Apple has been looking pretty shiny since Wednesday, having just crossed a golden threshold: slipping past Microsoft in “market capitalization”— the valuation of a company based on its current stock price multiplied by number of shares available; as well as “enterprise value” which is market cap, plus debt and minus cash holdings. Speculation had been rampant for months whether it would ever happen; and then, on Wednesday— surely to be memorialized in computer lore— after a wild ride on the market, AAPL ended the day worth a few billion more than its frenemy MSFT.
Apple was now not only the top technology company in the world, it was the second highest valued company in America (behind Exxon-Mobile.) Thursday, MSFT and AAPL traded neck-and-neck in valuation, but by the market close, Apple held the crown for a second day.
An astonishing turn-around, for a company once considered moribund, with doomsayers at ready to call Apple’s time of death. Famously, Michael Dell posited his solution for Apple woes— in a quote that continues to haunt him— during an October 1997 tech conference, in front of thousands of IT execs: “What would I do? I’d shut it down and give the money back to the shareholders.”
The past decade of explosive growth for Apple can be directly traced to the return of co-founder Steve Jobs in 1997, and the successive launches of the now-iconic iMac in August 1998, and of the original iPod, at a press-only event in October 2001, with secretive invites promising, “the unveiling of a breakthrough digital device.” And it matches a seemingly less disruptive change at Microsoft: the passing of the CEO baton from Bill Gates to his simian pal Steve Ballmer in January 2000. While Apple came out with a string of increasingly popular (and profitable) devices in the intervening years, Microsoft’s performance has been driven by lackluster marketing decisions, rather than innovation.
Not surprisingly, upon hearing that Apple had finally surpassed his company’s value, Ballmer put on the guise of Alfred E. Neuman, “What, me worry?” Speaking from New Delhi, Steve piled on the empty promises: “I will make more profits and certainly there is no technology company on the planet which is as profitable as we are.”
He added, “Stock markets will take care of the rest.”
The markets certainly have— for the last ten years, Microsoft’s stock price has been, in a word, nearly stagnant:
By way of example— and those of you who hate math may want to skip ahead: had you bought 100 shares of MSFT on May 26, 2000, you would have paid around $3100. Today, you’d own 200 shares (after a February 2003 split) worth $5200. You would have also benefited from about $530 in dividends on “profits.” A gain of $2630 (85%) doesn’t sound so bad, right? But that’s over a ten-year period, which is equivalent to a compounded annual growth rate of 0.5%. In contrast, if you were forward-looking enough to get a 100 shares of AAPL a decade ago for around $2200, you would now have 400 shares— after two stock splits— worth just north of $101,000! (A compounded annual rate of 3.24%)
Behind the scenes at Microsoft, a management shake-up is currently underway: Robbie Bach, Entertainment and Devices Division president, is “retiring” at age 48, after 22-years as a Microsoftie; while “product visionary” J Allard, Chief Experience Officer and CTO of E&D— a 16-year company veteran— said his goodbye two days ago.
When the news hit of the departures, Forbes investment editor Matthew Schifrin pleaded, “Bring Back Bill Gates.”
Likewise, James Kwak, economics writer for the Baseline Scenario blog posed, “Why Does Steve Ballmer Still Have a Job?”
And a poll at SFGate, published by Apple’s backyard paper the San Francisco Chronicle asked on Monday, “Is Steve Ballmer The Right Person To Lead Microsoft?” The current numbers were over 75% saying, “Nope.”