Microsoft vs. Apple valuation not really surprising.
There were a lot of people acting quite surprised this past week that Microsoft had become more valuable than Apple. But, I'm not really shocked that this happened.
What a lot of people fail to realize are two things; Microsoft was a MUCH larger company than Apple for a MUCH longer period of time. And Microsoft is no longer a one trick pony whereas Apple is.
The first point is pretty simple. Since Apple's meteoric rise, even at the height of the gap in value between Microsoft and Apple, the gap was never all that large. Apple over taking Microsoft on the other hand was the much more impressive feat. When Microsoft was big, they dwarfed Apple several fold, and for well over a decade. So, in terms of percentage growth, Microsoft never had as large a gap to close as Apple had originally when it took that throne.
The other side of it is that Apple dethroning Microsoft in the personal computing space had a positive long term impact on Microsoft. They are about much more than just Windows. In fact, Azure and Office are bigger than Windows now. And Windows still dominates in the PC market. It simply happens to be an ever shrinking market.
Apple on the other hand has never figured out just how to succeed after the iPhone. No matter what else they sell, none of it comes ANYWHERE near iPhone sales. And frankly, phones, technologically are no different from computers. So, the notion that we'd hit a point where the yearly upgrade or every 2 year upgrade cycle would be broken SHOULDN'T surprise anyone. And, given that Apple hasn't been as successful at ANYTHING as they have been with iPhones, it should also surprise no one that their value is now crashing.
Apple IS a one trick pony. And that pony is iPhone. iPod's no longer make a dent in their annual revenue. And while they may be dominating the smart watch market, as I long predicted, the market isn't big enough.
Their tablets aged out of the upgrade cycle INSANELY fast. And their laptops are simply too expensive. Full stop.
Microsoft adapted to their defeat. They shifted their business and they are succeeding in that effort. They still have a massive brand and respect. Especially in the industries where they make the most off of things like Azure and Office 365.
Apple's biggest problem is a simple one. iPhone only ever succeeded because smart phones are subsidized/amortized. But, that only prolonged the end. Those subsidies, deep discounts and financing plans allowed just about anyone to buy the new, latest gadget. But, ask your friends and family the last time they bought a phone outright. None of my family have except myself. And I was able to do so with proceeds left over after selling my house. My wife and I bought phones outright so we could have more control over our contracts and thus control the monthly phone payments. Combined we probably pay less a month than any single member of our extended family.
And, as carrier's increasingly cut out the subsidies and lock phones behind financing plans and lock those financing plans behind increasingly expensive contracts... suddenly, people are finding it increasingly easier to just hold onto their old phone and grandfathered plan than it is upgrade. A new iPhone isn't worth the contract costs anymore unless you're several generations back or your phone is physically broken. And most of my iPhone toting friends are carrying around years old models with half demolished screens. If that doesn't tell you how the luster has been lost, then nothing will.
Apple is a one trick pony. And the pony got out and ran off.
What a lot of people fail to realize are two things; Microsoft was a MUCH larger company than Apple for a MUCH longer period of time. And Microsoft is no longer a one trick pony whereas Apple is.
The first point is pretty simple. Since Apple's meteoric rise, even at the height of the gap in value between Microsoft and Apple, the gap was never all that large. Apple over taking Microsoft on the other hand was the much more impressive feat. When Microsoft was big, they dwarfed Apple several fold, and for well over a decade. So, in terms of percentage growth, Microsoft never had as large a gap to close as Apple had originally when it took that throne.
The other side of it is that Apple dethroning Microsoft in the personal computing space had a positive long term impact on Microsoft. They are about much more than just Windows. In fact, Azure and Office are bigger than Windows now. And Windows still dominates in the PC market. It simply happens to be an ever shrinking market.
Apple on the other hand has never figured out just how to succeed after the iPhone. No matter what else they sell, none of it comes ANYWHERE near iPhone sales. And frankly, phones, technologically are no different from computers. So, the notion that we'd hit a point where the yearly upgrade or every 2 year upgrade cycle would be broken SHOULDN'T surprise anyone. And, given that Apple hasn't been as successful at ANYTHING as they have been with iPhones, it should also surprise no one that their value is now crashing.
Apple IS a one trick pony. And that pony is iPhone. iPod's no longer make a dent in their annual revenue. And while they may be dominating the smart watch market, as I long predicted, the market isn't big enough.
Their tablets aged out of the upgrade cycle INSANELY fast. And their laptops are simply too expensive. Full stop.
Microsoft adapted to their defeat. They shifted their business and they are succeeding in that effort. They still have a massive brand and respect. Especially in the industries where they make the most off of things like Azure and Office 365.
Apple's biggest problem is a simple one. iPhone only ever succeeded because smart phones are subsidized/amortized. But, that only prolonged the end. Those subsidies, deep discounts and financing plans allowed just about anyone to buy the new, latest gadget. But, ask your friends and family the last time they bought a phone outright. None of my family have except myself. And I was able to do so with proceeds left over after selling my house. My wife and I bought phones outright so we could have more control over our contracts and thus control the monthly phone payments. Combined we probably pay less a month than any single member of our extended family.
And, as carrier's increasingly cut out the subsidies and lock phones behind financing plans and lock those financing plans behind increasingly expensive contracts... suddenly, people are finding it increasingly easier to just hold onto their old phone and grandfathered plan than it is upgrade. A new iPhone isn't worth the contract costs anymore unless you're several generations back or your phone is physically broken. And most of my iPhone toting friends are carrying around years old models with half demolished screens. If that doesn't tell you how the luster has been lost, then nothing will.
Apple is a one trick pony. And the pony got out and ran off.
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