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Apple or Microsoft, which is cheaper?
It is all over the news that Apple (AAPL) surpassed Microsoft (MSFT) market capitalization last week becoming the largest tech company from that metric perspective. The question is which one is more expensive?
Assume you have $500 to invest and you are trying to decide which one is a better bet. Let’s see. On June 10th, Microsoft opened near $25 and Apple near $250. So you could buy 20 MSFT or 2 AAPL. So what are you really buying with your hard earned bucks? Based on the prior 12 months and latest financial statements these are the numbers (rounded):
AAPL: revenue $51B, Net Income $10.7B, Cash and Short term investments $23B, and a market cap of $227B (908 M outstanding shares).
MSFT: revenue $59B, Net Income $17.2B, Cash and ST investments $39B with a market cap of $218B (8720 M outstanding shares).
So if you buy 2 shares of Apple your $500 buy you $112 in revenue, $23.50 in NI, and $50.70 in cash. Microsoft’s 20 shares are $135.3 in revenue, $39.4 in NI, and $89.4 in cash. In other words, picking one metric, let’s say cash, Microsoft is trading at 5.6 times cash, Apple at 9.8 times cash. That is 1.76 times more expensive!
Now, let me throw Google (GOOG) into the mix, just for kicks: Google was trading at around $480 with a market cap of $115B (240M shares). Revenues of $25B, Net Income of $7.1B, Cash $26B. You can buy 1.04 GOOG, meaning $108 in revenue, $30.8 NI, and an impressive $113 in cash (4.44 times cash).
So you tell me which one is more expensive? I know, I know, this is based on past results and does not factor in growth potential, investor’s sentiment, cult followers, and other factors. But for the same reason it clearly paints a picture of which company is more favored by investors and which one is less.
Consider one last point: Microsoft hit an all time high of $58.37 on December 31, 1999, Google $724.80 on December 14, 2007, and Apple hit $272.40 on April 26, 2010. Investor’s favoritism has been shifting over time. What’s next for all these three? If I knew, I wouldn’t be blogging about it but it is definitely interesting behavior of 3 of the most traded stocks.
Quoting Scott Adams, the creator of Dilbert, “I remind you to ignore me”. By no means this is an endorsment to invest in any of these companies. You, my fellow reader (singular) make your own judgment.
Enjoy.
Microsoft Getting Smart about Smartphones
Well, it was just a matter of time. PC World reported that Microsoft will announce its own smartphone in the World Mobile Congress in Barcelona this month. I guess the pandemic of iPhone envy is hitting everyone hard. This one promises to be interesting since it will allegedly be based on the Zune music player and the Windows 7 Phone platform. All good. Until now Microsoft’s strategy was OEM friendly. LG, Samsung, HTC, Motorola and others have introduced Microsoft based smartphones of varying success positioning Microsoft’s mobile OS as the 4th player (soon to be 5th thanks to Android) in the smartphone category (after RIM, Apple, and Symbian).
This strategy represents a hardware/software branded device from Microsoft in a sense competing with its own OEMs. All those companies however have not shown any loyalty to the Redmond folks since they have diversified or totally migrated to the Android platform. So I guess Balmer decided: Screw them I will go Google … sorry I will do like Apple … not really, I will do my own hardware and control my own destiny. Good move? We’ll see. But definitely not a bad one or a move that will damage any OEM relationships. The world is ready for a diversity in OSs and the smartphone category is the fastest growing category in the industry. Microsoft cannot afford to be the fifth.
The question is: Will this make a difference? Not likely.
Microsoft has by far the largest market share in the enterprise – with “big Windows”, not smartphones, that privilege belongs to RIM. It boasts millions upon millions of applications and it is the “standard” enterprise Operating System. These are not 99 cent apps, no! These represent real money for enterprises and Microsoft. A simple copy of Office may go for hundreds of dollars. Why? because it is the defacto standard (for now). The smartphone world behaves very different. With the exception of email and a couple of minor “connectors” to ERP systems there are very few apps for the enterprise. In fact Windows Mobile today has the largest number of enterprise ISVs (Independent Software Vendors) but they specialize in niche applications like inventory, supply chain, delivery, fleet management, etc. The devices these apps run on are not your typical HTC smartphone Fender edition but very specialized hardware made by Motorola and others.
The thing is: The Microsoft name, which carries a lot of weight in the enterprise, does not represent a mayority choice for the consumers as it does in PCs or in those niche applications. The perception of a “standard” OS with millions of applications does not exist in the Smarthphone world. There are millions of apps for several OSs, in fact lots of apps are available for most smartphone OSs (paradoxically Windows Phone is typically the last one to be developed). So my contention is that even if Microsoft comes up with a killer device it is an uphill battle to go after RIM, iPhone, Symbian, and Android. It may much better than OEM versions since Microsoft has intimate knowledge of hardware and software to make it so, but it will hardly take the world by storm as its competitors have.
Good luck Microsoft and thanks for giving us all something to write about and for another great opportunity for a clever Apple commercial. I’m sure there’s a map for that somewhere.
Enjoy.
Leadership is Execution
Although it may sound a bit cliche, the success of a company (or any enterprise for that matter) depends on its leadership. It not only depends on their ability to inspire action but also in the leaders’ ability to paint a picture that people can relate to. I recently bumped into a post by an ex colleague that clarifies the point very eloquently. He comments that leading visions must be clear, compelling, and credible for followers to act on them. I agree. However execution is a key element for any leader to succeed.
Continue …
Technology for the rest of us.
If you’ve gone to a Home Depot recently you will notice a couple of changes. First, an eager greeter at the entrance (reminiscent of Walmart) may hand you a flier along with a clever remark that makes you not only pay attention to him/her but you actually open the flier. Weird! Second, if you are browsing along the chainsaw aisle staring at the multiple HP machines in front of you someone with a friendly comment will actually offer help. What a concept! Customer service. Who thought of that? Apparently it takes a savvy business person like Marvin R. Ellison, Home Depot’s brand new CEO to come up with something like that. Back in May, Business Week ran an article highlighting the second largest retailer’s in the US new strategy .
Your Real "Real Money"
Cramer writes as he speaks: a little too cocky, self confident, straightforward, candid, and with a couple of “insider” jokes that make you think he is the only one that finds them funny. It is a great flight book (that is a book to read on a boring 6 hour flight). That being said, the book is a good collection of sane (yes, I said sane) advices for the novice and no so novice investor. His stock-picking rules are a good organized way to summarize the basics of disciplined investing / trading. I have two pet peeves on his recommendations: the way he defines diversification (which is not exclusive of Mr. Cramer), and the 5 stock limit for part time investors. Let me explain.
The battle for the Smart Phone is on!
The industry seems desperate to find an alternative to the iPhone so far with no success. Palm (the inventor of the category in a way) launched last week the “pre” a successor to the “pro” (pretty creative naming) that is supposed to be what we’re all been waiting for. Based on what Palm calls WebOS (do not try to pronounce it in Spanish) which is really a WebKit browser on top of a Linux kernel. It is to me just another “clever phone”, pretty well designed, but just a follow up.
It is not about the gadget
Reading through my June 2009 Bicycling magazine – which I typically do cover to cover, ads and all – the article from the editor Loren Mooney caught my eye. The author does a great piece on how keeping logs has changed and the the amount of data available for the casual rider thanks to multiple cool gadgets in the market. Technology combined with biking, what can go wrong? I then ventured to find my first logs too. Although I will not reveal the content, I found out that keeping a log by hand did not work for me not only because I was not too good, but because I was – actually still am – lazy too. However, towards the end of 2008 I snatched the Garmin Forerunner 305® on a huge sell that couldn’t resist. Given my definition of good weather, I have been able to try it out a couple of times only and I now realize this is the only real way to create a log.
What's next after the iPhone?
We all have seen the success of the iPhone, what it has done to AT&T, and how it has changed the way we look at our phones. Blackberry maker RIM, Nokia, Motorola, HTC, LG, Samsung, and others have touch phones (the last three mostly with Windows Mobile or Android) that arguably perform similar functions. App store clones are popping up like there is no tomorrow, carriers are warming up to WiFi, GPS is now a standard feature, and web browsing on a phone is a no-brainer. We can’t help but question what’s next? The problem with technology that took the industry by surprise is that it is very tough to follow. Sure there is a 3.0 upgrade in store for the iPhone but it is evolutionary at best. We all heard the potential improvements (a real keyboard, the ability to run multiple apps, a replaceable battery for crying out loud! etc.) but no analyst or company has come up with the next best thing. A truly smart smartphone is what’s missing.
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