Apple vs. Microsoft: Game Over

| Analysis

Microsoft announced its Fiscal Q2 results today. Two things are remarkable: essentially no growth from last year and revenue substantially less than Apple’s.

Apple is growing leaps and bounds. Apple’s year over year growth in the most recent quarter went from US$15.68 billion to $26.74 billion. Meanwhile, Microsoft remained just about exactly where is was from a year ago in revenue ( about $19+ billion) and earnings. To bring the point home, here’s a chart showing the most recent quarterly results.

AAPL vs. MSFT

In US$ billions.

One company is growing dramatically and taking the lead in mobile devices like the iPhone and iPad.  The other touts 300 million licenses of Windows 7 sold but is showing no growth overall.

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37 Comments Leave Your Own

Tiger

Growth vs. saturation.

Star_buck

However, Microsoft is more profitable than Apple.  Apple needs to figure out a way to get more profits from the revenue it generates.

RonMacGuy

Easy to show more profits when you aren’t investing in innovation.

Lee Dronick

They could make a big comeback, it has happened to businesses before. Or they could just keep going towards the cliff.

Randy A

Eventually saturation will come to the iDevices as well.

BurmaYank

Easy to show more profits when you aren?t investing in innovation.

... or when all your products are only DVDs, cardboard and service contracts.

peter c

However, Microsoft is more profitable than Apple.? Apple needs to figure out a way to get more profits from the revenue it generates.

Doesn’t the profit comparison indicate that far from Apple selling overpriced products to reap inflated profits, it’s apparently MS who is overcharging.

Apple’s more expensive products are apparently simply more expensive (mostly not, but that’s the way many see it) because they’re better built.

Don’t know, but that’s the way it looks from the comparison.

JKP

The profit discrepancy is because one is a software firm (higher margins) and the other is a hardware company (lower margins, but incredibly high relative to other hardware companies).

d'nomder

... or when all your products are only DVDs, cardboard and service contracts.

Which only underscores how poorly MS is ran.

MS’s profit margin should be 50%, absolute minimum.  How much overhead does it take to sell Office and Windows licenses?

Terrin

Apple actually spends a lot less then Microsoft on Research and Development. Apple, however, is more effective at getting the most from its research efforts. Take iOs for instance, the OS has spread out from the iPhone to the iPod Touch, to the iPad, and now the Apple TV. Innovations from iOs are making its way in to the Mac OS such as the Application Store. Microsoft does a much poorer job of that.

Currently, however, Apple may be spending more on acquisitions, lawyers, and retail then Microsoft. Apple also spends a lot to procure parts for the future 1) to guarantee a supply at a great price, and 2) deny competitors the same parts at the same price.

mhikl

Good points all round.

But I thought you Apple Fansboys were supposed to be closed-minded Apple droolers blind to the follies of Apple and the plight of its competitors. I’m shocked.

Is anyone approaching the point of irritation with Apple iPod TV ads? They are relentless. I still like ‘em, but I could see how they might grate on the nerves of Envyboys. (I care for all sentient beings, regardless their idiocies.)

I find I have to watch, though. I think I’m watching the same advert and then the order changes or a new bit is added. Tonight beer free to check and see.

Amy White

Microsoft sells Windows7 for $429.99
meanwhile
Apple sells the vastly superior OS-X.6 for $29.00

Every single aspect of Windows has been copied from Mac OS-X except for the one single area where Windows has 100% of the market; that of course is Malware they will always be KING in MALWARE.

Microsoft spends ten times what Apple does on R&D yet Microsoft has not had even one single popular innovation in thirty years. They have bought a few innovations and stollen everything else but every single one dies the Microsoft death once inside the beast.

Constable Odo

Far too much Apple hype.  It’s a well-run company but not quite as valuable as some think it is.  Despite musings of Apple becoming a trillion dollar company, ExxonMobil is leaving Apple in the dust in terms of market cap thanks to Steve Jobs’ health issues.  Each time Apple gets a couple of months good run, there’s always this talk of Apple needing to pull back a bit.  ExxonMobil has been rising for about six months straight and there’s no mention of a pullback. XOM is now sitting on a $400 billion market cap with no signs of taking a rest.  Apple’s market cap is just a meaningless number which was proved when Steve Jobs announced his medical leave and $15 billion disappeared in an instant.

Apple still isn’t selling enough iPhones or iPads to offset Windows 7 and Xbox revenue.  Some people keep saying that Microsoft is dying, but it hardly seems to be in its death throes this quarter.  Yes, Apple is a pretty good company but far from money mill it’s claimed to be.  Microsoft screwed up with Vista, their mobile strategy sucks, the Kin failed miserably and yet they’re still doing better than Apple.  Go figure.  I guess when a company owns 90% of the desktop market share, it’s almost impossible for them to lose.

Jamie

The thing that’s most telling to me isn’t in the numbers per se (though seriously: market share aside for a moment, who would have ever dreamed Apple would be prospering like this someday? Freaky), but the fact that Microsoft has stopped growing. Uncorrected this trend will become regressive, and there just won’t be anything for it. Their business model is dying fast.

I guess when a company owns 90% of the desktop market share, it?s almost impossible for them to lose.

Until the desktop becomes marginalized, which has already begun and will only be the case more so going forward. Make no mistake, the future of personal computing is mobile. If MS can’t deliver something soon they will be playing catch up for a good long while. Would be very smart of them to go back to software and deliver their flagship stuff to the devices that are already out there, IMHO. Under Ballmer though, I think that is unlikely. I won’t miss them.

peter c

Microsoft sells Windows7 for $429.99
meanwhile
Apple sells the vastly superior OS-X.6 for $29.00

You’re comparing Apples with oranges - or lemons as some would see it.

Apple sells computers and an OS. In that same market MS sells only an OS. Apple’s OS will only legally run on its computers so it has a revenue stream outside of the $29 OSX 10.6 upgrade fee.

That aside, there appear to be real problems in the way MS works internally. They have a number of teams who compete for the chance to see their projects run. Those who’ve left MS say there’s politics and back-stabbing, etc., rather than the innovative or technological merits of ideas determining what sees the light of day in the market.

Apple had a similar problem when it had people who didn’t understand either the technology or good design running it. It nearly died as a result.

MS has a huge herd of cash-cows to prevent it going terminal (excuse the pun), but unless people with a vision and/or passion for the industry in which their market sits, take control, it will increasingly become irrelevant.

Snrub

Game over? I doubt it. What’s the Apple Death Knell counter up to now?

Apple has had bad periods, too. But let’s remember the past and not start a Microsoft Death Knell.

Until it’s shut down, sold, or destroyed… it’s not over.

RonMacGuy

ExxonMobil has been rising for about six months straight

Nice selective data, Odo. Sure, they’ve been rising for six months straight, but just prior to that they dropped from $95 a share to under $60 a share. Big difference is, Exxon Mobil has been huge ever since Exxon and Mobil merged in 1999. But they basically haven’t grown since 2007. “No signs of taking a rest.” Really? You can predict the future like that? Funny stuff.

Lee Dronick

ExxonMobil has been rising for about six months straight and there?s no mention of a pullback.

At a time where we are trying to get off of our reliance on petroleum products to fuel vehicles and other engines. Perhaps they should be looking into including electric charging at their gas stations.

Lee Dronick

Apple has had bad periods, too. But let?s remember the past and not start a Microsoft Death Knell.

I agree, they could turn it around. Going back to the auto analogy, Ford was in trouble and now they are doing pretty well, General Motors seems to be on the way back. MicroSoft might need to have regime change, or Ballmer to have an epiphany.

I don’t want to see MicroSoft go down in a blue screen of death, it would ripple through the economy. I do very much want to see Apple succeed, but there is room for both of them.

RonMacGuy

Perhaps they should be looking into including electric charging at their gas stations.

Funny. There is no money for them in that. They’d rather sit back and rake oil-dependent people over the coals until they become the dinosaurs from which their oil originally came from.  Hee hee - made me chuckle.

I don’t think Microsoft will go down completely. But, they will have to seriously downsize. Microsoft Office does not appear to be improving with each new version, and there are many other packages out there now to compete. They need something revolutionary, and I’m not sure they are capable of that anymore.

nealg

Like others have said. It is not game over. The balance of power is shifting in Apple’s favor but not game over.

I think one major thing that MSFT could do to help turn things around is to get a new CEO. Eric Schmidt might be available wink.

Neal

Lee Dronick

They?d rather sit back and rake oil-dependent people over the coals until they become the dinosaurs from which their oil originally came from.

I have this vision where an electric vehicle pulls into a service station and the battery is swapped out for one that is pre-charged. Standard batteries across vehicle brands and models. Not necessarily needed around town where you could charge your vehicle at home, but along the interstates when you are traveling. Of course the batteries would be secured in the vehicle with big pentalobe bolts.

RonMacGuy

Of course the batteries would be secured in the vehicle with big pentalobe bolts.

That’s hilarious, Sir Harry!! Thanks for the laugh.

Unless battery technology take a light-year leap ahead and the cost drops 50-fold, I would not want to just swap my battery out with a battery where you don’t know how old it is and how close to death it is. The key will be high-speed charging. If they can get 60-80% charge in 10-15 minutes, which I think they are working toward, you can plug it in, go hit the bathroom, grab a snack and a Big Gulp Dr. Pepper, and then take off for another couple hundred mile drive. Then, get a full charge when you stop to eat a meal.

Lee Dronick

Unless battery technology take a light-year leap ahead and the cost drops 50-fold, I would not want to just swap my battery out with a battery where you don?t know how old it is and how close to death it is. The key will be high-speed charging. If they can get 60-80% charge in 10-15 minutes, which I think they are working toward, you can plug it in, go hit the bathroom, grab a snack and a Big Gulp Dr. Pepper, and then take off for another couple hundred mile drive. Then, get a full charge when you stop to eat a meal.

True that, high speed charging would probably be more practical. The thing is that we are thinking outside of the box and that is probably what MicroSoft needs to do.

How about vehicles fitted with flux capacitors powered by rubbish (Flash).

RonMacGuy

I know - Microsoft can ship a pentalobe driver with every version of Mac Office!!  Or, maybe to make Odo happy we should see a merger - Exxon Mobil Microsoft!!  Then we would see gasoline-powered computers running Windows 8.  How many Gigabytes per Gallon (GPG) does your PC get?  And when you get the blue screen of death, it drain the gas tank, requiring you to fill-er-up to reboot!!

Hey, maybe I should run for Microsoft CEO!!  Err, no thanks.

wab95

MS has a huge herd of cash-cows to prevent it going terminal (excuse the pun), but unless people with a vision and/or passion for the industry in which their market sits, take control, it will increasingly become irrelevant.

Well-aimed. I predict the latter (the passion part) will take effect.

Like others have said. It is not game over. The balance of power is shifting in Apple?s favor but not game over

Agreed, although that shift is a process that began in 2001 with the iPod, and went into hyperdrive in 2007 with the launch of the iPhone. Predictions about the imminent demise of MS are at best well-premature, and more likely simply incorrect.

Having MS drop out of the scene anytime in the foreseeable future would leave a gaping hole in the larger tech infrastructure that would result in global (literally) instability. Too many players are too heavily invested in MS solutions. Moreover, vision issues aside, there are simply too manner smart people in the MS orbit who have real business savvy to let the company plummet into oblivion. I would not discount the BG factor in the background, whom, if he feels his company is truly in peril (and the man has an uncanny business sense), may exert his influence to orchestrate a quiet, face-saving exit for Ballmer and/or anyone else who stands in the way of MS’s growth and future relevance.

webjprgm

RonMacGuy said:Unless battery technology take a light-year leap ahead and the cost drops 50-fold, I would not want to just swap my battery out with a battery where you don?t know how old it is and how close to death it is. The key will be high-speed charging. If they can get 60-80% charge in 10-15 minutes, which I think they are working toward, you can plug it in, go hit the bathroom, grab a snack and a Big Gulp Dr. Pepper, and then take off for another couple hundred mile drive. Then, get a full charge when you stop to eat a meal.
True that, high speed charging would probably be more practical. The thing is that we are thinking outside of the box and that is probably what MicroSoft needs to do.

How about vehicles fitted with flux capacitors powered by rubbish (Flash).

My habit on road trips is to drive 4 hrs straight, consuming 10gal (of a 14 gal tank) at 30-36mpg, gas up, use the restroom, close my eyes for 5 min if I’m getting tired, but then be back out.  The 15 min charge would work, but only if I could go 350 mi after that.  Otherwise I’d need to find a lot more gas stations and take breaks a lot more often.

What about charging as we drive?  Inductive rods in the roads ...  At least we know how to make that while we don’t know how to make flux capacitors or Mr. Fusion.  I agree with the battery swapping thing: it won’t work as long as there’s any doubt about quality.  (Maybe some kind of quality guarantee where the batteries are recycled at 80% of estimated lifetime charge cycles ... your car checks it each time ...)

webjprgm

Hey, maybe I should run for Microsoft CEO!!? Err, no thanks.

I’ve thought of that too. grin  My strategy would be to fire most of the management, then ... I haven’t figured out the rest.

webjprgm

Oh, and there’s no way MS will die.  Worse that can happen is if they lose the smartphone and tablet/slate/pad battle enough to force management shake-up.  I really don’t think Balmer is doing that great of a job, but they definitely have the strangle-hold on Office and their Xbox business is pretty good.

Most likely, they’ll continue to limp on for 5-10 years before any major changes, and then they’ll be like an IBM, which is a very old company with lots of “history” in how it runs, but certainly not on it’s deathbed.

Modena

Microsoft’s main bread and butter is Windows licensing and Office. As more and more people move to mobile devices where Microsoft has so far not been able to gain traction, that will seriously impact their revenues.

They also have purchased a lot of companies in what seems an effort to maintain their desktop hegemony - but the world is fast moving beyond that.

And the pressure for Microsoft to deliver on those fronts is going to be high which is probably why they are pushing HTML5 - it’s the easiest way for them to transition to this new world.

I wouldn’t be surprised if Microsoft CRM and Dynamics (Great Plains) are targeted technologies for HTML5 upgrades.

RonMacGuy

As more and more people move to mobile devices where Microsoft has so far not been able to gain traction, that will seriously impact their revenues.

I hear you, but I’ll be honest even after moving to an iMac for my main computer work, plus having an iPad, I still also have an old Windows XP desktop and a Windows Vista laptop I got from my father and a Windows laptop from my job. I think even though a lot of people are including mobile in their worlds, the old mainstays will remain. But, they may be less likely to upgrade their Windows version or less likely to buy a new computer as frequently as they have in the past, so this will impact revenue. But, a lot of people and many companies will continue to use Windows long into the future.

Steveafb

Yawn,

Apple will easily pass Microsoft in profits this year like they passed ms in revenue last year.

Steveafb

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Star_buck said on January 27th, 2011 at 5:35 PM:
However, Microsoft is more profitable than Apple.? Apple needs to figure out a way to get more profits from the revenue it generates.

Are you dumb or what? Ms is a software company, therefore their profit from each disc they sell has a higher gross margin than hardware apple sells. Learn some facts, ignorant american?

youweshey

Sorry apple guys I own a ton of apple products but MS is here to stay.  Until I bought a i7 MAC recently I bought into the hype about the OS.  MS w7 is a complete suite except for office.  I had to buy elgato for 99 for tv, 150+ for Dictate and many other little APPS to get my mac working closer to w7.  MS essentials is all I need for security have had a problem with my MAC except for the mozilla firefox problems.  MS does have a rapidly expanding segment in the XBOX and its AWESOME kinect.  That is the best kit I have purchased in a very long time and that is the revolution the other person was asking for from MS.

Lee Dronick

Sorry apple guys I own a ton of apple products but MS is here to stay.? Until I bought a i7 MAC recently

You have a “ton” of Apple products, yet you refer to it as a “MAC”. You type a like “Pc” user who doesn’t have any Apple products.

Regular MACobserver readers, I apologize for feeding the troll, but sometimes I reach my limit.

youweshey

Sorry “HARRY” I type like someone who is at work.  How about this…
2x all iphones ever made first one in Maryland with one
7 various ipods from nanos to the big hard drive ones
1 2010 i7 1tb mbp with 8gb ram
2 2010 mac mini for home theater
2 ipads 64gb Wifi and 3g
2 ipads 64gb wifi traded in for 3g because they were bought day one on vacaton in LA
ADOBE SUITE legal for mac only just got it.

Not a troll and I have never been called that reference.  I am new to OSX and that is frustrating I dont even use my applecare.  (Mail doesn’t have half the business acumen as MS Office for w7).  MS has a ton of adavantages in the market that I have already specified.  Sorry my use of MAC offended your colloquialism on this forum.  Lastly, I do troll around all websites with interesting stories that pertain to me and in that way I am a troll for trolling.

mike

Haters beware:
apple is king amongst the youth and therefore apple is prepping for a complete ownership of computers and devices once these kids grow up and never buy a cheap dell with crappy parts that will only last a few months to a year and they will make their family and kids buy apple too…people are getting smarter with their money and wont mind investing a few hundred more to receive a product that actually works. I bought a $2,200 dell that lasted 6months before the motherboard fried. Went out and paid 1400 for an imac 2 years ago that still boots up like i just bought it and now i own an imac, macbook pro, ipad, iphone 4 and an ipod…Apple is quality.

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