Tag Archives: Apple

New King of Technology – Apple Overtakes Microsoft

The moment came Wednesday when Apple, the maker of iPods, iPhones and iPads, shot past Microsoft, the computer software giant, to become the world’s most valuable technology company.

This changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and its co-founder and visionary chief executive, Steven P. Jobs. The rapidly rising value attached to Apple by investors also heralds an important cultural shift: Consumer tastes have overtaken the needs of business as the leading force shaping technology.

Microsoft, with its Windows and Office software franchises, has dominated the relationship most people had with their computers for almost two decades, and that was reflected in its stock market capitalization. But the click-clack of the keyboard has ceded ground to the swipe of a finger across a smartphone’s touch screen.

And Apple is in the right place at the right time. Although it still sells computers, twice as much revenue is coming from hand-held devices and music. Over all, the technology industry sold about 172 million smartphones last year, compared with 306 million PCs, but smartphone sales grew at a pace five times faster.

Microsoft depends more on maintaining the status quo, while Apple is in a constant battle to one-up itself and create something new, said Peter A. Thiel, the co-founder of PayPal and an early investor in Facebook. “Apple is a bet on technology,” he said. “And Apple beating Microsoft is a very significant thing.”

As of Wednesday, Wall Street valued Apple at $222.12 billion and Microsoft at $219.18 billion. The only American company valued higher is Exxon Mobil, with a market capitalization of $278.64 billion.

The companies have comparable revenue, with Microsoft at $58.4 billion and Apple at $42.9 billion. But in their most recent fiscal years, Apple had net income of $5.7 billion, while Microsoft earned $14.6 billion.

Microsoft has more cash and short-term investments, $39.7 billion, to Apple’s $23.1 billion, which makes the value assigned by the market to Apple, essentially a bet on its future prospects, all the more remarkable.

Microsoft and Apple declined to comment.

Apple’s climb to the top of the heap cements the reputation of Mr. Jobs, who once operated in the shadow of Microsoft’s co-founder, Bill Gates.

“It is the single most important turnaround that I have seen in Silicon Valley,” said Jim Breyer, a venture capitalist who has invested in some of the most successful technology companies.

While Apple is at the top of its game, it faces a new and powerful rival in Google, which is battling Apple in mobile devices with its Android operating system, and mobile advertising.

Google, with a market cap of $151.43 billion, also appeared to leap ahead of Apple in a new potentially important area, Internet-connected televisions. And Google is steering consumers toward yet a new model of computing in which Internet applications, rather than iPhone or desktop applications, rule.

“The battle has shifted from Microsoft against Apple to Apple against Google,” said Tim Bajarin, a technology analyst who has been following Apple since 1981. “Apple has a significant lead. But Google is going to be a powerful competitor.”

Apple and Microsoft initiated the personal computing revolution in the late 1970s, but Microsoft quickly outflanked Apple and grew to be one of the most profitable businesses ever created.

A little more than a decade ago, Apple, which had pushed out Mr. Jobs in 1985, was widely believed to be on the path to extinction.

Michael S. Dell, the founder and chief executive of Dell computer, went so far as to suggest that Apple should shut down and return any money to shareholders. (The computer maker is now worth about a tenth of Apple.) Around the same time, Microsoft’s chief technology officer called Apple “already dead.”

But with the return of Mr. Jobs to Apple in 1996 — and an investment by Microsoft of $150 million — the company began a slow path to recovery. Apple’s rebirth began in earnest with the introduction of the iPod music players, and Mr. Jobs began to gain a reputation for anticipating what consumers want. The company elbowed aside Sony and came to dominate the music distribution business with the iTunes online music store.

It later upstaged Nokia, the dominant brand in mobile phones, by introducing the iPhone in 2007. And this year, Mr. Jobs shook things up again, with the introduction of the iPad, a tablet computer that has the potential to create a new category of computers and once again reshape the way people interact with their devices.

Mr. Jobs helped create “the best desktop computer, the best portable music device, the best smartphone and also now the best tablet,” said Steve Perlman, a serial entrepreneur who was an executive at both Apple and Microsoft and is now the chief executive of OnLive, an online gaming company.

As Apple grew increasingly nimble and innovative, Microsoft has struggled to build desirable updates to its main products and to create large new businesses in areas like game consoles, music players, phones and Internet search. Microsoft, which is a component stock of the Dow Jones industrial average, has lost half its value since 2000.

Mr. Ballmer said Thursday that while Microsoft has “some very good competitors,” the company is a very good competitor itself. Yet Mr. Ballmer seemed to concede that Microsoft needs improvement in some areas.

“Windows phone – boom! We have to deliver devices with our partners this Christmas,” he said. Feedback so far has been good, he said, but the company still has “a lot of work to do.”

Still, Microsoft is a hugely powerful and profitable company in the tech world. Its Windows software runs 9 out of every 10 computers, while more than 500 million people use its Office software to perform their daily tasks, like writing letters or sending e-mail messages. These two franchises account for the bulk of Microsoft’s annual revenue.

But Apple has the momentum. “Steve saw way early on, and way before Microsoft, that hardware and software needed to be married into something that did not require effort from the user,” said Scott G. McNealy, the co-founder and longtime chief executive of Sun Microsystems.

“Apple’s products are shrink-wrapped and ready to go.”

Heather Timmons contributed reported.

i have had many things to crow about the the past couple of years, but Apple’s success is one of my favorites. i’ve been using apple products since 1984, when the first Mac came out — the same year that IBM’s XP desktop running DOS appeared. i tried both at the U of Texas and there was no comparison. one was user friendly and the other used the user.

i saw steve jobs speak on campus that same year. i rarely go to see people talk, because very few of them have anything worthwhile saying and hence are boring. but something jobs said stuck: ibm’s interacts with its customers by sending a technician out every time someone has a problem, a kind of mother for every computer. but if the personal computing industry takes off the way everyone says it will, then there aren’t enough mothers in the world to take care of them all. so at apple, we build mother into the computer.

his vision was that hardware and software and the operating system would be married into one product, and that the resulting computer would be intuitive to use and would make people actually happy to use it.

i mentioned this to an ibm-using colleague at texas, and he scoffed at my innocence: “i don’t have any problem remembering all of the keystroke commands i need to give the computer to write a paper. i just wrote each one down on a 3X5 card and i spend only 10 minutes studying them every morning. no problem.”

i stared at him, speechless. what can you say to someone who just doesn’t get the point? i have gone on to convert many people from pcs to macs in the intervening years, and every time apple reinvents the world with some new “have-to-have” product, the newly converted sing apple’s praises. many of them even “switch” — make the scary leap from the unholy trinity of a computer, operating system and software all made by different companies (and all of whom blame the other for any problems) to a serene life as “i’m a mac.”

it’s not that macs never have problems, but i can go to the apple store only a few miles away and have it fixed. the mac genius never says, “sorry, it’s that pesky operating system. we don’t have anything to do with that.” instead, they know just how the hardware, software and operating system merge and how to solve any problems.

what’s not to like?

the perils of success

this week Apple is making a not-so-secret announcement, generally understood to be the company’s entry into the small (not tiny, that’s the iPhone & iTouch) computer market. Apple has changed my life so many times now — the Mac, iPod, iPhone — that i wonder whether another such lifestyle-shattering experience is possible. i love my Kindle, but wouldn’t be reading be more satisfying on a color screen? i’m considering dropping my cable tv subscription for computer-based entertainment, and wouldn’t an Apple tablet make a fine entertainment enhancer? i’ve shunned my alarm clock, even my clock-radio, for waking up to my iPhone or Mac alarm or music, but can’t i imagine a sleeker, smoother entry into the day? and aren’t there things i need that i don’t know i need yet? Apple will tell me. and soon.