Apple over Microsoft by a TKO

By Robert X. Cringely
April 23, 2010

robertXcringely
– Robert X. Cringely has been writing about technology since 1987 and blogging since 1997. His work has appeared, well, everywhere, but can mainly be read at http://www.cringely.com. The views expressed are his own. –

Winning by a technical knock-out (TKO) over Microsoft, Apple this week became, according to Standard & Poors, the second most valuable NASDAQ firm by market cap after Exxon-Mobil (click here for more on S&P’s ranking).  What a difference 13 years makes!  Apple is on a roll and while Microsoft is far from down and out it is clear that the competitive momentum lies these days with Cupertino more than Redmond.

When Steve Jobs assumed the CEO position at Apple on July 9, 1997 Apple shares cost $3.42 and the company had a market cap of around $3 billion. This week Apple shares hit $266 with a market cap of $241 billion — 80 times larger than it was 13 years ago.  Microsoft shares, in contrast, went from $17.67 to $31 in the same time frame — not even a doubling despite more than $80 billion in share buy-backs by the company.

So what’s going on here, really?  Having known both Steve Jobs and Bill Gates for more than 30 years, it comes down to market transitions and the fact that, as Gates explained to me many years ago, “the way to make money in this business is by setting de facto standards.”  And while Windows and Microsoft Office remain the biggest de facto standards of all, Microsoft hasn’t created any new such standards in over a decade while Apple has the iPod, iPhone, a resurgent line of Macintosh computers, a huge retail operation, and dominant market share in music sales.

What’s really significant here is that the computer industry is undergoing a transition to web services and mobile hardware, neither of which are dominated by Microsoft.  Yet in each Apple holds a leadership role.  So while Microsoft can continue to live off Windows and Office fat for years to come, absent some very dynamic product initiatives, the long term trend for Redmond is far from good.

The trend line is definitely up for Apple and mildly down for Microsoft. It took 13 years to do it, but Apple is well positioned now to take Microsoft’s crown. I mean it. Look at the downward price erosion of Microsoft Office caused by a combination of Open Office and iWork, which is down to $30 on the iPad. How long will it be until Apple is giving iWork away to sell hardware — an option Microsoft doesn’t have? Not long. By then a bit more of Redmond’s goose will have been cooked. Digital market leadership is now Apple’s — not Microsoft’s — to lose.

But that doesn’t mean that Apple’s success is guaranteed any more than is Microsoft’s failure.  If Apple is going to maintain its momentum it will have to take on bigger and bigger competitors, which Steve Jobs seems eager to do.  Not just Microsoft, in this case we’re talking about the publishing, broadcasting, and movie industries, as Apple moves to dominate those media the way it already does music.  Microsoft is nowhere to be seen in any of these venues.

Microsoft, on the other hand, is still a mighty company earning $1 billion per month and determined to remain a factor in American life.  But is it the social and cultural force Apple has become?  No, nor was it ever. Will both companies still be huge in five years?  Sure.  In 10 years?  That’s an interesting question …

17 comments

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Please. Microsoft practically owns Apple. Many times Apple was on the brink and got support from M$. I’ll believe Apple can take down M$ when I see it myself.

Posted by Benny_Acosta | Report as abusive

The equations are simple:

Apple = Cool

Microsoft = Geek

Nothing has really changed.

Posted by Gotthardbahn | Report as abusive

[...] more here: Apple over Microsoft by a TKO | Analysis & Opinion | apple, trend-line, well-positioned This entry was posted on kwi 23rd, 2010 at 13:59 and is [...]

If it ever comes down to a stability comparison between operating systems, Apple will be wiping the floor with MS, not just in terms of cash in hand.

Once everyone has an iPhone, the way things are going, that’s probably what will happen next. And when it does, it won’t take another 13 years for the MS hack squad to have gone the way of the dinosaur.

Posted by HBC | Report as abusive

What’s telling about this particular skew is that 95% of people will read this story sitting at their PC’s running some version of Windows. And some will fret momentarily that because apples are worth more currently, there is something wrong with their orange. And a smaller subset might even buy their first Apple product to see what they’re missing, which is why this article was published in the first place. And of course 4-5% will be smugly peering at the 3.5 “HD” inch screen on their apple mp3 player thinking, “We win!”

Posted by hypodoche | Report as abusive

I think Microsoft has a got a leg-up on Apple, in an area which they tried to enter but have not yet garnered the market share (Apple TV vs. XBox/Netflix). Like Apple with music, I think Microsoft has developed a great strategy with Netflix in utilizing the XBox360 platform to bring streaming video to the home. I believe this platform, with Netflix, could ultimately corner the streaming video market…which would eventually replace Cable Provider services.
Competition is good…and the consumer needs both of these powerhouses to continue their innovative ideas to bring technical solutions.

Posted by MMF_USMC | Report as abusive

Alas, the previous commenter is wrong: more and more people are reading stories like this online (not on their desktops), and they’re using products from Apple and Google, not Microsoft or Palm. It shouldn’t be surprising that the winners in the mobile device war are the ones gaining in value…

Posted by wildguy | Report as abusive

You state:
“Microsoft shares, in contrast, went from $17.67 to $31 in the same time frame — not even a doubling despite more than $80 billion in share buy-backs by the company.”

Your analysis lacks details and is clearly misleading. Hopefully some readers will recognize your laziness.

Posted by youzer | Report as abusive

The future involves cloud computing, and Apple simply doesn’t get it. Please don’t forget about this.

Posted by a3949150 | Report as abusive

> Apple’s huge technology lead will start withering in a year’s time. Too many people gunning for them

It looks like the also-rans are gunning each other down. Android is killing WinMo and Palm, etc. They are not impacting the IPhone appreciably.

> Your analysis lacks details and is clearly misleading. Hopefully some readers will recognize your laziness.

Easy for you to say. Your follow-up itself lacks any details. The takeaway here is that APPL is up hugely over the last decade, and MSFT is fairly stagnant. Either admit that, or contradict it.

> The future involves cloud computing, and Apple simply doesn’t get it. Please don’t forget about this.

That’s a fairly nebulous buzzword. So who are these companies with great vision, that are into cloud computing in a big way? Microsoft? When have they EVER been first at anything? They always have to wait and see what R&D South … I mean Apple does, before they can have a target to aim for.

Sunny Guy

Posted by SunnyGuy53 | Report as abusive

The pro-MS comments here are laughable!! The FACT is MS products are garbage, and have been for decades. Phony new O/S are driven by marketing and not by quality. What MS hasnt developed in following trends, it has stolen from other developers and then stone-walled them with lawyers. NEVER in the history of software has one company been sued by so many businesses and governments for restraint of trade and illegal activity. That’s why Apple is cool and MS will end up like Corel. Apple products actually work, they develop what people want, and they don’t rip anybody off. And FYI, have never owned an Apple and yes, this is written on a PC — with a rock solid FREE Ubuntu O/S, FREE rock solid Mozilla and FREE OpenOffice software. Its been a helluva ride for you Billy G, but your game is done.

Posted by JJWest | Report as abusive

Apple does with its hardware what M$ does with its software. They lock it down. Apple programs only work on apple hardware. So what they’re shiny and sleek? It’s just the same business model applied differently.

Open source (which Apple has and continues to use), Gives us a better deal. Anyone who wants to learn to code can examine what’s out there and learn by doing. Governments using open source are not locked down by contracts and they can train their own personnel to maintain their systems and even customize code at less cost and with greater security. This is financially good for the tax payer. It’s also good from a security standpoint since no outside agencies would need to have access to systems using open source. In house techs could handle what problems arise.

I run a PC using Linux. I’m not rich and I can’t afford the latest and greatest gadgets. But I have a powerful robust OS, I have OpenOffice which is also free and is compatible with M$ Office and lots of other useful, powerful applications. Open source allows people to breath new life into older hardware. And in this economy that really means something.

If my computer breaks I can get parts off the shelf at any computer store or online. I’m not stuck paying Apple’s prices for its proprietary hardware. They’ve got nice stuff. No doubt. But it’s not worth the price considering what I can get for much less.

Posted by Benny_Acosta | Report as abusive

in my opinion as a chinese consumer,although Apple is not popular in china as its exetrme expensive price.We buy Apple because ownning an Apple means your are rich.And it is nice,always in pure white and excellent shape.Some of us just for its Mas OS as they are tired of windows XP.
But MS cann’t benefit too much in china because pirate here is so advanced.And now I am seating here waiting for the latest domestic win7 which and opreta favorable with the aid from some system repair softwares.
And MS have hitted the market with his Kin series mobile phones just some days ago,and this means MS is at the edge to turn to other bussiness beside software.

Posted by leacky | Report as abusive

have you heard there is a word called DIVIDEND???

Posted by Robot | Report as abusive

@ Benny_Acosta:

The 1990′s called you; they want their archaic notions back.

Please. Microsoft does not nor never has “practically” owned Apple. Nor has Apple been on the brink :many times” and MS saved them. You’re full of baloney.

MS invested $150Mln in non-voting shares back in 1997 and sold them in around 2000 iirc. In the time before Steve Jobs returned to Apple, the corporation was bleeding anywhere between $20-80Mln (or more) PER FISCAL QUARTER. Had several other things not occurred thanks to Jobs’ efforts Apple could easily had burned through that MS investment in no time and gone out of business.

FACT: Jobs saved Apple, not Gates.

As for whether or not Apple can “take down” MS, I’ll believe it when I see it, too. Apple should continue to be quite healthy for a number of reasons, but the most important thing for them now is that they have a SOLID presence in the public consciousness — to an extent they have never had before. But MS is seriously ensconced in the enterprise market as well as the consumer market and, regardless of Apple and Google, will probably carry on with leading market-share. Worst case scenario for them may see them at a significantly reduced market-share, and that may change the company in big ways, but I don’t think MS will ever be in second place.

All of that, however, is irrelevant for Apple. Even back in the dark days I have always thought that Apple should “run their own race” and I see nothing that should change that… even as their stock sits it’s current all-time high. Just keep making great hardware and systems, Apple. “Build it and they will come”.

Posted by BobBarker | Report as abusive

If I don’t recall, 1997 was about when Apple was on the ropes and Bill Gates had to bail them out…

In short, their stock was severely depressed. As they say, no where to go but up.

Both companies seem to have their proficiencies, I don’t really see much in the way of direct competition from them in the future.

Posted by nr5667 | Report as abusive

“Apple programs only work on apple hardware.” — Actually, Apple has switched over to X86 architecture, so their software works on any x86 based platform. That’s right, if you want to, you can install Mac OS on your Dell. However, that would violate your software license.

It’s moot, Windows 7 and OSX are both good operating systems. As I said, Apple is clearly going towards personal consumers and focusing on media, Microsoft is focused primarily on business and productivity.

Posted by nr5667 | Report as abusive

Apple is not winning by a TKO (Technical Knock Out) over Microsoft, I would say that it is winning by a PKO (Product Knock Out) and a MCKO (Market Cap Knock Out). I don’t find Apple being a better technology oompany than Microsoft, more like a better product company than Microsoft. I don’t know how the writer can imagine people will stop using Microsoft Office or Windows and iwork will take market share. Even if we dont like Windows, a whole lot of us cannot give up MS Office.

Except for multi-touch, apple has not delivered any revolutionary technology. The touch screen mobile phone existed in 1994 (IBM Simon), the first smart phones (widely adopted) were Blackberry. And anything that you can find on an iphone (technology wise) exists in other smart phones out there (Nexus One, Droid).

I feel whereas Microsoft spends a lot of energy on research and developing/exploring new technology, Apple spends that same amount of time dreaming up something they can sell in the market. As a technology worker, I find Apple’s approach limiting and don’t feel like its a technology company other than the fact that they sell technology products.

Posted by Per_se_us | Report as abusive

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