News

Apple Found To Be Worth More Than Microsoft

• By Kurt Mackie
• May 26, 2010

Apple Inc.'s market capitalization on Wednesday surpassed that of Microsoft Corp., signifying that the Cupertino, Calif.-based maker of iPods, iPads and Mac computers is a more valuable company.

The market cap for Apple weighed in at $222.12 billion, while Microsoft's trailed at $219.18 billion, according to Wall Street estimates. However, Microsoft has more cash at hand, estimated at $35.7 billion for Microsoft vs. Apple's $23 billion, according to the New York Times.

Still, it was almost 13 years ago that Apple appeared with hat in hand, seemingly at the mercy of the Microsoft colossus. Back then, in August of 1997, Bill Gates (Microsoft's CEO at the time) bailed out Apple with a $150 million investment. Gates appeared onstage at MacWorld with Apple founder Steve Jobs to make that announcement. The deal was associated with Microsoft's promise to continue to develop software for Apple's Mac.

Wednesday's financial turnabout comes after Apple's strong showing in the consumer mobile computing market. Microsoft, on the other hand, continues to make the bulk of its revenues from its Windows operating system and Office, with a firm presence in the small-to-medium business software markets. Microsoft's recent quarterly financial reports still show consumer sales of Windows 7 buttressing the company. Businesses have been slower to adopt the new OS.

On Tuesday, Microsoft announced management changes at its Entertainment and Devices Division. The move wasn't billed by Microsoft as a reorganization of its consumer division per se, but long-time executives Robbie Bach and J. Allard will be leaving the company. The changes at the top come even as Microsoft rolled out new consumer-oriented products, such as its Kin mobile phones in partnership with device-maker Sharp. Devices based on the new Windows Phone 7 OS are planned for release this holiday season, as well as Project Natal-based games for Microsoft Xbox.

Microsoft still sees itself as a software company that maintains partnerships with device makers. However, Apple's strategy has been notably different as the company maintains a firm control over both the software and hardware used in its products. Apple's strategy frees it from having to produce software for a variety of devices and form factors, unlike Microsoft.

Microsoft and Apple both face challenges from Google, which has been gaining strength in the consumer mobile space. Android, an open source mobile OS developed by Google, now ranks second among the most used mobile OSes, displacing Apple's iPhone OS, according to a recent study. RIM's OS for Blackberry devices hold first place.

In addition, Google has used the consumer space to slowly attack Microsoft's two cash cows -- Windows and Office -- in the small-to-medium business market. Google Apps are free to consumers but are offered as a paid service to businesses. Google touts its Apps Premium Edition service as low-cost substitute for Microsoft Office, while Microsoft disputes the claim.

Microsoft's second major threat may arise toward the end of this year, which is when new netbooks are expected to begin appearing using Google's Chrome OS. Google's new operating system supposedly would not require Windows, or any other OS, to run applications, which will all be hosted and accessed over the Internet.

Some industry observers, such as Joe Wilcox, are now claiming that "the Windows era is over," especially with the increasing popularity of mobile computing and the rise of cloud-delivered services. According to his view, Apple's market cap rise just confirms the fact that this shift is happening.

Wilcox also cited Microsoft's straying partner power, with Intel deciding to support Macs in 2006. In addition, long-time Microsoft partner HP announced the acquisition of Palm in late April, with plans to build mobile tablet devices using Palm's webOS. In January at the Consumer Electronics Show, the talk then was that HP would build a Slate tablet running Windows 7, but such talk has since disappeared. The Slate was to be Microsoft's challenge to Apple's iPad.