Most folks know that Apple is now worth more than Microsoft. Although few realize the huge difference. After years of dominating as the premier “PC” company, Microsoft is now worth only about 2/3 the value of Apple – $224B versus $310B this week (or, said differently, Apple is worth about 50% more than Microsoft.) Apple’s run by Microsoft the last year has been like a rock out of a slingshot. But that’s largely because Apple grew revenues almost 50% in fiscal 2009 and 2010, while Microsoft saw revenue decline 3% in 2009, and only grow 7% in 2010, putting revenues up a net 3% over the 2 years.
What few realize is how much Microsoft spent trying to grow, but failed. A look at 2009 R&D expenditures showed Microsoft outspent all tech competitors in its class – spending 8 times what Apple spent! Source: Silicone Alley Insider Chart of the Day from BusinessInsider.com
What did customers and investors receive for this whopping Microsoft spend? An updated operating system and set of office automation tools to run on existing products. Nothing that created new demand, or incremental sales. On the other hand, for its much lower spending Apple gave investors upgrades to iPods, the iPhone and the operating system for the later released iPad.
Simply put, Microsoft opened the check book and spent like crazy in its effort to defend its historical PC products business. And the cost was more than just dollars. That “focus” cost Microsoft its position in other growth markets; like smartphones. Few recall that as recently as 2008 Microsoft was the leading smartphone platform:
In order to defend its “core” business, Microsoft under-invested in smartphones and over-invested in its historical personal computing products. Now, PC growth has stalled as people are switching to new products based on cloud computing – like smartphones and tablets.
Apple is cleaning up with its investments, while Microsoft is hoping it can catch up by enticing its former executive, now the CEO at Nokia, to revamp their line using the Windows Phone 7 operating system. Good luck, because the market is already way, way out front with Apple and Android products
That was the past. What we’d like to know is whether Apple will keep growing like crazy, and whether Microsoft will do what’s necessary to grow as well. And that’s where some recent announcements point out that Apple, quite simply, is better managed. So it will grow, and Microsoft won’t.
ZDNet reported on the “changing of the guard” at Apple in March. Due to its different investment approach, iOS is now bigger than the MacOS at Apple. The “legacy” product – that made Apple into a famous company in the 1980s – has been eclipsed by the new product. And the old technology leader is graciously moving on to do research in a scientific community, while Apple pours its resources into developing products for the future.
Don’t forget, the Lisa was a product that Steve Jobs personally took to market – yet didn’t succeed. He personally remained involved, converting Lisa into the wildly successful 1980s Mac (see AOL Small Business story on history of Lisa and Mac.) You gotta love it when that CEO, and his leadership team and all the managers, can transition their loyalty and put resources into the future product line in order to keep growing! MacOS is not dead, nor is it going to be devoid of resources. But the future of Apple lies in growing the new platform, and that is where the best talent and dollars are being spent.
Comparatively, Microsoft announced this week it was changing its Chief Marketing Officer (SeattlePI.com.) And, not surprisingly, they did NOT select someone with smartphone, tablet or even gaming expertise for the role. Instead of identifying a leader who is deep into understanding the growth markets, Microsoft appointed as the next CMO the fellow who had been responsible for selling – wait – guess – Office, Sharepoint, Exchange and the other historical, legacy Microsoft products. Those products which have had no growth – only maintenance sales. Instead of reaching into the future for its leadership, CEO Ballmer once again reached into the past.
If you ever wonder why Apple is worth so much more to investors than Microsoft, just think about this moment in the marketplace. Apple is investing its best talent and resources into new products in new markets that are demonstrating growth. Microsoft, struggling with its growth, keeps placing “old guard” leaders into top positions, attempting to defend the historical business – hoping to recapture the old glory.
Too bad the market has already shifted and doesn’t care what Microsoft thinks.
When it comes to networking, cloud computing and the future of how we all are going to be productive Microsoft just isn’t in the game. And its attempt to have a fast falling Nokia save it by distributing second rate mobile products that are late to market while iPhones and Androids keep extending their lead won’t make Microsoft great again. Especially when the leadership keeps wanting, in its heart, to sell more PCs.
Apple is just better managed, because it keeps looking to the future, while Microsoft simply can’t seem to get over its past. Good thing Steve Ballmer is already rich. Too bad all the Microsoft employees aren’t.
