Apple the most valuable company ever, if you forget inflation

Apple the most valuable company ever, if you forget inflation

Summary: The world is ringing with the news that Apple is the most valuable company ever. But is it really?

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TOPICS: Apple, Microsoft
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commentary Apple is apparently the world's most valuable company ever.

On Monday, the company's rising share price saw its value inflate to more than US$621 billion, beating the record for market capitalisation set by Microsoft in 1999.

Apple's stock is riding on a wave of optimism around rumours of the impending launch of the iPhone 5, and a smaller, cheaper iPad.

Of course, the supposition that Apple is now the most valuable company ever doesn't take inflation into account, and assumes that money has the same value now as it did back at the turn of the century. You and I both know that's total bollocks. As consumers, we will have noticed how everything costs more now than it did in 1999.

In inflation-adjusted dollars, Microsoft was worth about US$850 billion on 30 December 1999. Microsoft is now worth US$257 billion. So, I'm sorry Apple, but you've got a while to go before you take that crown, even if there are predictions that you'll reach a trillion-dollar valuation. At this point, they're just predictions.

Of course, if we took inflation into account, the record would probably still be held anyway by some very early company, like the South Sea Company, which rose to staggering valuations before collapsing into a frothy foam of nothingness.

Which leads to another point: market capitalisation depends on the number of shares and the share price. The share price, in the end, is a measure not really of how the company is doing, but of how well we think it's going and how well it will continue to go, as well as a whole lot of not-very-solid things, like assumed brand value. We have seen with Facebook's share price how strongly that assumed value can vary. So what does Apple's valuation really mean?

While it's true that Apple has achieved great success since its near-death experience, and has battled its way into the hearts and minds of consumers and investors alike, I will not concede that it is the most valuable company in history. It would be more correct to claim that it is the greatest turnaround in a company's fortunes.

And a final thought on this evaluation goes to the SQLite team.

The inflection point
(Credit: SQLite )

AAP contributed to this article.

Topics: Apple, Microsoft

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at ZDNet.com.au as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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21 comments
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  • Database provides a performance underpinning.

    Having a 'real' database in the OS is important. It provides a standard & performant basis for building a whole lot of apps & infrastructure.. next time you're waiting for Microsoft's crud to grind away doing some trivial task, think about what they missed.
    twhitmore.nz
    • This is nearly nonsensical

      The SQLLite thing was posted for the purpose of whimsy. I doubt the author included it out of any sense that it made the OS (though it did enable the handy Spotlight feature.)

      Windows NT has had innate database support (Jet) since 1996, and easily added Compact SQL support since the early 2000s. SQLLite is one of OS X's more unremarkable features (disclaimer: I'm using OS X Mountain Lion to add this comment.)
      Mac_PC_FenceSitter
      • Anyway, no one really claims is Apple is the most valuable in history ...

        ... besides nominal value. Also, it should be noted that this all only relates to public companies. Even now Apple is not the most valuable if you consider private companies, too. Saudi's oil company might worth about $800 billion now.
        DDERSSS
  • Are You Allowed To Say “Bollocks” On ZDNet?

    n/t
    ldo17
  • So, what you're basically saying is that Microsoft

    has lost close to 70% of its value in the last 13 years.
    baggins_z
  • Wow, so SQLite is what did it eh?

    I guess it wasn't Steve Jobs after all.
    Better update my knowledge database.

    fact = "SQLite is responsible for Apple's turnaround";

    UPDATE knowledge SET question = "What is responsible for Apples's turnaround", answer = fact WHERE question_subject = "Apple's turnaround" LIMIT 1;
    sayhi2yourmom4me
  • If you know anything about stocks

    You'd know NOT to buy Apple stocks now as they are presently overvalued and will fall sooner or later. Possible a good time to sell some though, you'd make a pretty good profit but guessing when they might fall could be tricky.
    martin_js
    • This is worth tagging...

      It will give me a chuckle and let me remember how clueless tech heads ate when it comes to finances.
      Bruizer
    • Thank You Michael Dell...

      People have been saying Apple is juuuuuust about to tank.. for the entire span of its existence. Wishing and hoping and praying they would despite Apple chugging right along.
      Tigertank
      • I never said it had reached it's peak!

        I don't personally care what you do with your shares. I don't own and don't intend to own shares. Apple, Microsoft ABC Learning,( last one was an Aussie company running at record high, 2 years after that, bankrupt.
        Now don't get me wrong, not saying Apple will go bankrupt, pretty sure it never will, BUT if you believe it will keep getting higher and higher forever and a day, you dreaming. It's clearly overvalued.
        If you in it for the long term and bought in cheaply there is no issue about keeping them, but if you have bought into them at a high price, you could be in for a lose.

        You need to keep fanboy/girl out of financial decisions, look at long term trends and tell how many company's go to record highs and stay there long term?
        martin_js
    • Low P/E ratio

      Apple stock is not overvalued. Their price-to-earnings ratio is very low, considering how fast their earnings are growing. If anything, I would say that they're undervalued.
      Joshua Issac
  • And while we're at it.. once and for all...

    Market Capitalization is not the same thing as Company Valuation.

    The value of a company is it's assets and forward looking profitability. The money in the market isn't owned by Apple and if anything, is actually a liability in some respects. While it means it's unlikely Apple could be bought by another company in a hostile takeover bid - it also means Apple can't afford to buy back their own shares should they want to regain total control of their future. It also sets expectations for dividends.

    About the only advantage to Apple is that they can get credit more easily - but Apple doesn't really need a lot of credit at the moment.

    So, if you want to ask which company is the wealthiest or most valuable (not the same surprisingly), compare assets and forward profitability, not market cap.
    The Werewolf!
  • Apparently The Dutch East India Company Holds The Record ...

    ... for the largest market cap in inflation-adjusted terms ever.
    ldo17
  • "If we account for inflation..."

    Why would we?

    If I had a dollar in 1990 and saved it to now, under my mattress, I'd still have a dollar. I don't get this obsession with saying "yeah, well, inflation". Can I spend inflation? Does inflation really matter? As you put, if inflation mattered... Microsoft would be worth 850 billion dollars.

    They're not.

    So, yes, Apple is, right now, the company that is worth the most. Inflation is irrelevant. It doesn't matter what money used to be worth, it matters what it -is- worth.
    Michael Alan Goff
    • I think you misunderstood the article

      The article is about the most valuable firm ever, not the most valuable firm today. Apple was already the most valuable publicly traded firm, as it has been for some time. If you're comparing firms today, then the nominal dollar values are fine. If you want to compare at different points in time, your comparison is nonsense unless you adjust for differences in the price level.

      To take an extreme example, a Zimbabwean dollar was worth a bit more than 1 US cent at the beginning of 2001. By mid-2008, it would have taken more than a trillion Zimbabwean dollars to buy one US cent. Would you say a Zimbabwean household with a net worth of a few trillion dollars in 2008 was richer than a Zimbabwean household with a net worth of a few million dollars in 2001? Of course not. It would be a nonsensical comparison.

      At current prices, Microsoft's market value at the end of 1999 was roughly US$850 billion. It was massively overvalued because of unrealistic expectations of continued dot-com-era growth rates, but that's what it was worth. Apple's current valuation, also at current prices, is high, but not as high, so it certainly isn't the highest ever. Microsoft in 1999 probably wasn't either.

      As for saving, nobody who is sensible would save by putting currency under a mattress. People save by putting their money into financial assets. The most conservative way to save is to put money into an interest bearing account protected be deposit insurance. Even these pay a positive rate of interest, which is indirectly linked to the rate of inflation (when people expect higher inflation, such accounts have to pay higher nominal interest). If you had put a dollar into such an account in 1990, you would have more than a dollar today, but would not necessarily have more spending power than that dollar had in 1990.
      WilErz
    • Adjust for inflation

      Sorry, but I must disagree with you. This is a common mistake with reportage of the movie industry, when some breathless announcer states that " 'Movie X' made a record profit this weekend in comparison to 'Movie Y' ", which set the record 10, 15, or 20 years previously.

      It looks good on paper and sounds good on tape, but you simply can't make that kind of comparison *without* adjusting for inflation. Otherwise, the comparison is essentially invalid.
      M.R. Kennedy
      • So you would say

        East India Trading Company was the most valuable company ever? I mean, if we adjust for inflation...
        Michael Alan Goff
    • Just don't respond at all...

      if you clearly don't understand inflation. Go read the wikipedia page... or better yet, ask your grandparents how much money they made a year.
      kstap
      • Interesting retort

        Now allow me to respond to your response with... why does it matter how much they made a year back when they were young? I don't mean this academically, as it shows the decline of the value of the dollar, but I mean in a practical sense.
        Michael Alan Goff
  • Unquestioning regurgitation of Apple propaganda

    "Apple the most valuable company of all time"

    WRONG.

    Ever heard of inflation? You can't just choose to leave it out when comparing the value of businesses over a long timespan.

    Top marks for unquestioning regurgitation of Apple's usual mindless corporate propaganda, though. ;)

    If you do the maths correctly, IBM is the most valuable company in history, and Microsoft is in second or close third place.
    http://techcrunch.com/2012/08/20/apple-is-not-the-most-valuable-company-in-the-history-of-the-world-ibm-won-the-prize-in-1967-with-a-value-of-1-3-trillion/

    P.S. Apple's share price plunging
    http://news.cnet.com/8301-13579_3-57497395-37/its-tuesday-so-naturally-apple-shares-are-plunging/
    Tim Acheson