Apple pips Microsoft as top tech firm

The moment came on Wednesday, when Apple, the maker of iPods, iPhones and iPads, shot past the software giant Microsoft, to become the world’s most valuable technology firm.

This changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and its co-founder and Chief Executive Steven P Jobs. The rapidly rising value attached to Apple by investors also heralds an important cultural shift: consumer tastes have overtaken the needs of business as the leading force shaping technology. Microsoft, has dominated the relationship most people had with their computers for almost two decades, and that was reflected in its stock market capitalisation. But the click-clack of the keyboard has ceded ground to the swipe of a finger across a smartphone’s touch screen.

And Apple is in the right place at the right time. Although it still sells computers, twice as much revenue is coming from hand-held devices and music. Over all, the technology industry sold about 172 million smartphones last year, compared with 306 million PCs, but smartphone sales grew at a pace five times faster. Microsoft depends more on maintaining the status quo, while Apple is in a constant battle to one-up itself and create something new, said PayPal co-founder Peter AThiel. “Apple is a bet on technology,” he said. “And Apple beating Microsoft is a very significant thing.” As of Wednesday, Wall Street valued Apple at $222.12 billion and Microsoft at $219.18 billion. The only American company valued higher is Exxon Mobil, with a market capitalisation of $278.64 billion.

The companies have comparable revenue, with Microsoft at $58.4 billion and Apple at $42.9 billion. But in their most recent fiscal years, Apple had net income of $5.7 billion, while Microsoft earned $14.6 billion. Microsoft has more cash and short-term investments, $39.7 billion, to Apple’s $23.1 billion, which makes the value assigned by the market to Apple, essentially a bet on its future prospects, all the more remarkable.

Microsoft Chief Executive Steven A Ballmer, shrugged off the shift Thursday morning. “No technology company on the planet is more profitable than we are,” he said. “On any given day, the stock market is a voting machine,’’ he said, and only “‘in the long run is it a weighing machine.”

Apple’s climb to the top of the heap cements the reputation of Jobs, who once operated in the shadow of Microsoft’s co-founder, Bill Gates. While Apple is at the top of its game, it faces a new and powerful rival in Google, which is battling Apple in mobile devices with its Android operating system, and mobile advertising.

Google, with a market cap of $151.43 billion, also appeared to leap ahead of Apple in a new potentially important area, internet-connected televisions. And Google is steering consumers toward yet a new model of computing in which internet applications, rather than iPhone or desktop applications, rule. “The battle has shifted from Microsoft against Apple to Apple against Google,” said Tim Bajarin, a technology analyst. A little more than a decade ago, Apple, which had pushed out Jobs in 1985, was widely believed to be on the path to extinction. Michael S Dell, the founder and chief executive of Dell computer, went so far as to suggest that Apple should shut down and return any money to shareholders.

But with the return of Jobs to Apple in 1996 — and an investment by Microsoft of $150 million — the company began a slow path to recovery. Apple’s rebirth began in earnest with the introduction of the iPod music players, and Jobs began to gain a reputation for anticipating what consumers want. The company elbowed aside Sony and came to dominate the music distribution business with the iTunes online music store. It later upstaged Nokia, the dominant brand in mobile phones, by introducing the iPhone in 2007. In 2010 Jobs shook things up again, with the introduction of the iPad, a tablet computer that has the potential to create a new category of computers and once again reshape the way people interact with their devices.

As Apple grew increasingly nimble and innovative, Microsoft has struggled to build desirable updates to its main products and to create large new businesses in areas like game consoles, music players, phones and internet search. Microsoft, which is a component stock of the Dow Jones industrial average, has lost half its value since 2000.
Ballmer said on Thursday, that while Microsoft has “some very good competitors,” the company is a very good competitor itself. Yet Ballmer seemed to concede that Microsoft needs improvement in some areas. But Apple has the momentum. “Steve saw way early on, and way before Microsoft, that hardware and software needed to be married into something that did not require effort from the user,” said Scott G McNealy, the co-founder Sun Microsystems.