Apple takes over Microsoft as world’s biggest technology company

Last week, Apple completed its epic comeback by overtaking Microsoft as the world’s biggest technology company. It’s the first time Apple has been bigger than Microsoft since December 1989.

And the milestone happened to coincide with the global launch of the company’s latest gadget, the iPad.

The takeover

On Wednesday, Microsoft’s share price fell 4% to $25, after an 18% fall throughout May. This put Microsoft’s total value at $219 billion compared to Apple at US$222 billion.

It’s a phenomenal comeback for Apple considering they were valued at $5 billion in 2003 against Microsoft’s $400 billion in 2000.

Microsoft still leads the way in profits – $14.6 billion last year versus Apple’s $5.7 billion. And they still earn 59% more revenue.

In fact, the reason Microsoft’s shares fell on Wednesday wasn’t really anything to do with substance, but more in response to a speech made by Microsoft CEO Steve Ballmer saying the effects of the European debt crisis will spread.

Ballmer’s comments were relating to the economy as a whole – not just Microsoft.

Nevertheless, the fundamental shift in fortunes cannot be denied. The market obviously thinks future profits will favour Apple, who seems to be leading the race in innovative new products.

But while Microsoft seems content with improving existing products, they are by no means down and out.

Apple v Microsoft

The two companies have been fierce and friendly rivals since they were both founded in 1975.

Apple sued Microsoft in 1988 for supposedly copying their idea of a graphical user interface – the mouse-controlled screen concept we use today.

However, the court ruled that Apple could not protect such an idea, and that they and Microsoft had actually taken the original idea from Xerox (who had left it too late to sue).

For the most part, the relationship has been clearly dominated by Bill Gates’ Microsoft, which sold its Windows operating system to the majority of computer users around the world – including the lucrative business market.

Meanwhile, Apple’s operating system was almost entirely incompatible with Microsoft’s, leaving them relegated to the sidelines.

After Apple founder Steve Jobs was pushed out of his own company in 1985, he went on to build a new operating system called NeXT, which he later sold to Apple in 1996.

He then returned to Apple as CEO in 1997 and quickly struck an agreement with Microsoft to develop a new version of Office for Apple’s Mac computers. In return Microsoft could buy US$150 million worth of Apple shares.

This allowed Apple to become serious contenders again, and provided them with much-needed cash after nearly going out of business.

It also left observers confused about why Microsoft would help out its rival who had earlier sued it for copyright infringement.

Some speculate that Microsoft planned to use the agreement as a moral defence in their lawsuit case the following year. In this case, the US government had accused them of uncompetitive behaviour in promoting Internet Explorer (the case was settled out of court).

In any case, with Jobs back at the helm, and the new software-compatible iMac nibbling away at market share, Apple’s rise had begun.

The new era

It was the series of innovative personal products designed by Apple’s Jonathan Ive that really catapulted the company to become equals again with Microsoft.

The first was the iconic iPod and iTunes online music store. The second was the iPhone – one of the world’s most popular mobile phones.

Ive’s third big invention is Apple’s iPad, a tablet-type device that’s a cross between a phone, a book and a computer.

This was launched internationally on Friday – a delayed date after heavy demand in the United States saw 1 million iPads sold in the first month.

Now Jobs hopes to unveil the latest version of their iPhone at an annual developer’s conference on June 7.

Despite being overshadowed by Apple’s creativity, Microsoft is certainly not resting on its laurels. It spends about $10 billion a year on research and development, more than any other company in the world.

This is largely in the growing area of cloud computing, the field of internet-based information (such as Hotmail and Facebook) as opposed to computer-based information like Word and Outlook.

In response to last week’s result, Microsoft chief Steve Ballmer said that while Apple and Google are good competitors, Microsoft was good as well.

He also pointed out that no tech company on the planet is as profitable as they are, and that 94 times out of 100 someone still picks a Windows computer.

Nevertheless, according to the stock market Apple is king. And with Google charging ahead and Microsoft determined to prove itself, the technology race stands no chance of cooling down.

By The Casual Truth

Photo – Steve Jobs with the Apple iPad.