Today the market capitalization of Apple moved ahead of the market cap of Microsoft, making Apple the second biggest company in the U.S. (after Exxon/Mobil, which is #1). Are you an Apple fanatic? Do you want to know what "market cap" means?
Ooze yourself under the fold to find out more.
I did a search and I couldn’t find anyone on DKos who has diaried this, so I thought maybe I’d write something. Because a few people might care about the market cap.
What’s a Market Cap?
Every company that has gone public has a certain number of stock shares outstanding. And every stock has a current price on the stock market. Multiply those two numbers: (Number of shares) times (current price) = market capitalization, or "market cap" for short. Theoretically, it’s the price you’d have to pay to buy 100% of the company, assuming that 100% of stockholders would sell the shares they own for the current price. It’s one way to figure out the value of a company.
Example: Let’s say "Friendly Joe’s Store" has issued a million shares of stock. And the stock market price is $10. A million shares multiplied by ten bucks is ten million bucks. The market capitalization is ten million dollars. Theoretically, that’s what the company is worth.
In reality, if you wanted to take over a company, you’d be expected to offer a premium (10% extra, or 20%, or whatever) to convince stockholders to sell. And sometimes, to take over a company you don’t actually pay cash, you swap stock. And, actually, you don’t need 100% of the stock, 50% plus one is enough to get control of a company. So it gets complicated. And there are golden parachutes and poison pills and various other crappy things, like demanding a seat on the board of directors.
But the market capitalization is a way to get a number that tells you how much a company is valued.
Apple and Microsoft
I first read about this in the Seattle Times, but when I did a Google search, I found this HuffPost story: Apple Dethrones Microsoft As World's Biggest Tech Company.
Here’s an excerpt:
On Wednesday, Apple Inc.'s shares slipped $1.11 to close at $244.11, making its market cap about $222 billion.
But Microsoft Corp.'s stock fell $1.06, or 4.1 percent, to close at $25.01, for market cap of about $219 billion.
The only U.S. business with a higher market value is Exxon Mobil Corp. The oil company's market cap is about $279 billion, based on Wednesday's closing price of $59.31.
Tomorrow, if the price of Microsoft goes up a little and if Apple goes down a little, Microsoft might regain its place as the second biggest company by market cap. It doesn’t matter all that much. They could trade places several times over the next few years. And Apple has a P/E ratio that’s double Microsoft’s.
Hardware vs. Software
Apple started out as a computer hardware company. They sold Apple IIs and Macs (and the ill-fated Lisa). Microsoft started out as a software company (operating systems and Word and Excel and programming languages). But both companies expanded into the other kind of ware. Apple is now selling lots of software (songs) for iPods. Microsoft is now selling Xbox game machines. And they’re both doing a lot of internet stuff (cloudware).
And who knows what will happen with Google or Amazon or Facebook or some other company? Three years from now, maybe one of them will have a higher market cap.
Today’s Shakeup at Microsoft
Today I saw another article in the Seattle Times: Game-changer at Microsoft: Bach, Allard leaving. Here’s an excerpt:
Two Microsoft veterans, the fathers of Microsoft's Xbox video-game business, are leaving. Robbie Bach, the president of the Entertainment and Devices division and a 22-year employee, will retire in the fall. J Allard, senior vice president for interactive entertainment and a 19-year veteran, is leaving his job but will continue to consult for CEO Steve Ballmer as a strategic adviser.
Microsoft is making money from Xbox, but they’re far behind Apple on things like music hardware players (Apple’s iPod) and hardware tablets/pads (Apple’s iPad) and mobile phones (Apple’s iPhone). Microsoft needs to catch up.
Full Disclosure
I live in Seattle and (Jesus, has it been 20 years?) about 20 years ago, I worked for Microsoft, writing software documentation about the C language and QuickC and C++ and MASM (Microsoft Assembly Language). This was in the old days when you got the software on 20 floppy disks (which took many hours to install) with hundreds of pages of a paper manual, with ink printed on paper. And the major concern at Microsoft at the time was COGS (cost of goods sold). All those disks! All those pages! We have to reduce the COGS!
Also, I have a brother in law who is an Apple fanatic. Sometimes he preaches to me like an evangelical Christian about the wonders of Apple hardware and software. Or sometimes he just makes sarcastic comments. My brain translates his words thusly: "Why would you buy a Chevy, when you can buy an overpriced Jaguar, which is clearly superior?" Uh, because a Chevy (PC) isn’t as expensive as a Jaguar (Mac)? And maybe because if something breaks, it will be cheaper to fix?
No doubt I’ll start some arguments with these comments. And don’t get me started on Unix. Or Linux. Or whatever.