Devoted Mac fans probably expected it all along, but Apple’s market capitalization finally exceeded that of Microsoft as the largest technology firm — capping one of the most successful turnarounds in recent business history.
Redmond, Wash.-based Microsoft (NASDAQ: MSFT) closed Wednesday with a stock price of $25.01 per share and a market capitalization of $219.18 billion, while Apple (NASDAQ: AAPL) closed with a share price of $244.11 and a market cap of $222.12 billion.
That’s a far cry from 1997 when Microsoft’s then-CEO and chairman Bill Gates stepped in to help out with a $150 million investment in Cupertino, Calif.-based Apple, which at the time was still on shaky financial ground. Apple had for years been facing sliding sales and stock price thanks in part to flops like the Newton and lackluster interest in its PCs, which were pricier than competing Windows-based offerings. Those missteps cut into its bottom line, and Apple went through several changes at the top before welcoming back co-founder Steve Jobs to lead the company in 1997.
Microsoft, meanwhile, continued to rake in profits from sales of its software — chiefly the Windows operating system and its Office productivity suite and related packages — but struggled to play catch-up in areas like digital music and mobility, where Apple has since emerged as a dominant force.
That Apple had to reach out to Microsoft for a helping hand in 1997 may make this week’s triumph all the more sweet for Mac fans. The news also means that Apple is the second-largest company in the U.S., trailing Exxon Mobile (NYSE: XON), which closed Wednesday with a capitalization of some $278.64 billion.
Apple vs. Microsoft enters a new chapter
Of course, the financial underpinnings of both of the technology giants are very different: Apple’s revenues come largely from sales of consumer-oriented products, including Macs, iPods, iPhones, and the iPad, in addition to its iTunes online music store.
Microsoft, by comparison, makes most of its money on Windows and the Office productivity applications suite, along with server products and other technologies aimed at business users.
Although Microsoft is moving as quickly as it can to embrace consumer products with its Zune music player, and the Kin smartphone and Windows Phone 7 OS, it has enjoyed the most success in penetrating the consumer space to date with its Xbox 360 gaming console business.
Microsoft hopes to broaden its consumer market base later this year when it officially launches Windows Phone 7 as well as what it hope will be a breakthrough product, its “Project Natal” device, which through the use of 3D camera technology converts the player’s body into the game controller. Windows Phone 7 is also seen as having potential to revitalize Microsoft’s strength in enterprise mobility, which is dominated by the likes of Research In Motion’s BlackBerry and, increasingly, the Apple iPhone.
The importance of the consumer and mobility spaces where Apple has emerged as a powerhouse certainly hasn’t been lost on Microsoft, which on Tuesday announced it is reorganizing its Entertainment and Devices Divisionwith the retirement of division president Robbie Bach, who will leave the company this fall.