft is at the
moment. They've invested heavily in their core tech - mostly a good idea - but
then they have really nothing to compete with Apple or Google in the mobile
space, at least until their new phone os hits (and even then it faces a
serious uphill battle). Balmer is probably wishing he had bought Palm at this
point.

I wonder if Bach and/or Allard end up at Google... a GBox has a nice ring to
it actually.

~~~
Perceval
Bach may have been fired precisely because HP bought Palm rather than
continuing as a Windows Mobile customer:
[http://blog.asymco.com/2010/05/25/the-reason-robbie-bach-
was...](http://blog.asymco.com/2010/05/25/the-reason-robbie-bach-was-fired/)

J Allard has apparently ruled out working for Google or Apple, and wants to
focus on extreme sports instead:
[http://www.techflash.com/seattle/2010/05/bach_allard_leaving...](http://www.techflash.com/seattle/2010/05/bach_allard_leaving_microsoft_in_upheaval_of_consumer_business.html)

~~~
evo_9
Man, what's really scary is that I thought this article was going to be about
how MS lost out to HP in the Palm deal, and that's why they fired him. But it
sounds like they never even considered this, and it was more about 'losing a
key client'.

Wow, I really thought they had a better grasp of the market trends and were at
least aware of the major problems they face.

------
dejb
This surprises me given that it seems pretty clear they are about to lose
their projected dominance in the smartphone game to Android. I can't see how
you can justify that sort of valuation without projecting them to be the
dominant smartphone platform. The iPad seems to be doing well but it all
hinges on the same OS as the iPhone. Is it possible that Jobs "reality
distortion" field is now working on the market?

~~~
jstevens85
Why is it clear that they'll lose the #2 spot to Android? It certainly may
happen, but it doesn't appear to be anywhere near certain. Notice that at
Google I/O, they said that Android was #2 _in the US_. Why didn't they say _in
the world_ , or _in the US and Canada_ , or _in the US and Europe_ , or even
_in the US and Australia_? Obviously it's because the US is the only major
market where they've been able to beat Apple. If Apple announces a multiple
carrier version of the iPhone at WWDC, I would say it's likely that Google
would lose the #2 spot in the US.

~~~
dejb
Android is growing much faster than the iPhone. The rest of the world (where I
come from) is a lot more varied. RIM doesn't do so well and Nokia dominates
heavily in a lot of markets. The iPhone doesn't do so well outside of the US
either.

~~~
metachor
Android might be growing faster than iPhone, but how does that directly
benefit Google? Apple makes money for every iPhone sold, but Android phones
are manufactured and sold by other companies than Google. I thought Google
gave away the OS for free (unlike Microsoft's strategy of licensing their
mobile OS at a cost). Can someone explain to me how Google makes money on
Android phone sales?

Please don't say "future search ad revenue from having more internet connected
devices in the hands of consumers."

Edit: In answer to my own question, if the only profit Google makes from
Android sales is search ad revenue, then according to this article
([http://aseidman.com/2010/05/65000-new-android-devices-
ship-e...](http://aseidman.com/2010/05/65000-new-android-devices-ship-each-
day-how-much-are-they-worth-to-google/)), Google makes only $8.63 per Android
device sold over the entire lifetime of that device. Article was found via HN,
but no one has commented on it yet.

So apart from this meager search ad revenue, how _does_ Google benefit
financially from Android sales? I just can't figure this one out.

~~~
dejb
I never said it helps Google only that it hurts Apple. The fact that google
can hurt Apple so much without a large direct profit motive is pretty telling
about Apple's weakness IMHO.

------
jacquesm
Interesting tidbit, when you scroll down the page to the end where the logos
are displayed, the apple logo looks new, shiny and modern, the microsoft logo
looks old and boring.

Their corporate images reflect the logos quite well.

edit: funny moderation here, would you mind telling me why ? Apple logo on the
page not shiny ? Microsoft logo not old and boring ? Or do you - mistakenly -
take me for an apple fanboy or something ?

~~~
dflock
I don't know about the moderation, but what you said is entirely subjective -
and quite possibly simply your perceptions of the two companies projected onto
their logo's. You could equally well say that the MS logo on that page is
elegant, simple and understated, while the Apple logo looks cheap, plasticy
and tacky. Either personal opinion would be equally valid, just looking at the
two logo's on that page.

~~~
jacquesm
Apple has adapted their logo over the years - and their website - to reflect
the changing times, microsoft has kept their logo the same for a very long
time.

Now there is something to be said for keeping your logo the same, possibly
forever. But the crowd that apple appeals to and that they intend to sell
their gadgets and computers to _loves_ shiny stuff, and apple is very good at
making shiny stuff. It stands to reason they'd adapt their logo to that.

Microsoft has a much stronger presence in the corporate world and I think that
is why their logo looks the way it does _and_ why they don't want to change it
too much. They try _not_ to be a fashion statement, apple tries very hard to
be one.

~~~
smackfu
Microsoft keeps a steady logo for the company, and updates the logo for their
products. See Windows vs. Vista vs. Windows 7.

Apple doesn't have logos for their products, so they update their company logo
instead.

Just different approaches.

~~~
werrett
I'd beg to differ that Apple doesn't have logos for some of their products.
For example:

iTunes - <http://www.google.com/images?q=itunes+logo> Garageband -
<http://www.google.com/images?q=garageband+logo>

But not all certainly - <http://www.google.com/images?q=iPad>

~~~
smackfu
Here's another one, didn't last long:
<http://i.zdnet.com/blogs/ilife05-box-200.gif>

------
davidw
According to the ancient, unspoken rules of the Silicon Valley elders, this
means that Bill will have to pass the Sacred Dagger of Evil to Steve in a
secret ceremony with the sacrifice of a virgin. Apple fans are already lining
up by the hundreds, hoping to be the "chosen one". Said one "well, yeah,
stabbed to death, but...hey, it's Apple! The iDagger is so cool!"

------
teyc
The real question is whether Apple's growth is defensible?

Talking about smart phones, Apple is a latecomer to the industry, and does not
have a sufficiently strong patent pool to prevent competitors like Oracle, HP
and MS from encroaching.

Apple is the first to deliver to the mass market affordable tablet computing
and touch computing devices. This will remain growth areas, and hence Apple's
willingness to accept lower margins in return for a beachhead and a
sufficiently large user-base to establish itself as a platform-play.

However, further on, Apple is going to have to finely balance the tension of
being the most widely used vs being "exclusive", "cool", or "different". Give
a few years when competitors reach feature parity, Apple will be at crossroads
whether to go mass market or boutique.

~~~
X-Istence
I wouldn't necessarily say that Apple doesn't have the patent pool for mobile
devices (yes, the smart phone sector included) with Apple doing a lot of
innovation in the form of multitouch, OS UI design, usability and a whole
other range of other things.

Dismissing Apple outright is definitely the wrong thing to do.

~~~
teyc
I'm sorry, I should have said "patent barriers" instead. Apple is faced with
the necessity of cross licensing their patents with their competitors in order
to continue developing smartphones. I don't think Apple will be able to
aggressively use their patents to prevent MS, HP, etc from copying.

------
louislouis
Smells like an Apple bubble?

~~~
Perceval
Actually, their P/E ratio has been steadily declining over the past five
years, even as their stock price has risen dramatically. Usually a stock is
considered overvalued if the P/E ratio is really high. But this chart (stock
price on top, P/E ratio on bottom) seems to indicate that AAPL is not being
overvalued by the market as the stock price goes up:
[http://bigcharts.marketwatch.com/advchart/frames/main.asp?ti...](http://bigcharts.marketwatch.com/advchart/frames/main.asp?time=12&freq=1&compidx=aaaaa%3A0&comp=NO_SYMBOL_CHOSEN&ma=0&maval=9&uf=0&lf=16777216&lf2=0&lf3=0&type=2&style=320&size=2&sid=0&o_symb=aapl&startdate=&enddate=&show=&symb=aapl&draw.x=21&draw.y=19)

~~~
louislouis
But investors are putting their money in to sell high since APPL doesn't pay
dividends. The price is high atm, and there are many who are waiting exit, so
any kind of trigger could set off a landslide.

------
herdrick
So, when did Microsoft surpass Apple in market cap? 1992? 1988?

~~~
hugh3
Good question. I couldn't find out since I can't get either google finance or
yahoo finance to plot market cap, but I did get this:

[http://ycharts.com/search?q=MSFT%20vs%20AAPL&c=market_ca...](http://ycharts.com/search?q=MSFT%20vs%20AAPL&c=market_cap)

It only goes back ten years but it at least shows that MSFT was _vastly_
bigger than AAPL back in 1999.

~~~
arethuza
I remember picking up an iPod in what was probably '02 and thinking "I should
buy some Apple stock".

Damn.

------
dym
Apple, unlike Microsoft, is well-positioned to take advantage of demise of
high-tech industry as we know it. This demise has already happened once, with
an industry that was "hi-tech" for centuries: clocks and watches.

[http://abandontheweb.blogspot.com/2005/11/is-hi-tech-
timeles...](http://abandontheweb.blogspot.com/2005/11/is-hi-tech-
timeless.html)

------
Kilimanjaro
Ballmer MUST go!

~~~
KERMIT
And be replaced by who?

~~~
david927
Anyone with vision, courage and the ability to inspire.

Balmer could always execute, but that's not what Microsoft needs right now. It
doesn't know where it's going, so it's meaningless how well it gets there.

Microsoft, for better or worse, is still in the driver seat. In terms of
market share, Apple is a rounding error. But they inspire. They are exciting
people about the future. When was the last time Microsoft did that? This isn't
just about share price; it's about perceptions by investors, customers,
employees -- everyone. They need to inspire again.

------
tomlin
Also: More controlling than Microsoft.

~~~
FraaJad
controlling, maybe. MSFT is not the most "controlling" tech company out there
(take a look at electronics and automation companies for real tight arsed
behaviour)

The problem people had with MSFT is their use of market dominance to kill off
competition.

~~~
louislouis
"The problem people had with MSFT is their use of market dominance to kill off
competition."

Isn't that just doing business?

------
spoiledtechie
I hate the fact that Apple is soo good at what they do. They go after the
dumber people trying to be in style. They are such a closed company. If they
were a government, they would be totalitarian country. I for one will never
support them because of their closed mindedness.

------
mootothemax
Wow, that happened a _lot_ faster than I thought it would. Well, to be honest,
I think I _wanted_ Apple to overtake Microsoft more than I ever thought I'd
see it happen.

I wonder if in a few years from now Facebook'll overtake MS and Apple? ;)

~~~
FraaJad
The problem with facebook is it does not produce any _value_ unlike Microsoft
and Apple.

Both Apple and Microsoft's product help people create stuff, get things done,
entertain themselves. Facebook does a tiny bit of entertaining and
socializing, it is no where near MSFT or AAPL in terms of having a tangible
impact on people's lives.

~~~
jpablo
I'll bet facebook has more impact than Apple. Apple makes your iPod, that
let's me listen to music. Facebook creates your social life (for a lot of
people it does).

~~~
TheSOB88
I disagree. For me, the only way Facebook helps me socially is as a sort of
phone book and with events. Catching up over Facebook seems a useless event
compared to conversing IRL. Besides, an inordinate amount of people use it as
a game system with a leaderboard. Facebook's value isn't really social at all.
It's pseudosocial.

~~~
tomolope
Facebook will get you laid.

Having an iPod.... nope.

An iphone might have done it about 2 years ago.

~~~
eru
> Facebook will get you laid.

How does Facebook accomplish that? I'd rather count sitting behind your
computer as a counterproductive.

------
apphacker
Did MG Siegler just violate SEC laws by not disclosing if he owns Apple stock
and telling thousands of his readers that Apple stock will continue to
increase?

~~~
hugh3
Are SEC laws that easy to violate?

Hey everybody, I think Apple stock is going to continue to increase! I may or
may not own Apple stock.

~~~
ekanes
It makes sense. Without a law like that, people with circulation/influence
could manipulate the markets by buying, boosting and selling.

~~~
eru
Just buy some of everything (index fund), and always put the disclaimer in,
and it will become meaningless.

(Or do you have to reveal your net position, with shorts netted against
longs?)

------
MikeCapone
Now it's time to see if money corrupts absolutely..

------
buster
wow.. 25$ a share for MS vs. 250$ for Apple? As much as i like that Apple
innovates and does produce good products, you'll have to be blind to not see
the share crash in the future.. it strongly reminds me of the old startup
days..

I mean (not offending) MS products are deployed in what.. 95% of all
computers? office in every companies PC? Windows?

Ok, Apple does have music selling through itunes, hardware (very low market
share here!) and the mobile app sales.

I don't know, i'd rather want to see the income of both companies per
division, that'd be more meaningful to me, at least. A lot of shareholders
betting insane amounts of money into a company seems to be too familiar.

(Also i'm usualy not interested in shares and such, so i've probably missed
something)

~~~
ashot
you can't compare stock prices directly, they have no relative meaning

~~~
buster
Mh, yes, now that i think of it... my first thought was "woah, i'll have to
pay 10 times as much for one apple share", but in reality i'd just say "in
invest 1000$ in whatever company, regardless of how many shares".. if the
share goes up 10% it doesn't matter how many shares.. well.. my bad, as i
said, i've no real interest in that stuff :P

So, all in all, this means that Apple is seen as much worth as MS (and not 10
times more). That's a point of view i didn't consider..

Still, i would really like to see the income sources of both and how much
income is generated where, that'd be interesting.

~~~
steveklabnik
> Still, i would really like to see the income sources of both and how much
> income is generated where, that'd be interesting.

Here you go:

<http://finance.yahoo.com/q/sec?s=MSFT+SEC+Filings>
<http://finance.yahoo.com/q/sec?s=AAPL+SEC+Filings>

