
What Happens When Apple Passes Microsoft In Value? Yes, When. - wheels
http://techcrunch.com/2010/03/26/apple-microsoft-stock/
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ewanmcteagle
This comes up a lot but it always misses one aspect of this. Microsoft has
returned many many billions to shareholders and continues to do so with a
quarterly dividend. When they started along this dividend path they made a
large special dividend payment to shareholders. This makes these kinds of
comparisons very difficult and of questionable meaning. One of the reasons
companies like Apple don't want to pay out a dividend is that keeping the
money in the bank drives up the stock price. A business with 1 dollar in sales
is worth X. A business with 1 dollar in sales and 1 dollar in the bank is
worth X + 1. This simple effect makes it easier for the stock to climb and
options of executives to be more valuable. It does not necessarily make the
business any better especially after a certain point when there's enough money
to withstand downturns. This is why market caps are a not a good way to
compare businesses. You can consider things like return on assets, net profit
margins etc. and see if those feel like better measures of the quality of a
business. After a certain market cap, I think it's more correct to look at a
business as large or large enough rather than an important measure of
something.

~~~
Nelson69
You don't really have to pay a dividend when you're stock is rising like
Apple's is on growth. It's a fairly new thing for MS to pay one too and it's
only because the growth ended. Since MSFT started issuing a dividend, Apple's
stock has gone up over 1000% the dividend doesn't compare.

~~~
rue
Correct, because stocks are a thing in themselves and not something related to
the actual or expected value of the company.

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stcredzero
What most people don't realize is that while Apple claims to be a _mobile
device_ company, the truth is that Apple is really a _mobile ecosystem_
company.

 _It's the ecosystem_ which is the key! The seamless iTunes/iPod experience
was built on the foundation of a workable, legal, profitable music download
ecosystem. Apple then leveraged this into the iTunes/AppStore/iPhone mobile
device ecosystem.

Remember the lessons of the iPod. Lots of people made mp3 players with
more/better stats and features. But no one else had the ecosystem on which to
base a smooth and seamless experience. (And the marketing to not only bring it
to our attention, but make it hip.) Right now, lots of people are making
phones that can _do more_ than the iPhone, but once again it's not the device,
it's the ecosystem. And as heavy-handed as Apple may be, they're still at
least twice as good as any of their rivals. The carriers are suffocating the
gosling that will grow up to lay the golden eggs. Apple is feeding theirs
enough so it will grow up marginally healthy. That's why they're winning.

(Palm understood this, but by trying to sync through iTunes, they put Apple in
the position to sabotage their ecosystem. Bad move.)

EDIT: Suspect I am being punitively downmodded by someone whose post I
criticized.

~~~
jakarta
I agree - Apple has a tendency to create good devices and then services around
the devices.

iPod:iTurnes iPhone:App Store

These services are great because they act as monopolies: "You want to make
something for the device? You have to sell it in our store where we take a
cut."

So far this has worked quite well and I imagine the returns on capital are
huge.

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mixmax
Apple's elephant in the room is Steve Jobs. He's undoubtedly one of the
greatest, if not _the_ greatest business leader of the twentieth century, and
a lot of Apple's fortunes can directly be ascribed to him being at the helm of
the company.

It's uncertain what will happen when he passes the torch along, voluntarily or
otherwise. There are ongoing concerns about his health, he has had a liver
transplant, he's had cancer and as Wikipedia states: _On January 14, 2009, in
an internal Apple memo, Jobs wrote that in the previous week he had "learned
that my health-related issues are more complex than I originally thought" and
announced a six-month leave of absence until the end of June 2009 to allow him
to better focus on his health._ [1]

As the Sculley period shows Apple without Steve Jobs might not do as well.
He's truly one in a million, and a lot of the company's fortune has his
signature on it.

[1] <http://en.wikipedia.org/wiki/Steve_Jobs#Health_concerns>

~~~
gizmo
Agreed on all points. I suspect the problem is that characters such as Gates
and Jobs, who are focused visionaries don't leave much room in the highest
ranks for people like themselves. To put in another way, put two Steve Jobs'
in one room, and only one will leave.

So the people who excel in companies like Microsoft and Apple can't be the
same kind of uncompromising visionaries like Jobs and Steve, they are almost
by definition the best #2 guys in the industry.

I expect that Apple will slowly turn into Ballmer-era Microsoft. Profits will
climb for a while, but the new leader won't likely have the guts to attack new
markets and develop revolutionary products. For if the executive did want to
do those things, he would have started his own company 20 years ago.

~~~
jorgecastillo
I am not really an Apple hater or fan and the only thing I would miss if Apple
went down would be Mac OS X. I know Darwin is open source but what makes Mac
OS X awesome is the GUI + Darwin.

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encoderer
What happens? Nothing. Absolutely nothing.

~~~
symesc
What happens to the companies themselves? Nothing.

What happens to perceptions? Probably something.

There's always mistrust of the biggest player. If Apple become's the most
valuable technology company in the world, their propensity to control their
stack will be even more a focus for the media.

I think Microsoft will relish being an underdog for a change: "Clearly we're
not a monopoly. We're not even the biggest technology company in the world."

Even if both companies change nothing, they will be seen differently.

~~~
thaumaturgy
I'm not so sure about this -- it would only play out this way if people's
perception of size were based on the company's size, rather than their
exposure to the company.

For one example: one of my business clients has a couple of die-hard Mac users
(who I'm happy to support), and the administrator there is one of those "bah,
Macs are toys, why don't they just get a PC like everyone else?" idiots. I
mentioned to him one day that Apple had enough cash in the bank to purchase
Dell outright. However, this did not at all change his perception of Apple.

It doesn't help that many individuals' exposure to Apple right now is through
consumer devices like the iPhone and iPod, and not so much through "serious"
computers.

Oh, and also: software. I'd hazard a guess that most of my clients don't think
of the stuff on their iPhone as software in the sense of "stuff that runs on a
computer". I suspect that they think of it more as "features", so for them,
the only Apple software that they know of is iTunes.

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grellas
Cisco held the title of "world's most valuable company" at one point during
the bubble (see <http://news.cnet.com/2100-1033-238483.html> \- March 27,
2000).

That proved pretty meaningless then, as it would for Apple now.

Market cap is not a good basis upon which a company should frame its strategic
planning and for the article to suggest that Microsoft may do this vis-a-vis
Apple and Google renders its analysis pretty superficial.

~~~
qeorge
Good point. Volkswagen did as well, during the kerfuffle with Porsche in 2008:

[http://www.autoblog.com/2008/10/28/volkswagen-temporarily-
be...](http://www.autoblog.com/2008/10/28/volkswagen-temporarily-becomes-
largest-company-in-the-world/)

------
josephd
Apple still has to contend with Nokia for the largest mobile computing firm
slot, as far as it concerns mobile phones. Granted, Apple has the larger
profit because of its iTunes/Apps ecosystem which enables the iPhone, but
Nokia still has the larger sales numbers and is working hard to build its
ecosytem with its new Maemo OS. I also find WinPhone 7's concept of ''hubs''
radically innovative and superior to the the apps concept. In other words, no
one is sitting still...

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jasonneal
I find one thing a bit unbelievable. The author says Chrome OS is meant to
kill Windows. I don't believe Chrome OS is meant to kill Windows...From what I
read it is more of a new style of platform developed for Netbooks and less
powerful devices. There is no way that something like that could kill Windows
in my opinion. Aside from that, I really don't believe the anything happens
when Apple passes Microsoft. Some of Microsoft's bigger innovations aren't out
yet, such as their new Mobile 7 phones and even Project Natal, which comes out
for Xbox 360 later this year and could give Microsoft a big Holiday stock
push.

~~~
daleharvey
I would suggest reading innovators dilemma, todays "less powerful devices" can
very quickly become what everyone is using tomorrow.

~~~
ratsbane
It's more likely that Windows, when it finally does die, won't die because of
a single product like Chrome. Rather it will die slowly of a thousand cuts.

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FluidDjango
I realized the headline "question" is just rhetorical and fashioned to be
link-bait, but can't resist offering an answer of: "Nothing."

...because this is not the long-dreamed-about NCAA national football title.

It's not about titles. Or even dollar totals. Whether Apple as a country can
_continue_ to offer great value to its shareholders (wish I were one) depends
on its long-term business model (and ability to judge consumer
tastes/desires). And they certainly _could_ potentially make some strategic
missteps like any huge corporation (can you say, 'Toyota'?).

More interesting than Apple teaming up with MSFT at this point would be Apple
moving into Google's turf: _search_.

What if Apple bought up DuckDuckGo and invested as much innovative energy
there as it has in hard/software? It's sounding likely that they'll soon be
launching iAd to compete with other online ad processes. They're already
getting practice at building huge server farms (Maiden, NC).

I wouldn't rule out Ads/Search from Apple: it would just require getting
ratcheted higher up on Steve's priorities.

~~~
stcredzero
The fact that a single person can create a Google competitor indicates this is
something that Apple might _not_ want to get into.

~~~
bricestacey
Just because a product can be replicated by a single person doesn't make them
competitive in any way. I don't think that is a valid concern.

Also, by your very argument, Google might not have wanted to get into search
either. But of course, anyone would laugh at such a statement.

~~~
stcredzero
_Just because a product can be replicated by a single person doesn't make them
competitive in any way. I don't think that is a valid concern._

It's not a concern. That was never my position. What it does tell us is that
search at that level is becoming a _commodity_.

The Google ecosystem as a whole, on the other hand, is not a commodity. That
is the competition Apple needs to be concerned about.

 _Also, by your very argument, Google might not have wanted to get into search
either. But of course, anyone would laugh at such a statement._

Just because you weren't able to synthesize the facts into something more than
a straw man, don't assume that it's not possible. Sergey and Brin were
pioneers, so of course it's not commodity when they did it. I think the case
is strong that it is now.

