Apple vs Microsoft

A little less than a year ago, Wall Street in the battle of Microsoft vs Apple first estimated Apple 's market value above Microsoft .

Apple's market capitalization (total value of all shares) exceeded Microsoft's capitalization, although the latter company had more revenue and twice as much profit as Apple. It is clear that Wall Street is looking at the company's potential growth and not at its current earnings, which is why Apple looks like a more attractive company.

Market capitalization

Although the cost of Microsoft and Apple were very close last spring, now everything is different. Since May 26, 2010, when Apple first overtook Microsoft, Apple's market capitalization has grown from $ 223 billion to more than $ 306 billion (as of April 14, 2011). Microsoft's capitalization, meanwhile, fell slightly from $ 219 billion to $ 212 billion.





Bottom line : Wall Street currently believes that Apple has higher growth potential than Microsoft. Last year, investors made the right forecast for both companies, but only time can show how companies justify their high value.

Market share

In addition to Wall Street data, how is the company’s battle for users? Microsoft holds a leading role in the desktop operating system business, holding approximately 92% of the market from 2005 to 2009 (the latest available data from IDC). The share of Mac OS X ranged from just 3.5% to 4.0%.
Apple grabbed a significant share of the smartphone market - 15.7% of the global market share last year, compared with Microsoft's 4.2% share. However, according to forecasts by Gartner and IDC , Windows Phone will beat iOS by 2015, taking 19.5% of the market share against 17.2% from Apple.


Source: Gartner Inc.

In addition, according to IDC, Apple led with 87.4% of the global tablet market share last year. Gartner predicts that Apple will hold 69% of the market this year and another 47% by 2015. Windows does not appear in this forecast at all.

Bottom line : a number of influential analysts believe that in such a fast-growing field as smartphones, Microsoft should ultimately come first. In another area - tablets, there is no way for Microsoft. However, Microsoft has maintained its huge position in the desktop market.

Investment value after a long time

If you invested $ 1,000 in stocks of each company on January 3, 2000, what would you receive in April 2011? Considering stock splitting, and in the case of Microsft, dividends, but not including taxes and deductions to brokers, you would receive $ 2072 from Microsoft and $ 13294 from Apple.


Source: Reuters, Yahoo Finance, Computerworld

If you invested $ 1,000 in each of these companies on May 26 last year, your Apple stock would be worth $ 1,427 in mid-April, while the price for your Microsoft stock would be $ 1,033.

Bottom line : Apple has been an excellent investment target over the past ten years.

Income

Microsoft's revenue in 2006 was double that of Apple that year: $ 44 billion, compared to $ 19.3 billion. What is happening now? Apple’s revenue has more than tripled, while Microsoft’s revenue has grown by less than 50%.

Bottom line : Apple's revenue in 2010 slightly exceeded Microsoft's revenue, $ 65.2 billion from Apple versus $ 62.5 billion from Microsoft (note: Microsoft's reporting period is July-June, while Apple's is October-September).


Source: Company websites, SEC data, Reuters. Microsoft's reporting period ends on June 30, while Apple's reporting period ends on September 30.

Profit

In 2006, Microsoft had six times more profit than Apple. Apple's net profit subsequently grew seven-fold, while Microsoft's net profit was only about 50%.

Bottom line : While Microsoft is making more profit than Apple, the gap has narrowed significantly over the past few years. If current trends continue (and it is very likely that they will continue), then Apple, together with Microsoft, will be in the top profit.


Source: Company websites, SEC data, Reuters. Microsoft's reporting period ends on June 30, while Apple's reporting period ends on September 30.

The number of employees

There are still significantly more people working at Microsoft than at Apple, although Microsoft has dropped a bit from 93,000 in 2009 to 89,000 in 2010. Apple’s staff, on the contrary, is growing: there has been a significant jump from 34,300 employees in 2009 to 46,600 in 2010.

Bottom line : Apple's revenue per employee at the end of 2010 was significantly higher than that of Microsoft: $ 1.4 million versus $ 702,000. In addition, Apple's earnings per employee were $ 300,429 versus $ 211,236 at Microsoft.


Source: Company websites, SEC data, Reuters. Microsoft's reporting period ends on June 30, while Apple's reporting period ends on September 30.

Conclusion

So what is the result? Apple attracts investors much more than Microsoft, despite the fact that the latter is larger (company size) and continues to dominate the desktop market. Apple's ability to create a special, new category of devices, like the iPhone and iPad (and the iPod, as it was a few years ago), carries much more weight in the market than Microsoft's steady stream of revenue from the already mature market. However, experts believe that Microsoft will overtake Apple in the smartphone market.
Some believed a year ago that Apple might be overpriced , but no serious evidence has yet been submitted.

Mari Keefe has collected most of the data for this report.
Sharon Machlis is the editor in chief of ComputerWorld. Her address is smachlis@computerworld.com. You can follow her on twitter: @ sharon000 , on her Facebook page or subscribe to her RSS feed: articles | blogs .