Apple Surpasses Microsoft In Market Capitalization

je ne sais quoi writes "Today Apple surpassed Microsoft in market capitalization, a metric of the perceived worth of a company. At around 2:30 pm EDT, the total number of Apple shares were worth $227 billion, whereas Microsoft's were worth $226 billion. Both companies' stocks ended the day in the red, and have dropped in value since the Greek crisis began, but Apple's share price has been falling less quickly. Of American companies, only Exxon-Mobil has a higher market cap at this point at $278 billion. According to the article: 'This changing of the guard caps one of the most stunning turnarounds in business history, as Apple had been given up for dead only a decade earlier. But the rapidly rising value attached to Apple by investors also heralds a cultural shift: Consumer tastes have overtaken the needs of business as the leading force shaping technology.'"

Comments

Growth

[TheRaven64]

Microsoft hasn't really been growing for a decade, while Apple has. The market capitalisation often reflects this, because people are more willing to buy shares in a growing company, expecting that their value will increase over the next few years. People only buy shares in a stable company based on the expected dividends. This means that Apple's stock price is likely to be more volatile than Microsofts and, as long as the continue to be perceived as growing, greater than the current 'real' value of the company.

Re:Growth

[samkass]

It's called cooking the books. It's not profit or anything like that, it's how that people *think* profit is going.

Apple really is an insanely profitable company. Their margins are sky-high and the volume is high enough to get the top-tier of economies of scale. They pull in billions of dollars of actual cash profit per quarter. The P/E is about 20, which isn't astronomical (less than twice Microsoft's). This isn't some dot-com speculation-- Apple really is performing phenomenally well financially.

Re:Growth

[seanadams.com]

You either have no idea how equities actually work or you are being deliberately obtuse. Do you think huge companies just instantly vanish in some random event that nobody can predict? No. All that cash in the bank? It belongs to the shareholders. Likewise all the other assets of the company. You can take profits selling your AAPL any time you like - right now it's close to its all-time-high.

The reason fast growing companies don't pay dividends is because shareholders don't want them. The reasons they don't want them are:

1) Dividends are taxed as ordinary income, which by the time you figure typical state taxes is about double the rate for long term cap gains.
2) If the company has a use for the money (eg mergers, or even just stockpiling for future downturns) then it's better for the shareholders to keep the cash in the corporation than to be forced to raise money through borrowing, or dilution at times when the stock is weaker.
3) Shareholders want to choose when they take their profits/income.

The shareholders literally, legally, OWN the company. It is more than simply a game of betting which way the share price will move although many people look at it that way.

When you look at an established company with good profitability but shaky prospects for future growth - case in point, MSFT, that is when shareholders will demand a dividend. If the stock isn't going up and the company can't find efective ways to reinvest its profits, then the shareholders will want a periodic return. AAPL shareholders are expecting more from the company right now and you'd have been a fool to bet against them at any time in the last 12 years or so. That's not saying it goes up forever but AAPL has so much cash and such a broad product portfolio that it's not the kind of thing that can go out of business without a seriously protracted unwinding.

And your notion that it's only a matter of having a sufficiently long time frame is patently false. Never mind that this only can happen if the entirety of the company's assets are liquidated to satisfy its debts... what if they are acquired in whole? I suppose you would argue that the acquiring entity eventually will fail, etc ad infinitum. Well that's entropy for ya - heat death of the universe. So what? Should nobody invest then? Should successful growing companies all pay dividends instead of using that money to expand operations?

Why don't you invest in such companies while the rest of us hold our AAPL. Sounds like you've got an angle!

Re:Watch out

[SEE]

It doesn't just "look like" the OS X desktop. Limbaugh is a long-time Mac user and evangelist.

Re:It was ten years ago today, all my tech stocks.

[whisper_jeff]

http://www.apple.com/pr/library/2010/01/25results.html

Um, Apple generates billions of dollars in profits each quarter as well. Sorry, what was your point?

Only VERY foolish investors....would listen to YOU

[jamrock]

Even if Apple were to grow sales 100% a year for 5 years they still couldn't match Microsofts actual profits.

Really? Let's see:

Microsoft - Year ending December 31, 2009, Net Income $16.26 Billion on Revenues of $58.69 Billion

Apple Inc. - Year ending December 31, 2009, Net Income $7.477 Billion on Revenues of $42.05 Billion

According to you, if Apple grew sales 100% per year for 5 years, over that period they'd earn $16.26 billion in net income on revenues of more than $1.3 Trillion. Let's assume Apple's net income remains 17.78% of revenue. On sales of $1.303 Trillion, they'd show net income of $231 billion, not $16.26 billion as you assert.

We're supposed to take any part of your post seriously? You're spouting bullshit in such an authoritative manner you'd be right at home behind the anchor desk of Fox News.