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Apple Now Much Bigger than Microsoft -- and Google's Gaining

The world turned upside-down some months ago when Apple became bigger than Microsoft, thereby rendering obsolete -- or, at least, purely historical -- Bill Gates' declaration to Steve Jobs in the epic film Pirates of Silicon Valley that, "I got the loot!" It's about 7:40 here if you want to see it again.

Billions of dollars in sales of iPhones, iPads and just plain ol' Macs later, Apple isn't just bigger than Microsoft -- it's way bigger. In fact, it's $100 billion in market cap larger than any other company in the technology industry. (Yes, that's billion with a "b.") That's some pwnage, as we understand the kids call it these days, right there.

But look out, Microsoft. Your grip on the No. 2 spot is slipping. Rushing up behind you is Google, which is within striking distance of taking the runner-up spot. Apple and Google are growing explosively, and Microsoft is, well, not. So, what does all of this mean for the former king of the software hill?

We at RCPU actually interpret it as mostly good news. Microsoft's slow growth is bad news for partners, but its loss of the top spot in the technology industry (by a huge margin) shouldn't really matter that much. In fact, as we've said here before, it should encourage Microsoft to stop chasing Apple in the consumer market and focus instead on holding its enterprise ground -- which is where partners derive most of their revenues, anyway.

In the Pirates of Silicon Valley clip, somebody who works for Apple tries to convince Jobs that it's Microsoft, not IBM, that is the company's mortal enemy. Microsoft could take a similar lesson here: It's Google, not Apple, that Redmond should watch out for. Sure, the iPad is cutting into PC sales. But Google's cloud-based business offerings cut to the very core of Microsoft's most profitable and stable enterprise offerings.

And we're not talking about search here, either. Bing is actually making inroads against Google, but Microsoft has to focus on protecting its enterprise market. Azure and the cloud strategy will be key to that, and so will making sure physical servers stay relevant in an era of expanding cloud infrastructure. All of that means competing against Google, not Apple.

Bill Gates, to his immense credit, is busy giving his loot away these days. Back in the rat race, it's Steve Jobs, not Steve Ballmer, who has it now. Microsoft should just let that go, as difficult as that will be at a company that is used to ruling the roost. Better to hang on to second place than to slip behind another competitor that could do some serious damage.

What's your take on Microsoft's standing in the software industry? Send it to lpender@rcpmag.com.

Posted by Lee Pender on 02/16/2011 at 1:23 PM


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Reader Comments:

Thu, Feb 17, 2011 Evan Northern California

I agree with Mark, market value is just an opinion. Although Microsoft and Apple have similar revenue, Microsoft is more profitable, has more assets, and a lot more employees.

Microsoft's stock has long been undervalued because investors don't see much growth potential for the company. Apple stock, on the other hand, trades at a premium - just like their products.

Still, I agree with the article that Google is the real threat. When my company went shopping for smart phones, we didn't even consider WP7. We went for Droids.

Thu, Feb 17, 2011 Mark Boston, MA

High market valuation means nothing. It's just an opinion of the general public about a company. Think back to all those companies in the dot com bubble that were worth billions one day and were worth nothing the other.

Wed, Feb 16, 2011 Tom

MS is making a lot of good progress these days with things like Win7, WP7, Azure, the Zune ecosystem (hope they don't abandon the Zune branding), XBOX, dev tools and so on. But the one place where I think they need serious improvement is their Windows Live/Hotmail UX. It really seems to be a huge complicated mess of an interface and has now moved into the realm of 'Live Mesh Beta' by replacing it with 'Windows Live Mesh'. 'Live Mesh Beta' is a fantastic product loved by almost everyone who uses it, but is scheduled for decommissioning at the end of Mar 2011 - and I don't think the replacement holds a candle to it's Beta predecessor. Anyway here is a perfect opportunity to bolster MS's image by rearchitecting the Hotmail UX which touches so many. Let's make it cool, give it real themes, make it look like an RPG game or something, I dunno. But most importantly make it easy to navigate and locate functionality in the proper places.

Wed, Feb 16, 2011 Kevin Fream Tulsa, OK

Apple is the new Starbucks. High price for comparatively limited features will not hold in the next few years versus a sea of Google and Microsoft/Nokia devices. Where is the recurring revenue model and what will happen when Jobs steps away or even if there is a serious virus (gasp) for iPhone?

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