May 10

Microsoft: reality sinks in

If you’ve been following the adventures of Microsoft and Apple even casually for the last 10 or 20 years, yesterday was a day of almost unimaginable importance.

Apple actually passed Microsoft in terms of market capitalization.

Market cap is more of a theoretical measure, as it’s based on stock prices that vary by the second — but it’s still beyond huge. Apple is now the second most valued corporation, trailing only ExxonMobil.

Despite Apple’s innovations for 20 years, there was always the harsh reality that they were the upstart, not nearly as “important” in the world of technology as Microsoft. This now officially changes.

What a big day for fresh thinking. Quite dramatically, Apple has now proven that innovation pays. In the past ten years, Apple’s market cap has increased ten times — while Microsoft’s has dropped 20%.

Even if you’re just in it for the money, which some technology companies seem to be, Apple’s business model is infinitely more compelling. With a brand that allows them to collect a premium on their products, Apple makes more money by selling fewer products.

If Microsoft feels a little stung by this development, imagine how Dell must feel — now dwarfed by an Apple valued more than ten times as much.

It’s kind of amusing that Apple’s overtaking of Microsoft happened on a day when the AAPL stock price actually dropped. It’s just that Microsoft’s stock price dropped even more. This is like winning the pennant at the end of a long season because the other team lost. But it is a big win, and it’s the result of all that hard work over such a long stretch.

Microsoft just seems terribly lost these days. It’s almost enough to make you feel sorry for them. But not quite.

While Apple vs. Google fight it out in mobile, Microsoft doesn’t even have a first-row seat. Windows Phone 7 is forever coming soon. Zune is Zune. And last week, the top two guys in Microsoft’s Entertainment & Devices division “retired,” resulting in more involvement from … Ballmer.

This is the same Ballmer who one day after his company fell behind Apple in market cap, says that Microsoft is “executing well.” He hides behind Microsoft’s profitability — which remains obscenely high — but I can’t imagine he can hide there too long.

Given Ballmer’s performance these ten years, the torch-wielding villagers can’t be too far behind.

Tags: , ,

  • Bryan

    Think different, might be the answer to everything.

  • sarumbear

    It is indeed quite an achievement for Apple, but you must see why it happened. Apple had been an also-run in the computer sector (and is still) but they are big players I the consumer electronics sector. That is why they have removed the word ‘computer’ from their name and became simple known as Apple.

    R.I.P. Sony

    Till mid 70s USA was the leader in consumer electronics. RCA was THE force to reckon with. That has changed by the end of 70s as Japan took the lead. Enterprise USA had been doing everything they can to reflect this tide.

    US fooled Japan into believing that they are adopting their High Definition standard so long while eventually adopting the US designed ATSC that Japan lost the crucial time to develop products. ATSC allowed US to control their future in TV manufacturing.

    Similar is happening now with iPod. It is not simply the stupidity of Sony that made them lose the market to Apple. (Even though they had tried hard! LOL)

    Same with mobile phones; THE market leader Nokia does not even has a foot hold in US because US designed a different communication system and Nokia couldn’t develop in time to put their foot through the door. Even the otherwise inept Motorola has a hefty market share in US. Now Google is doing its bit to make sure that US manufacturers becomes the leading players. And it is working; iPhone’s market share in Japan is getting bigger every month and that scares the shit out of the Japanese!

    US had been preparing to re-gain the consumer sector and now we are seeing the results. Jobs saw that and decided to cash on this. A very shrewd move and it paid back.

    Hail Apple!

    But also R.I.P. to Apple Computer. Soon Apple will stop the Mac Pro line and those gorgeous 30” displays, which are the products that only a computer company can have and the transformation to consumer products manufacturer will be complete.

    Do you think Apple will continue to treat Apple TV as a hobby now that Google is entering the arena with their Google TV? You must be joking. As early as this Christmas we will see Apple branded TVs or set-top boxes that will compete with Google. Just give them time to finish with iPhone v4.

  • sarumbear

    Yeah! Think different. If you are rubbish in making computers that the majrity doesn’t care about, build something else!

  • Marian

    sarumbear, great comment!

    I’d like to add that Sony failed in the competition with the iPod also because Sony is conglomerate, that includes a media sub-company. They were more focused to prevent piracy than to offer the customer what he wants!