Apple is Officially Worth More than Microsoft(techcrunch.com) |
Apple is Officially Worth More than Microsoft(techcrunch.com) |
Also, Microsoft pays a (albeit small) dividend, whereas Apple does not.
I actually think it is more useful to look at these companies from a yield perspective. So if you take the free cash flow / enterprise value of each company you get:
10.8% for MSFT and 6% for AAPL. This is in line with what you said (MSFT producing greater earnings) but presents the data in a more readable manner I think.
If market trading is solely based on the ability to resell stock at a higher price how is the market expected to select companies that deliver real value to the economy?
Surely the ability of a company to consistently and stably deliver dividends to the stock holders would be the best measure of success, re-investment cases aside.
Unless I misunderstand the only shareholder value in this context is the ability to flip the stock or get a piece of the action if the company is sold.
Buybacks can work just as well if you are buying back at the right price. A lot of management teams are bad at capital allocation and buyback stock at 52 week highs - that is almost always incredibly stupid.
But sometimes the business is trading at irrationally low levels and it makes a lot of sense to just buyback stock, especially if the fundamentals are in tact. I saw a company doing this and it is a great decision, their business earns a 50% return on invested capital and they have an earnings yield around 20%. It is a slam dunk strategy. When it is overvalued, you can issue stock and use it for acquisitions.
Look at Henry Singleton who ran Teledyne and used that strategy. Teledyne went from $100,000 in profits in 1960 to $238 million in 1986. Shareholders’ equity grew from $2.5 million to over $1.6 billion. Teledyne trounced the market by 4x over that period.
Using excess capital to fund accretive acquisitions, internal growth, or to invest outside of the company can work if you are disciplined in the process (most aren't). Warren Buffett became one of the richest people in the world, simply by doing this (it sure wasn't his $100K salary).
In companies that can't do much R&D, you see much more dividend action, for example, natural resource stocks are high dividend, since there's near nothing they can do to reinvest, at least not with everything they pull in.
They have had some success with xbox, but overall they are yet to be in the black there. There is still a chance to grow with the online services. If they can get the xbox positioned as a general entertainment devices in enough peoples homes, but it may be too expensive for that. You have google coming into this space now, and they are going to do things very cheap.
Zune hasn't worked out for them.
They lost there way with Windows Mobile, it seems they just forgot about it, just as they did with IE.
IIS has started to falter, and .Net has seen some great growth, but looks like stagnating now as well.
Whereas Apple have some exciting products coming out, that seem to do very well.
They probably don't do it because they are such conservative douche-bags and don't want to threaten their cash-cows, but I wouldn't bet against them in case the money from Windows / Office stop flowing and they end up in a position where they either compete or die.
Also, earnings for MSFT are about $17B and AAPL is about $11B
Microsoft's P/E is heavily "discounted" because it's considered a sort of swan song of easy money (the Windows and Office empire that they've coasted on). Apple's is considered the beginning of things. Stock value today isn't based on today, it's based on "tomorrow".
Who says that? They could be at the top of their game right now and not see more growth and stabilizing and/or decreasing in the future. There is no way to tell, otherwise you'd be very rich already ;)
> Stock value today isn't based on today, it's based on "tomorrow".
Who says that? Many believe that Apple stocks are overvalued today, that's for sure. Oh, and again, there is no way to tell the future.
Apple is relatively small when compared to companies like Walmart, which has 2.1 million employees and almost 8x revenue.
It's interesting that this happened without breaking Microsoft's 90% desktop monopoly. Apple got bigger but it wasn't to the detriment of Microsoft. They just grew into new markets.
He's doing what a recent article on disruption (http://news.ycombinator.com/item?id=1375141) reminded me of: don't confront entrenched competition, it will "invoke a competitive response" and they'll win (or "never attack a fortified hill", from crossing the chasm). Instead, do something else.
Many predict that a similar thing will happen in the battle between Google and Apple.
put the graph to 1y or 5y.
I wonder if Bach and/or Allard end up at Google... a GBox has a nice ring to it actually.
J Allard has apparently ruled out working for Google or Apple, and wants to focus on extreme sports instead: http://www.techflash.com/seattle/2010/05/bach_allard_leaving...
Wow, I really thought they had a better grasp of the market trends and were at least aware of the major problems they face.
Let's not go there ok ?
Their corporate images reflect the logos quite well.
edit: funny moderation here, would you mind telling me why ? Apple logo on the page not shiny ? Microsoft logo not old and boring ? Or do you - mistakenly - take me for an apple fanboy or something ?
Now there is something to be said for keeping your logo the same, possibly forever. But the crowd that apple appeals to and that they intend to sell their gadgets and computers to loves shiny stuff, and apple is very good at making shiny stuff. It stands to reason they'd adapt their logo to that.
Microsoft has a much stronger presence in the corporate world and I think that is why their logo looks the way it does and why they don't want to change it too much. They try not to be a fashion statement, apple tries very hard to be one.
When given a choice between an ipod and a zune with twice the storage capacity the majority of teen-agers would probably pick the ipod.
When you sell consumer stuff 'cool' matters.
Microsoft always has to balance their business image with their 'cool' image and in most (hardware) consumer products (other than the Xbox) they seem to fail at that. Phones that run windows CE are (rightfully) seen as old fashioned, the zune was dead on arrival and so on.
Cool & shiny really matter.
Talking about smart phones, Apple is a latecomer to the industry, and does not have a sufficiently strong patent pool to prevent competitors like Oracle, HP and MS from encroaching.
Apple is the first to deliver to the mass market affordable tablet computing and touch computing devices. This will remain growth areas, and hence Apple's willingness to accept lower margins in return for a beachhead and a sufficiently large user-base to establish itself as a platform-play.
However, further on, Apple is going to have to finely balance the tension of being the most widely used vs being "exclusive", "cool", or "different". Give a few years when competitors reach feature parity, Apple will be at crossroads whether to go mass market or boutique.
Dismissing Apple outright is definitely the wrong thing to do.
Does the competition take away or does it help them stand out more?
There's too many people chasing the bus.
http://ycharts.com/search?q=MSFT%20vs%20AAPL&c=market_ca...
It only goes back ten years but it at least shows that MSFT was vastly bigger than AAPL back in 1999.
http://abandontheweb.blogspot.com/2005/11/is-hi-tech-timeles...
Balmer could always execute, but that's not what Microsoft needs right now. It doesn't know where it's going, so it's meaningless how well it gets there.
Microsoft, for better or worse, is still in the driver seat. In terms of market share, Apple is a rounding error. But they inspire. They are exciting people about the future. When was the last time Microsoft did that? This isn't just about share price; it's about perceptions by investors, customers, employees -- everyone. They need to inspire again.
The problem people had with MSFT is their use of market dominance to kill off competition.
Isn't that just doing business?
I wonder if in a few years from now Facebook'll overtake MS and Apple? ;)
Both Apple and Microsoft's product help people create stuff, get things done, entertain themselves. Facebook does a tiny bit of entertaining and socializing, it is no where near MSFT or AAPL in terms of having a tangible impact on people's lives.
Many people have had countless friendships reconnected and met other new people as a direct result of Facebook being as linked up as it is. Whether "tangible" or not, this is at least as valuable as an iPod to many.
Hey everybody, I think Apple stock is going to continue to increase! I may or may not own Apple stock.
http://news.cnet.com/SEC,-teen-settle-Net-stock-scheme-case/...
I mean (not offending) MS products are deployed in what.. 95% of all computers? office in every companies PC? Windows?
Ok, Apple does have music selling through itunes, hardware (very low market share here!) and the mobile app sales.
I don't know, i'd rather want to see the income of both companies per division, that'd be more meaningful to me, at least. A lot of shareholders betting insane amounts of money into a company seems to be too familiar.
(Also i'm usualy not interested in shares and such, so i've probably missed something)
So, all in all, this means that Apple is seen as much worth as MS (and not 10 times more). That's a point of view i didn't consider..
Still, i would really like to see the income sources of both and how much income is generated where, that'd be interesting.
Ok, Apple does have music selling through itunes,
hardware (very low market share here!) and the mobile
app sales.
Also, the global market share for smart phones: http://en.wikipedia.org/wiki/Smartphone
You surely don't want to know the numbers for mobile phones in general.
I agree.
In order to make great things, and then to sustain that, I really truly believe you have to grow to dislike what you made before. It's the only way to take a critical eye one what you have done and learn from it.
Lots of people think Jobs is a tyrant inside of Apple (and I agree with that sentiment), but I think the motivation for that is that he simply wants to create something he doesn't hate right now. It might be bootup time, or interface delays, or screen pixel density etc. That kind of thinking, a critical review of your own likes/dislikes is healthy I think in order to grow.
Fanboyism, by definition, is not a process of critical thought.
(Except maybe Sony, who will probably attempt to build their own system. It won't work very well outside Japan.)
Here you go:
http://finance.yahoo.com/q/sec?s=MSFT+SEC+Filings http://finance.yahoo.com/q/sec?s=AAPL+SEC+Filings
(Or do you have to reveal your net position, with shorts netted against longs?)
Please don't say "future search ad revenue from having more internet connected devices in the hands of consumers."
Edit: In answer to my own question, if the only profit Google makes from Android sales is search ad revenue, then according to this article (http://aseidman.com/2010/05/65000-new-android-devices-ship-e...), Google makes only $8.63 per Android device sold over the entire lifetime of that device. Article was found via HN, but no one has commented on it yet.
So apart from this meager search ad revenue, how does Google benefit financially from Android sales? I just can't figure this one out.
Nothing? Don't you think that's a little strong?
P/E reflects growth prospects, and a large, established financial company has limited growth prospects. Just as a large, established, coasting tech company tends to have lower P/E ratios. GS lives in an industry with lower P/E ratios, but saying that it has "nothing" to do with it is terribly wrong.
Its not that what you're saying is completely wrong, just unnecessary.
A P/E ratio is useful, but it requires lots of context. You provided no context and mentioned a stock that shows little to no correlation to the tech industry and plus the financial industry is somewhat "messy" right now.
I suggest you look up some other large established banks and their P/E ratios right now. For example, Morgan Stanley (MS) has a P/E of 98. Does that mean they have that much more growth potential? Maybe it means that GS is currently undervalued with all the negative press they are getting recently? A low P/E could also be a sign of being undervalued, just as a high P/E can a sign of being overvalued. On the other hand, the tech industry is proving to be quite lucrative lately. Apple has released the iPad and is coming up on their WWDC and there is plenty of speculation concerning iPhone 4G and mobile advertising opportunities. With all the media attention Apple gets, their "friendly" design, and their phenomenal advertising campaigns, isn't it quite possible that they are overvalued? As soon as a viable Windows 7 based tablet comes out that lets you torrent, play divx via divxplayer and flash, don't you think the iPad might be a little more than fucked in its current incarnation/closed environment? And who knows, maybe Microsoft is undervalued right now seeing as two execs have left? Its at a fairly low share price (historically speaking) right now.
tl;dr Fundamental analysis is complicated enough as it is, don't throw in unrelated numbers.
There are plenty of other large cap companies to compare MS to that are far more applicable, look at Proctor and Gamble's P/E is 16.06. Colgate Palmolive's is 19, IBM's is 12. Those are more comparable/normal.
So you're going to provide another poster's "point"? Their point was that they were two different industries, which is entirely fair. Your point is something entirely different altogether, yet you're speaking on their behalf.
P/E is often a farcical metric, yet you know I'm not the one who brought P/E into the discussion, yet here we are.
Sure, the Macs are expensive, but the hardware is very high quality, and when you compare them to Thinkpads and Vaios--other high-end computers--it's pretty reasonable.
I'm no Apple fanboy (as of now, the only money I've ever given Apple is 30% of app purchases I've made for my hand-me-down iPhone 2G), but in a couple of days, I'm buying a MacBook Pro because it's a high quality unix system that Just Works. Given that I'm a programmer who will use it constantly, the time it will save me should cover the extra few hundred dollars by the end of summer.
Most people don't compare Macs to equivalent systems, often because there is no comparable alternative. Even if you spec out a similar machine from other manufacturers you are almost guaranteed to be giving up something, whether that be battery life, a good case, or just the little touches that make you happy day to day like the battery life indicator or addictive multi-touch gestures.
Even the Vaio-Z, which is pretty slick and only 13", isn't on par with a MacBook Pro when it comes to the little touches. Yet it costs as much as a 15" MBP.
People who like to compare specs think they're getting a better deal but they rarely take into account actually using the thing for 8+ hours a day. The little things make a big difference when you use your computer that much.
The stock price for buybacks doesn't matter, if you only care about getting money back into investors' hands.
Conversely, the aggregate opinion of investors does has some value. Otherwise you could make a fortune betting against any stocks with high P/E ratios.
Many believe that Apple stocks are overvalued today, that's for sure.
Sure. And just as many believe it's undervalued, otherwise the current price would be lower than it is. This is true for any stock.
In the future, anything's possible. But the future is almost always a function of the past, and current trends indicate anything but a decline in Apple's growth.
Check this http://www.davemanuel.com/investor-dictionary/momentum-play-...
A share price can be both under and over valued right? Under or over what? Worth.
One way to measure is revenue/outstanding shares (though secondary factors like P/E, private investments, etc. figure into this to define more precise measures) another way is based on a softer metric like "valuation" which is typically some multiplier of revenue/yr (notice the root word of valuation is "value" which is precisely what I'm talking about -- and we both know that valuations can have very little to do with reality (see Facebook for a case study in how valuations can be broken).
Share prices are merely a representation of the subjective "value" of a share vs. the actual price for some % of a company. If the market thinks something is hot, it doesn't matter if a share is actually worth only $2 or $3 from a pure revenue/yr perspective, demand for those shares can drive shares up to ridiculous levels -- hundreds of percent above what they should be. If a company is not "hot" (based on the very subjective moods of the market) those shares might even sell for less than they are worth because people see the value as less.
The market does a very efficient job of obscuring the worth of a share in some company by only feeding investors value signals.
There is nothing different from this concept than the concept of value at the microeconomic level. If I see an item for sale. I have a pretty good idea what it's worth is based on materials, construction techniques and various other factors that contribute to the manufacturing cost of a product. But again, just like in the market, all of the signals I receive about a product are value signals not worth signals. So I compare that mental model to the asking price to determine if I'm getting a good value for my purchase. Value here being how close to the average per unit cost I'm able to estimate. A pair of shoes might be priced to sell at $150. The next week it goes on sale for $100. That increases the perceived value I get from the purchase. But I might still skip it if I have a good idea that the average cost per unit-pair of shoes is only $10. But companies seek to increase the value of their products at higher prices by various means like brand building.
This is the logic that good investors use when deciding to buy and hold or sell shares. If a stock's value is perceived to be too high compared to the average worth of a share, investors expect that the share price will more likely go down than up. Companies seek to influence this by keeping investors interested with positive statements about the company. "new product!", "big contract!", "how new business concept!", "change in leadership!", "increase in business efficiency!" so that a share of XYZ company, that may only be worth $10 on a revenue/shares matter is valued at $150 by the market.
Apple doesn't have logos for their products, so they update their company logo instead.
Just different approaches.
iTunes - http://www.google.com/images?q=itunes+logo Garageband - http://www.google.com/images?q=garageband+logo
But not all certainly - http://www.google.com/images?q=iPad
For every dollar you spent, you have effectively lost 50 cents. Sears admitted as much back in 2007 when they were buying back stock at $180 only to watch it drop to $90 a few months later. Remember, the idea with buybacks is to reduce overall share count so that you boost EPS and in turn your share price.
The amount you can retire might double if you simply wait out a bubble period. That's why dividends and buybacks need to be looked at relative to where the stock valuation is. When your stock is trading at a peak valuation, if you want to release value to shareholders, you are much better off using a dividend than a buyback.
If you want managers to play the stock market, your comments are spot on--but you shouldn't restrict them to buying only shares of their own company. If they are good at predicting when valuations are high and going lower, or the other way round, you should open an investment fund and profit from their expertise.
Most companies aren't in the business of playing the stock market.
If you just want to transfer money from the company to the stock holders, you can either issue dividends or buy back shares at any time there's excess cash. Apart from taxation issues, there's no difference between share buy-backs and dividends in terms of getting money back to the investors.
