How, and why, Apple overtook Microsoft and left it in the dust

“When Microsoft stock was at a record high in 1999, and its market capitalization was nearly $620 billion, the notion that Apple Computer would ever be bigger — let alone twice as big — was laughable,” James B. Stewart writes for The New York Times. “This week, both Microsoft and Apple unveiled their latest earnings, and the once unthinkable became reality: Apple’s market capitalization hit $683 billion, more than double Microsoft’s current value of $338 billion.”

“Apple earned $18 billion in the quarter — more than any company ever in a single quarter — on revenue of $75 billion. Its free cash flow of $30 billion in one quarter was more than double what IBM, another once-dominant tech company, generates in a full year, noted a senior Bernstein analyst, Toni Sacconaghi,” Stewart writes. “Microsoft’s revenue was barely one-third of Apple’s, and operating income of $7.8 billion was less than a quarter of Apple’s. Microsoft shares dropped over 9 percent as investors worried about its aging personal computer software market.”

“Robert X. Cringely, the pen name of the technology journalist Mark Stephens, told me this week that when he interviewed Microsoft’s co-founder, Bill Gates, in 1998 for Vanity Fair, Mr. Gates ‘couldn’t imagine a situation in which Apple would ever be bigger and more profitable than Microsoft.’ ‘He knows he can’t win,’ Mr. Gates said then of the Apple co-founder Steve Jobs,” Stewart writes. “But less than two decades later, Apple has won… ‘Apple has been very visionary in creating and expanding significant new consumer electronics categories,’ Mr. Sacconaghi said. ‘Unique, disruptive innovation is really hard to do. Doing it multiple times, as Apple has, is extremely difficult. It’s the equivalent of Pixar producing one hit after another. You have to give kudos to Apple.'”

Read more in the full article here.

MacDailyNews Take: While there’s no way to wish harder that Steve were here to see it, he, of all people, visionary that he was, knew what was coming. But, boy are we glad Gates is alive to witness his cheating, thieving, tasteless outfit’s comeuppance. Delicious!

Now, there’s lots of hand-wringing in the full article about what Apple could ever do next. These people have no idea of the colossal paradigm shift that Apple Watch is going to create.

With iPhone, Apple changed the fabric of our everyday lives: All around the world today, you see people constantly pulling phones from pockets and staring at them. With Apple Watch, Apple will change behavior worldwide once again. A quick glance at your Watch and you’re off. No more smartphone zombies. Watch and see.

Related articles:
Apple now worth double Microsoft’s market value – January 29, 2015
Apple Inc. posts biggest quarterly earnings of any company ever – January 27, 2015
Apple destroys Street with all-time record earnings – January 27, 2015

29 Comments

  1. I think the big takeaway is that tech companies can rise and fall in pretty short time frames although I feel Apple has a far better shot at maintaining a large presence over the long haul than an outfit like say Microsoft.

    1. The deal is that Apple’s competitors (WS and the media as well), all of them, see smartphones as a featured telephone on steroids. The competition believes the killer app, the primary job the smartphone was hired to do, is make phone calls.

      Apple views the smartphone as a very mobile computer, with the ability to make telephone calls It has but three jobs, A/ communicate (telephone, email, texting, FaceTime, Facebook, Twitter, etc), B/ provide access to information via apps and the internet, and C/ entertain (games, iTunes music, movies and books, Netflix, YouTube, Vimeo, content apps, etc).

      The Apple Watch will be successful because of the same fundamental viewpoint. The Apple Warch is far more than a quick reference smartphone. It is a very mobile computer CONNECTED DIRECTLY AGAINST THE HUMAN BODY. That capability, coupled with Healthkit, is going to disrupt how the medical industry monitors bodily functions, captures that data, stores that data, provides multi institution access to that data. HealthKit is going to disrupt hospital record keeping and sharing (bringing medical record storage/sharing into the 21st Century from the 19th Century).

      The Apple Watch isn’t going to be a massive success because of its quick reference smartphone capabilities. It will be massively successful because it is poised to massively change the medical industry (and who knows what else).

  2. Actually MDN it started with the iPod and that gave confidence in the iPhone and then came the iPad – Something Mr. Softy tried for years and now comes Apple Watch …..

    Hits keep coming!

    1. I’m glad there are several to choose from. Not everyone’s thought processes work the same way, so having the choice can mean everyone can choose what works best for them. Also, the competition keeps the vendors on their toes, which means we as users benefit.

    1. Apple should have a black-ops bug “hit squad” in place whose sole duty is to quickly smooth and remove those offending issues to create a completely smooth experience.

      The fact that I still have some of the same issues with Safari over succeeding generations of iOS and 32 to 64 bit devices is unfathomable. Yes I have A d b l o c k & i C a b mobile apps but dammit Jim, Safari should be fixed!!

    2. Old Tech, what an apt name. 🙁
      Improve quality and reliability, er,,, do you mean like windows 8???
      While I agree that I like to see things work perfectly, its pretty much impossible. Especially when we are now connecting phone, pad and computer. Any change must be evaluated over all three. And every possible app out there getting in the way.

      I am sure you just love how windows 8, the Zune, and windows TV (Xbox) all just work together seamlessly, right? Why does not MS do this, if its so easy? Cause its not.

      Just saying.

  3. Interesting fact. Since its inception M$ is up 40,000%. However you would have had to buy the stock in the late 80’s to realize most of the gain. Apple is only up 2800% but even if you bought the stock in the mid 90s you still will be able to realize a gain of 1000%.
    Apple definitely a stock with more potential and M$ has been in the doldrums for a over 10 years. The dividend is high $0.61 per quarter so or ~5% of the current price so that is the only thing it has going for it.

  4. To be fair it’s not really a comeuppance for Bill Gates. Does Microsoft not sell way more copies of windows on way more computers than Apple?

    What’s happened is Apple has won every battle since then, creating new markets and dominating them.

    $100 says Bull Gates believes he could have won those battles, too, if he’d stayed onboard. I’m sure he feels zero distain for anyone in this whole Greek tragedy apart from Ballmer the Mortician, who ate, drank, bragged and slept while Rome burned.

    1. Microsoft built the Windows for people’s work castles and tried to make their form of Windows fit all castles by linking up with the contractors who built castles.

      Meanwhile Apple recognized people didn’t want to be shackled into working only in castles, but be free to move around.

      Microsoft is pathetically a decade behind in attempting to be serious about mobility. Gates & Ballmer talked a great game, but delivered only crap in mobile.

      Both Gates and Ballmer exhibited a lack of commitment to the reality of the world move to mobility over a period of at least 10 years. Vast profits skewed their perception of reality and they lost out on the growth.

      Buffett’s showed his wisdom back in the late 90s when asked if he invested in his friend Gate’s company. Warren replied something to the effect that he didn’t see the long term (5 decades) value in a software company.

    2. I believe Bill Gates foresaw the coming success of Apple and Microsoft’s impending decline by the time he stepped down. It is _why_ he stepped down. He saw the increasing difficulty in maintaining Microsoft’s hegemony. OS X nailed MS, because the operating system stayed “up” and pointed the finger at sloppy software that just crashed (“MS Word just crashed, what would you like me to do now?”). Bill Gates nearly missed the internet, but managed to hang on. He missed portable music and mobile computing, too, but never caught up. He never understood the consumer. He never appreciated the beauty of quality and excellent design. (Pages made Word look really crude.) They say the future is already here, but most people simply cannot see. Well, one day, Bill Gates woke up and saw the tipping point coming. Actually, it was a series of small tipping points leading to a tsunami.

      1. I see it differently. Gates never really cared about the product, it was just a way to make money. Once he had more money than he could possibly know what to do with he lost interest, hence his stepping down and finding much more worthy causes to spend his time on.

        Jobs in contrast was all about the product. Every single aspect of it. That obsession is now written right through the centre of Apple’s culture in a way Microsoft was never able to emulate.

  5. ‘I shouldn’t say this in public, but the only problem with Microsoft is they just have no taste. I don’t mean that in a small way. I mean that in a big way, in the sense that they don’t think of original ideas, and they don’t bring much culture into their products. I have a problem with the fact that they just make really third-rate products. Their products have no spirit to them. They have no spirit of enlightenment about them. They are very pedestrian. And the sad part is that a lot of customers don’t have a lot of that spirit either. They’re the mainstream. A lot of people who don’t want to think about it too much are just going to buy their product. But the way we’re gonna ratchet up our species is to take the best and spread it around everybody. So that everybody grows up with better things, and starts to understand the subtlety of these better things.’

    ‘Steve Jobs Bio: The Unauthorized Autobiography.’

    1. Most people who read that statement consider it somewhat arrogant and generally just an opinion of a person on a losing end of a two-way battle (which is where Apple appeared to be when Jobs said that).

      The substance of the statement, however, is significantly more powerful and, actually, quite true. And the moral of this message is not just about Microsoft not having taste, but about the foundation of the Apple philosophy, compared to virtually everyone else.

      There is some profound logic and reasoning behind Jobs’s obsession over the shade of colour used for the INSIDES of a Macintosh computer. Countless hours were spent (and the clueless people might say, wasted) on deciding exactly what shade should be the colour of the part of the computer that practically NOBODY would ever get to see. This philosophy continued o extend throughout Jobs’s tenure at Apple, and resumed quickly upon his return. When you open any user-serviceable Apple device (such as, for example, Mac Pro of previous generation), the insides will show a beautifully designed machine, with gleaming polished aluminium covering, with wires meticulously bunched together and bent at straight angle, curved at exactly the same radius at every turn, with all the electrolytic capacitors soldered at exactly the same angle and distance… Jobs and Ive had likely spent as much time and effort designing the insides of this Mac as they did for the outside.

      It is this kind of obsession with most minuscule details that sets apart the ‘pedestrian’ Windows (and all other MS products) from meticulously thought out Apple products. While we may have noticed some degree of erosion of such obsessive attention to details at Apple since Jobs died, the general philosophy remains there, and will likely remain as long as Jonny Ive is there (and I’m sure Cook is in full support).

      Companies rise and fall, and no company is invincible, but Apple has such deep bench and a strategy that has unbeatable record behind it, it will be many years before Apple begins to wane.

  6. What Steve got that Gates didn’t was the internet. Steve saw very early how much it would become a part of our everyday lives, and our need to access it from more than just our desk. And he was doing it long before the mobile internet revolution. People forget that Apple’s Airport base station was really the first wireless router aimed at the general public and began the move to un-tether us from our desks.

    1. Steve’s vision for how the personal computing world would evolve was already in evidence clear back when he did Next.

      Do you remember what Next had and did not have? Steve was thinking 3 decades out. He clearly understood that networks and networking of devices was the future in multitudes of different ways both wired and unwired methods.

  7. there is substance in the belief that apple’s success will continue for some time. bred into their leadership and middle management is the belief their mission is to change people’s lives for the better. SJ said that somewhere along the line. making $ is an outcome, not an attribute of this honorable activity. when you do it well, you make gobs of $.

    was musing today that apple didn’t invent the music player, phone, tablet, or watch, but changed, or will change how people see and use those devices. apple doesn’t invent categories (the personal computer being the exception) but has learned that making those devices more life expanding is the way to change people’s lives.

    after apple is done with it, the music player is not a music player any more. it is you life on music. the phone is not a phone anymore, it is a mobile computer. the watch will not be a watch anymore, either. apple uses the legacy devices as a trojan horse to get the masses to adopt and accept new paradigms that they might not understand or accept otherwise. once done, the masses are addicted. i was addicted in 1985.

    this story is wonderful to watch unfold again and again.

  8. “Robert X. Cringely, the pen name of the technology journalist Mark Stephens, told me this week . . .”

    Just an aside, so he interviewed the pen name and not the actual person? 😀

    Back to the article.

    There may be a cautionary tale in all this for Apple itself. And that is that all good things must eventually come to an end – though Apple is probably the only body out there capable of defying gravity! – no matter how “un-endable” they seem.

    It doesn’t look like it’s going to happen any time soon, but a day will surely come when Apple’s present paradigm will start to fade.

    But Apple, more than any other institution, is uniquely poised to neutralize such an eventuality because of its gargantuan, and ever-growing, pile of cash.

    Questions have arisen about what Apple plans to do with the cash. My hope is that Apple will somehow, carefully and in well-thought-out and timely moves, start using this cash mountain to fail-proof its long-term future.

    I’m no corporate genius and I couldn’t even venture a well-informed suggestion other than the usual diversify and buy every big company in sight. But I feel the Cook team at Apple should start wrapping their heads around what Apple needs to do to still be a thriving giant well into and beyond the 2020s – if they are not already doing that.

  9. What pisses me off about this, is that Microsoft basically stole Apple’s UI. Win 3.1 was okay. But by Windows 95, it was plainly obvious what had happened. Office by itself was good. Windows was a copy. Apple tried to protect their IP, but lost in court. They got the shaft. Bill Gates sentiments were a bit cheesy, so today’s announcement is all the more sweet.

    Michael Dell and Bill Gates had no clue, the company they faced. We delight in the current situation.

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