Microsoft pips Apple to regain most valuable US company crown

Mr Satya Nadella pivoted Microsoft into the hugely lucrative and expanding cloud arena with the Azure product.
Mr Satya Nadella pivoted Microsoft into the hugely lucrative and expanding cloud arena with the Azure product.PHOTO: AGENCE FRANCE-PRESSE

Software maker ends week with market capitalisation of $1.2 trillion to ward off competition from iPhone giant

WASHINGTON • Microsoft and Apple duelled last week for the title of most valuable US company, reviving a decades-long rivalry marked by industry domination, misfires, comebacks, iconic gadgets and two transformative business leaders: Bill Gates and the late Steve Jobs.

Microsoft, based in the Seattle area, was within US$1 billion (S$1.4 billion) of unseating the Silicon Valley iPhone maker for largest US market capitalisation last Wednesday. Market cap is the total value of a company's stock shares.

"They are in a battle," said Mr Howard Silverblatt of S&P Dow Jones Indices.

Microsoft slipped into the lead by close of trading last Friday, with a market cap of US$851 billion (S$1.2 trillion), one valuation shows.

Apple was worth US$847 billion.

Amazon.com was in third place at US$826 billion.

"This is a sumo wrestling match almost without precedent in the history of corporate America," said Washington investment manager Michael Farr. "There was a time when Microsoft never even cared about Apple. Apple wasn't big enough to care about."

TRADITIONAL STRENGTH

The key moment was in 2014 when Satya focused the company on its traditional strengths. They stopped trying to out-Apple Apple. Microsoft went back to doing what it does best. It might not be cool, but it's clearly valuable.

MR TODD BISHOP, editor at GeekWire and longtime reporter on the Microsoft beat.

Microsoft's ascension to the most valuable company would be its first return to the top spot since 2002.

Apple has held the No. 1 spot as most valuable company since 2012, when it unseated Exxon.

Apple employs 123,000, has annual sales of US$265 billion, earned US$60 billion in its last fiscal year in profit and is sitting on US$122 billion in cash, net of debt.

The company's stock buybacks - the amount of money it spends just to buy back its shares on public markets - are worth more than most companies.

Apple grew its 2018 revenue by US$36.4 billion, which is equivalent to a year of total sales by a Fortune 100 company.

Microsoft turned a US$30 billion profit on US$110 billion in revenue in its last fiscal year. It employs 131,000 and has US$135 billion in cash on its books.

 
 

Microsoft and Apple were launched by rivals - Mr Gates, the software pioneer, and Mr Jobs, the design genius.

Apple is so rich that it spent US$64 billion buying back its shares in the nine months ending Sept 30 - a record for a US company and enough to buy any of 410 companies in the S&P 500 index.

Microsoft saw its stock enter hibernation in the early 2000s. The software maker was hugely profitable on its Windows and Office products, but unable to replicate the magic that Mr Jobs infused into the Apple brand.

Then in 2014, Mr Satya Nadella took over from Mr Steve Ballmer and pivoted the technology giant into the hugely lucrative and expanding cloud arena with the Azure product.

The office ecosystem of Windows and Office 365 became subscription businesses, and along with the company's move to the cloud - think servers - revenue and profit soared.

"The key moment was in 2014 when Satya focused the company on its traditional strengths," said Mr Todd Bishop, editor at GeekWire and longtime reporter on the Microsoft beat. "They stopped trying to out-Apple Apple. Microsoft went back to doing what it does best. It might not be cool, but it's clearly valuable."

Apple shares peaked in August at around US$232 each, making the California company the first US$1 trillion publicly traded US firm. Its value peaked at US$1.12 trillion.

But it has been rocky since, with the share price declining 20 per cent in the past six weeks even though Apple had sales of US$62.9 billion in the last quarter.

"We thought the stock was overvalued because expectations for future iPhone growth were too aggressive," said analyst Abhinav Davuluri of Morningstar Research.

Microsoft, meanwhile, saw its share price more than triple to a peak of US$115 in October before falling with the recent slide in technology shares.

"It's an exciting company," Mr Ivan Feinseth, chief investment officer at Tigress Financial Partners, said of Microsoft.

He added that he has a buy rating in Microsoft and owns it on behalf of clients.

"The stuff they are doing in the medical field, financial field, gaming, Surface, retail, artificial intelligence. They are a force behind all of computering."

WASHINGTON POST

A version of this article appeared in the print edition of The Sunday Times on December 02, 2018, with the headline 'Microsoft pips Apple to regain most valuable US company crown'. Print Edition | Subscribe