Thursday, May 27, 2010

Wake Up Call For Microsoft's Board

I woke this morning to find the best proof that what I've been saying for years now is right on the money:
It's Official: Apple (AAPL) Is Now Worth More Than Microsoft (MSFT).  Ina Fried has more to contribute here, also.

Back in 2003 (or so) I made the statement to a number of people that Microsoft would never have the influence over the microcomputer industry that they had then.  Sure, Windows XP was doing well and Office 2003 was a significant improvement over Office 2000, but with rumors that Apple had been working on an Intel-based Mac if the PowerPC line didn't keep up (which, tbh, it wasn't even back then despite Apple's misleading advertising to the contrary) and Mac OS X having gained popularity since its release in March 2001(yes, Mac OS X Server was released back in 1999 - but I'm talking popularity here), with the iPod being a brilliant success since 2001 and with Bill Gates having handed the CEO title over to Steve Ballmer, the writing had been appearing on the wall for a while.

And now this (from as at the time of the publication of this blog post):

Valuation MeasuresApple (AAPL)Microsoft (MSFT)Google (GOOG)Amazon (AMZN)
Market Capitalization222.12B219.18B151.43B54.91B
Enterprise Value (2010-05-26)199.98B197.29B125.43B50.71B
Trailing P/E20.6912.9621.6453.69
Forward P/E (fye 2011-06-30)15.8310.8314.8331.43
PEG Ratio (5yr expected)1.121.490.931.58
Price/Sales (ttm)4.363.846.102.08
Price/Book (mrq)5.675.003.979.91
Enterprise Value/Revenue (ttm)3.913.315.031.90
Enterprise Value/EBITDA (ttm)12.657.8112.1032.40

While I was at it, I thought I'd throw both Google's and Amazon's figures in for good measure.  Please click on the title links above for the full set of figures and any descriptions as per the Yahoo Finance pages.

This has been on the cards for some time - obviously - but it has now finally happened.  (Even including Apple's interesting way of calculating Cash On Hand, if this "Apple's bigger than Microsoft" point hasn't been reached now, it will in the very, very near future.)

Sure, Apple *still* sells overpriced PCs, but they make a fat wad of cash on each one.  It is a very different model to Dell's and Microsoft's and it seems to be working rather well for them!  According to Business Insider, Apple only has around 7% market share but they have 35% of the operating profit - until people all wake up, that's rather lucrative.

In ballpark figures, since around the time Microsoft injected a measly US$150m into Apple to ward off the legal system and to show support for continuing developing for Apple's Mac platform, Microsoft's profits have risen by $25B from around $37B to $62B - an increase of 67%.  In the same period, Apple's income has risen by $28B from $8B to $36B - an impressive increase of 450%!

It will be interesting to keep an eye on this and also on Google to see where they move with their Android-based mobile (and maybe soon desktop) devices and their Google TV (as I blogged recently).  But one thing's for sure - Microsoft no longer has the influence they once had when Bill Gates was running the company - "visionary" has been replaced by "myopic" and they can't seem to see the wall they are walking towards!


The Outspoken Wookie


Alan said...

Good post... except for "they can't seem to see the wall they are walking towards!"

They get that the cloud is going to be the future and they are "All In"... They get that iPhone and Android are better phone OS's and they are doing a reset to ensure that their new phones are an excellent consumer experience...

I am not saying they are going to rule the world like they do in the Desktop OS market... but

Microsoft are well aware of the changing computing eco system... and they are changing their spots... all be it slowly they are chaning... Look at Office Web Apps... Look at Azure... Look at exchange in the cloud... Look at sharepoint in the cloud... look at Windows Phone 7...

These are all example of Microsoft changing their products from a very traditional service they sold in a box to cloud based services...

The same could not be said about the Giant of IBM in the 80's and 90's...

Alan said...

I also point to this article that show just how well they are doing in the cloud RIGHT NOW... when compared to even Google...