Apple Market Cap Bigger Than Microsoft? Not Quite Yet, It Isn’t

NEWS
Apple Market Cap Bigger Than Microsoft? Not Quite Yet, It Isn’t
Saturday, April 24, 2010

••• Boosted by upbeat investor reaction to its strong earnings report this week, Apple on yesterday became the second largest company on the S&P 500 Index in terms of market capitalization, surpassing software giant Microsoft.
Revenge, they say, is a dish that is best served cold. And if this is true, then Apple must be pleased as punch to see itself in the second spot in the S&P 500, second only to Exxon Mobil.

While coming second is in itself notable – with the notable exception of coming first – what must be especially pleasing to Apple is the company it has replaced – Microsoft.

To understand this, you must travel back in time to 1988. In that year, Apple filed a case against Microsoft, claiming that the Windows graphical user interface (GUI) infringed upon the Mac’s “look and feel.” Of course, since Apple had itself borrowed the Mac’s look and feel by looking at products from Xerox and feeling that the GUI is a good thing, the judges of the United States Court of Appeals for the Ninth Circuit ruled that Apple cannot get patent-like protection for the idea of a GUI.

What is more humiliating than being beaten by an opponent? Running back to the same opponent for help when you are down. And Apple was forced to do this in 1997, when Steve Jobs announced that Apple would join Microsoft to release new versions of Microsoft Office for the Macintosh, and that Microsoft made a $150 million investment in non-voting Apple stock. The money made a huge difference to Apple because in 1997 Apple was in deep trouble and was facing a huge finance crunch.

Enough history. Cut to the here and now. Apple is on top and has ousted Microsoft to become the No 2 company on the S&P index. It would be wrong to say that its iPod, iPhone and iPads are selling like hot cakes – it would perhaps be better to say that hot cakes are selling like iPads.

Purists may argue that the S&P 500 represents merely float-adjusted market cap. In fact, as Marco Tabini posted on macworld.com, “Microsoft’s full market cap still outstrips Apple’s by $275 billion to $241 billion.”

True, Microsoft’s market cap is still higher, but Apple has one psychological advantage that was once enjoyed by Microsoft in the PC era – the ability to drive the direction of the market. Now, Apple decides what happens.

Want proof? The iPad now accounts for 26 per cent of all of the mobile traffic on wired.com. The site is so impressed that they are making their Flash-heavy pages iPad compatible. “We are aware of the irony that the majority of wired.com’s videos, which use an Adobe Flash-based player, don’t play on the iPad. We’re working on that, starting with our homepage,” wrote Dylan F. Tweney in an article that appeared on the site.

Many many moons ago, when Steve Jobs hired John Sculley from Pepsi, he is reputed to have asked him, “Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?” Scully didn’t change the world. In fact, during his regime, Microsoft threatened to discontinue Office for the Mac if Apple did not licence parts of the Mac GUI for use with Windows. And those days, Microsoft got what it wanted. But it looks like iPad has just turned the tables.

• What is S&P 500?
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. After the Dow Jones Industrial Average, the S&P 500 is the most widely followed index of large-cap American stocks. It is considered a bellwether for the American economy.