Apple versus Microsoft: the ticker tape tells the tale

Apple versus Microsoft: the ticker tape tells the tale

Summary: If all you ever read is the tech press, you probably think Microsoft is doomed, and you probably can't understand why Apple's stock has plunged over the last six months. Maybe it's because the press is only seeing a tiny slice of the pie.

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TOPICS: Microsoft, Apple
167

Windows 8 was released to the general public exactly six months ago.

During that time, the PC industry has contracted sharply and Windows 8 buyers have been less than fully enthusiastic.

The conventional wisdom is that Microsoft is flailing and Apple is a productivity machine. Apple’s products are uniformly loved and Microsoft’s are unable to get any traction. Apple's cool, Microsoft's not.

And yet the company’s stock prices have gone in completely opposite directions since the launch of Windows 8. This chart begins on the day Windows 8 was released to the public.

MSFT-AAPL-charts-April2013

Now, the market has been known to be dead wrong before. But it’s odd to see this big a divergence between public perception and market performance.

Last week Microsoft released its quarterly results. This week Apple weighed in with its numbers. That gave me a chance to look at both companies in a little more detail. And when I did, I saw far more similarities than differences, including two CEOs who have drawn their share of fire from critics who think they need to be replaced.

At Microsoft, Steve Ballmer gets dinged for the company’s inability to make any serious inroads into the mobile category. After six months on the market, neither Windows Phone 8 nor Windows 8 have managed to get out of the single digits in terms of usage.

And yet the company managed to increase its profit 19 percent over the corresponding quarter last year. How? By concentrating on the boring, yet highly profitable units that most tech bloggers yawn at. Microsoft Business Division (responsible for Office 365, which is about to become a billion-dollar business) and Server and Tools (with multiple billion-dollar businesses under its umbrella) are both bigger than Windows.

MSFT-revenue-2012-13

Meanwhile, the Windows Division reported flat revenues even though PC shipments dropped by 14 percent during the same period. I’ve read several critiques from armchair financial analysts implying that Ballmer and Co. are somehow cheating by including its new Surface hardware line in the Windows Division’s results.

But that’s Microsoft’s strategy for Windows, part of its initiative to become a “devices and services” company. You can argue about the execution of that strategy, and you can place bets on whether it will succeed. But there’s nothing timid or tentative about it.

And then there’s Apple. Superficially, its business looks as diversified as Microsoft’s, with revenue and profits coming from a variety of products.

AAPL-revenue-2012-13

But in the same quarter where Microsoft's profits were up 19 percent, Apple's were down almost 18 percent.

There’s no question that Apple will sell lots more iPhones and iPads. But as CEO Tim Cook acknowledged on the earnings call, “We acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high level we experienced in 2012.”

In developed markets, Apple has masterfully executed against its plan to sell high-priced, high-margin products to the wealthier segments of the buying public. But there’s evidence that that market is saturated, and the first-mover advantage is gone. On the same earnings call, Cook conceded as much: “We can't control items such as exchange rates and world economies and even certain cost pressures.” Growth for Apple in its existing product lines means appealing to more price-conscious buyers and moving into markets where the $618 average selling price of an iPhone isn’t an option.

Is there another breakthrough hardware product in Apple’s back pocket? It’s hard to believe that a smart watch or a TV has the potential to define a category as the iPhone and iPad did.

Maybe services? Revenue on the iTunes/Software/Services line in Apple’s just-completed quarter was up 30 percent. But as the latest 10-Q report makes clear, that’s a by-product of the larger installed base of iOS devices:

This increase was due primarily to growth of iTunes [which] reflects continued growth in the installed base of iOS devices and expanded iTunes digital content and applications offerings around the world, resulting in higher net sales on the App Store and higher net sales of digital content.

Outside of iTunes, Apple hasn’t exactly excelled at delivering services to its own customer base, let alone expanding those services to a larger market. So it’s hard to see that as a real growth opportunity.

Indeed, that’s the real difference between Steve Ballmer’s Microsoft and Tim Cook’s Apple. Ballmer has a significant challenge in one division that represents about a quarter of his company’s revenue, while other divisions are growing steadily outside the gaze of the gadget-obsessed tech press.

Meanwhile, Apple has become downright boring and predictable. As Felix Salmon wrote after seeing Apple’s latest numbers:

Today’s earnings report marks the point at which Apple is officially no longer a high-growth tech stock, valued on its monster potential. Instead, it has become a cash cow, valued on its ability to pump hundreds of billions of dollars into its shareholders’ pockets.

That's actually a fairly accurate description of Microsoft's performance in the Ballmer era. And given the challenges of the economy and a fickle technology market, it's a significant accomplishment for both men.

In short, regardless of the stock market's vicissitudes, neither company is doomed. And I suspect neither CEO is going anywhere soon.

Topics: Microsoft, Apple

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167 comments
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  • "regardless of the stock market's vicissitudes, neither company is doomed."

    ^ This.
    ForeverCookie
  • if I compare the price of cows with the price of goats

    It seems like you're grabbing at straws trying to promote Microsoft Ed. It would be interesting to see the graphs of Google and Samsung versus Microsoft. That would prove NOTHING, just as this article proves nothing. Face it Ed, the world is beginning to realize that it can live without Windows and Office. The corporate computer techs, most of whom have spent their lives working with Microsoft, are in a state of denial, and are going to continue with MS as long as possible, note the Windows tablet sales, but eventually, Open Source will run everything. It's hard to compete with FREE.
    StevenAbaby
    • @StevenAbaby

      You are paying for open source same price as corporate tech fees. r u dombee
      Mac_Win
      • Office is an antique

        Linux is free but let's keep that our secret. Office is like an antique. Now a days people can just imagine a document and it is shipped off instantly. The George Jetson era is here. Microsoft is so last century that it hurts. Microsoft is no more cool than a typewriter. My grandmother says that Microsoft makes antique software.
        Tim Jordan
        • Wow!

          And this coming from someone who CLEARLY knows NOTHING about what MS is doing as far as technology and advancement! AND your grandmother!
          HBCASurfer
        • i guess you haven't read much on this

          imagine a document and it is shipped off instantly...
          first i never saw george do that,
          second what the hell are you talking about?

          google "microsoft cooler than apple" looks like to most, other than you, microsoft is seen as cooler today than in many moons. that being said, some typewriters were pretty neat.

          unless your grandmother watches the industry i fail to see how her opinion is valid. I can call something young just because I am young and it is equally meaningless.
          dosmastr@...
    • Unless you are office,

      In which case no one even comes close to office, regardless of price.
      grayknight
      • You mean proprietary.

        You know, it's typical here for people to equate proprietary with features. Actually, by not using Active-x, alternatives just as applications, contrary to MS Office which is deeply entrenched into the OS, similar to Internet Explorer.

        Confusing proprietary to essential feature is born from Microsofts' monopolistic tendencies, nothing more.


        Elementary, High School, College and Graduate work can be done easily on Open Office. The idea that MS Office is somehow superior is false and part of their propaganda effort. My daughter went through high school and college using only LibrfeOffice and OpenOffice without the slightest problem.
        Joe.Smetona
        • BUT....

          those ARE VERY limited! When you want to do REAL AND SERIOUS work....every one KNOWS they come running to MS office!
          HBCASurfer
          • Definition

            Although this has nothing to do with the article's topic, please explain what you mean by "REAL AND SERIOUS work...." People often use a phrase like this, but never say what they mean. On some posts, it means CAD or photo editing, and such. However, I don't see how someone would be able to do that type of work using any form of office.
            Webminotaur
        • i've used both, OO.o and office xp

          granted my version of office is old, but its never crashed on me.. OO.o can't say the same.
          dosmastr@...
          • Yes, OOo DID crash a lot at one time

            But that time was about 5 years ago. The problems that caused that behavior are now gone.

            However, the current versions still have the long load time. Microsoft Office uses many of the same routines that are in Windows itself. That's why MS Office load quicker.

            Alternatively, Open Office and Libre Office are both really a single program. When you load Writer, you are also loading Calc and Presenter. that means that the initial load of the program is much longer (often over 30 seconds on my machine). So, if you operate in a strictly Windows environment, Microsoft Office is quicker.

            As far as capabilities go, both office suites do more than almost any business needs. As a practicing Professional Engineer, I find that I can write specifications, run calculations on complex problems, and prepare graphically intensive presentations using either system.

            My personal preference for an office package is still Word Perfect. The data base system there is even weaker than the one in MS Office, but, I can use a stand alone Data Base for that.

            Previously written macros hold many people captive in whatever office package they have used for several years, especially in spreadsheets. However, I have found that I can rewrite the macros with only a little extra effort. Java is really a better language for macros than Visual Basic, so I would even give that a win for Libre Office over Microsoft Office. However, Scheme (a Lisp language) as it is implemented in the Gnome Office application Gnumeric is a more powerful one. If the Libre Office people do include Python as a macro language, as promised, then that might change back to a nod for Calc.

            Microsoft Office does include a few tools that are not included in Libre Office, such as Outlook with it's email and calander applications, but, the Libre Office people want you to use Thunderbird (from Mozilla) for that. I have found Thunderbird as a fine replacement on my Windows machine anyway. I have always found Outlook to be insecure. It is also fragile, in the same way that Microsoft Word files are fragile. Word files are much too likely to become unusable when transferred over different versions of Windows, and lack compatibility with very many versions of Word.

            I've said before on these forums that I have had the 'honor' of recovering important files that were created in Word where the format was vital and the users (even the 'experts') just couldn't stop some paragraphs from reformatting themselves. The best tool for that job that I have found is still Word Perfect. Libre Office is improving for that task. Slowly.

            If you are using something other than MS Office, be sure that you do the conversion to and from .doc or .x___ format on your package. Microsoft products NEVER convert formats properly. If you don't tell them, they probably will never know. Word Perfect, and recent Libre Office packages do the conversion properly. Open Office is getting better at that too.

            One thing that may cause problems, especially in presentations, and somewhat full spreadsheets is the font selections. To really get the same appearance, the documents need to use the same fonts. Microsoft has it's own fonts, which are spaced a little bit differently than the others. The individual letters may look the same, but over the document, it will make a difference. This is not so much a problem in Windows, where you will have access to the default Windows font sets (though not necessarily to the expanded fonts that come with Office), but it can be a killer on other operating systems.
            YetAnotherBob
    • Who was comparing the PRICE of cows and goats?

      How ironic and ridiculous to make an apples-to-oranges comparison type analogy by referring to the PRICE of cows and goats.

      The author was not, for example, comparing the price of an iPhone to the price of a Microsoft Surface Pro. He specifically was looking at common measures of both companies… revenue growth or decline rates, stock price rise or decline rates, etc.

      How ironic also for this commentator to be talking about others' state of denial when in fact he is ignoring the actual growth in Microsoft revenues in absolute and relative terms.

      I suggest refresher courses, e.g. Comparisons 101, Irony 101, Reality 101, etc. ;-)

      Imran
      http://blog.imran.com

      PS My day job for the last several months is with Microsoft (in a non product, non sales, onsite at a client, non-Microsoft specific support role) but I do not speak for the company, nor are they responsible for my opinions before or since.
      ImranAnwar
      • @stevenababy

        He seems to be one of those people who look at the pictures and don't read the book.
        WATKINS12@...
    • Compare MS to Itself, not Apple

      Way up overall. Way up on Office 365. Way up on Cloud services. Way up on server systems. Windows flat. WP8 only slightly up. The point is that Microsoft redesigned itself years ago to be ready for a shift away from Windows. They will do fine. And maybe they will even get some traction. Who knows?

      What I do know is that this is a good corporation in which to own stock.
      karps
      • Microsoft isn't moving away from Windows.

        ¿Remember Windows Live? countless of Cloud-based services too many to count with little popularity, they've bundles ALL* of those into Windows 8 because they weren't making a name for themselves as services and Microsoft's products were fractured, they're all in Windows 8 now (Including Zune which they call Xbox Music & Xbox Video now), even Bing is big in Windows 8, if there's anything to Microsoft, it's that they preserve EVERYTHING, no matter how much they've failed, Microsoft keeps supporting them.

        * = Many Windows Live services have feen merged, example: Windows Live Mesh, Windows Live SkyDrive and several ''minor-''services have been merged into Microsoft SkyDrive.

        If Windows 8 is an indication of anything, it's that Microsoft believes in Windows, and thinks ''Windows 8 is the way to the Cloud''.
        Văn Minh Nguyễn
        • I don't see a problem with convergence

          If I understand you correctly you practically hate Microsoft for allowing integrated Search, SkyDrive, Cloud Sync et al. Actually it is a great way to connect Windows to the cloud which people will be using more and more every day.

          Windows Live was no failure (Hotmail, Live Mail, SkyDrive, MSN Messenger, Office Web Apps), they were used more than comparable services. Having all of those present without any additional downloads is brilliant. Something I've wanted since XP.

          Windows is a part of the Microsoft story, not the whole story. It's a great cash cow so Microsoft won't dump that just because of the cloud.
          Dreyer Smit
          • I would take it a step further

            It was atrocious that SkyDrive was not built into the desktop, drag and drop. MSM drives people crazy trying to get rid of it (you're right that it was popular, but it still seems like no one uses it. This is typical MS though, i.e. where is Skype on the Xbox?
            stano360
    • See? This writing here is an example of nonsense.

      @StevenAbaby

      See? This guy here is the most common kind of prime example of really stupid writing, talking like he has a point, actually says nothing substantive, but makes a claim, a claim by the way provably and obviously wrong, but says it as if he means it and as if its based on some common truth.

      Its obvious and uncontestable crap.

      His claim:

      “Face it Ed, the world is beginning to realize that it can live without Windows and Office”

      The world is beginning to realize no such thing. What a joke. Neither the particular business I am in or any of the businesses I have been through nor any of the homes or anyplace Ive been to over the years seems to have had any so called ‘realization’ that Windows isnt needed. What a load of guff. Its like someone took a pile of nonsense and distilled it down to its finest form.

      What the world may have realized is that you don’t need Windows to run a cell phone or tablet. This in itself is a joke. Its like saying “The United States is beginning to realize that you don’t need Russian built rockets to go into outer space”.

      Ummm…I don’t get it…are you claiming they just recently came to realize this? Like…didn’t the U.S.A. go to the Moon or something already without Russian rockets? Like, a bunch of years back?

      And similarly, when did the world ever think that Windows was needed for a cell phone or a tablet???

      My guess would be something like the 12th of never.

      It seems to me that the whole world in so far as business and home use of Windows goes that years ago they would walk into Best Buy and look at desktop computers and laptop computers, there been an area for Macs for some time. If they were not buying a Mac they were buying a Windows computer. Sometimes, although we know rarely, people will now sometimes buy a Chromebook. We know that people don’t buy nearly as many desktops and laptops as in the past because everyone already has one. And we know, just exactly like the “good old days” about 90% of the computers sold are still Windows computers.

      It dosnt fly in any sense of the term that the world is coming to realize that they don’t need Windows. Its just impossible given the facts that the world actually knows exists.

      Hopers and dreamers that want Windows and usually MS to disappear and die use such phrases based on the fact non Windows OS tablets and cell phones have sold amazingly well, but it has shown absolutely nothing to the notion the world can get by without Windows. Nothing, as like in NOT A THING. Its like saying that now we have airplanes and submarines the world is coming to realize we don’t need automobiles.

      We know why people say these really stupid things. It allows them to dream of a world in the near future where things are more like the way they would like them to be. It gives some fertile ground for them to hope and dream there is some rational belief for thinking that their dream world is somehow closer to a reality than it actually is.

      The world still needs Windows every bit as much as they always have. At least certainly in general. And worse yet for the ridiculous dreamers who for odd reasons hate Windows and MS so much they live to exist in this dream world, is that we are not really much closer in significant ways to being any closer to any kind of world that can get by without Windows yet.

      Why they want to live without Windows so badly, I just don’t know. Nobody except another hater knows really I guess. Right now, as has been for many many years, at least 90%+ of the world dosnt know why they hate Windows so much.
      Cayble
      • RE: See? This writing here....

        Cayble, a very well written and thought out piece. My only thoughts are:

        For pretty much every Windows Hater, there are an equal amount of Apple haters, which is very evident on this site, whom also want to see the demise of Apple.

        What many of these haters don't seem to understand, is that we really don't need or should want any company to go down, the resulting effects it has on everyone is bad.

        People will be out of a job in an economy that is already strained enough, and then the other businesses that deal with those products also loose business and customers.

        And then of course, the consumers loose in the end as well. I prefer to have choice, just as I prefer to use different platforms for different parts of my job, or at home.

        But if it's one thing I've learned over my life, a lot of people just like to complain, and they need something or someone to take it out on. And they never seem happy unless their bashing something, trying to make themselves feel better than others...

        Life really is too short to always focus on negativity, people need to focus on just enjoying life and family.

        Thanks...
        TW
        T-Wrench