Apple over Microsoft by a TKO
— 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 …