Apple overtaking Microsoft in cash, how Steve Jobs 'smoked' competition with iTunes
Look at that chart up there - it shows the total cash and short term investments of tech companies and comes to us from the Silicon Valley Insider. Isn’t it interesting to see the company people rejected as a spent force in the mid-to-late 90’s (Apple) now has more cash in hand than Google or Intel and is rapidly moving to eclipse Microsoft.
Only another half billion dollars or so and Apple will be a bigger company by cash on hand than Microsoft.
How did we get here? There’s a lot been said on reports that Microsoft’s dated competitive corporate infrastructure and its focus on internal competition is partly to blame.
We also like the look of this Groklaw report here, which points out that all the way down the line since Steve Jobs return to Apple, Microsoft execs felt they had been “smoked”.
The report publishes a whole host of internal Microsoft emails from 2003 when the company reeled in shock at Apple’s launch of iTunes.
Here’s what Bill Gates really had to say about Apple’s iTunes Store in 2003.
"Steve Jobs ability to focus in on a few things that count, get people who get user interface right and market things as revolutionary are amazing things.
"This time somehow he has applied his talents in getting a better Licensing deal than anyone else has gotten for music.
"This is very strange to me. The music companies own operations offer a service that is truly unfriendly to the user and has been reviewed that way consistently.”
He added in a somewhat visionary moment, “I am not saying this strangeness means we messed up - at least if we did so did Real and Pressplay and Musicnet and basically everyone else.” (Editor’s note, yep. so they did.)
Jim Allchin’s response is charming:
“1. How did they get the music companies to go along?
2. We were smoked.
jim”
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Comments (33)
Deja vu--I've seen this before but I can't remember where.
To answer my own question, I saw this on Cult of the Mac.
Apple's cash reserve seem to be rising faster than Microsoft's over the last few quarters, but Windows 7 sales are just kicking in so Microsoft would seem to have an advantage in the long run. Every PC user in the world will be forced to update older Windows PCs to Windows 7 including businesses having thousands of licenses, so Microsoft has a huge void to fill with Windows 7 sales. All Apple has is hope that consumers will continue to buy iPhones in quantity and possibly purchase millions of iPads this year. Analysts still talk about the death of the iPod, so that revenue might be coming to an end for Apple.
Microsoft still has more reserve cash than Apple despite the fact that Vista was pretty much a total disaster for two years and now there is almost the complete collapse of Windows Mobile. Apple has been on a tear for the last two years with increased Mac and iPhone sales and it still is a bit behind Microsoft in reserve cash. Microsoft is just so huge that even having bad years hardly makes a difference in MS's market cap. Microsoft's market cap is way larger than Apple's and it doesn't appear that either Apple or Google are gaining any ground at all.
Justify it however you want MS Fanboy, but ultimately MS is in big trouble and not even another good Balmer rant will save the day or keep people interested.
He has some valid points, even if I'm not buying them. MSFT current numbers and its potential are impressive, but that's all they have.
I like Daring Fireball's take that MSFT is like Detroit (GM, Ford, etc.) that became a slow moving, slowly-dieing behemoth. Sure, it takes decades for them to die, but they've been long, slow and painful for all concerned.
They've lost the mindspace and haven't defined "what comes next" for some time.
If you've worked there (and I have) it's the equivalent of a small country. They have a massive bureaucracy for servicing the current business, and like all bureaucracies, it really serves its own existence.
They're in a slow eclipse and decline. Not sure where I read it (recently) but gutting the anti-trust decision that they managed was the worst thing for them -- they should have been busted up into 2 or 5 different companies. They likely would have become far more nimble and innovative as a result.
Microsoft is selling very few Win7 copies to people that already own XP and Vista.
And XP will remain in active support until 2014, unless they extend it - which seems likely, as XP is still sold "new" on Netbooks.
Let Microsoft their Win 7-Cash.
As before, the are too late in a new segment. They were too late for the internt,the MP3-Players, the smartphones, the search engines and so on.And they will be too late in offering a sleek operating system for MIDs.
How can a company with so much power (cash) be so bad in developing new products in terms of quality and time?
Everybody is talking about the iPhone and Android and RIM. But what do you think, companies like Motorola or HTC will buil in their new handsets? An OS they have to pay for (like Win 7 mobile)?
I don´t think so.
Of course, Android will gain market share over the next years but M$ will become meaningless in this sector.
Apple has a chance to become the new marketleader, as in MP3-players, if they learn to play their cards in the right way.
This might continue few more years untill everyone discovers about mac. A lot of people are already switching to mac since they found mac thru iPod and iPhone. Then the growth for mac would be exponential. There are two strong reasons the buy Macs. Their sexy hardware. Meaning MacBooks, and MacbookPros and iMac. And second Mac OS X.
Apple is continuously innovating in hardware. Eventually they will get the things right so that they can offer their machines at a low price and then competition will not be able to keep up. Just like they did with iPad, they are selling it so cheap that rest of the netbook and e-book reader market gonna simple die. Just as it happened to MP3 players. Apple has no ambition of having huge market share or huge cash pile. They are fully concentrating on innovation. And that one thing will always keep them ahead of the game.
Apple success with the iTunes and iPod is the turning point of their fortune in the early 2000. Now, the iPhone/iPad and the App Store will be Apple next decade of cash generator.....with so much developer flocking to learn and develop iPhone OS which is somehow related to Mac OSX..be expect to see much more great apps for iPhone and Mac OSX. I also suspect that Apple will be competing with XBOX / PS3 and Nintendo for the gaming market with their new launch of Apple TV that support gaming and app store as well in the near future.
This is a golden age where Apple will outgrew Microsoft to become the next corporate giant in the US and the world.
People may be surprised what MS will be bringing "to the table," with their new WinMo 7 OS, to be introduced at MWC in Barcelona, on Feb 15th. I have only heard the "rumors," that it will have a sleek Zune GUI, and really optimized kernel, that will only run on very "high spec'd hardware," probably like Tegra 2 SoC,dual-core Cortex A9, or Texas Instraments, OMAP3,4, or the Scorpion-based CortexA9, Qualcomm Snapdragon, at 1GHz. Redmond, may have something that may enlighten some people.
Microsoft's big handset partners (Motorola, Samsung, LG, HTC, SonyEriccson, etc) have been moving at full speed to the much less expensive and much more capable Android platform.
Let's be real: Microsoft is on life support within the mobile market. The key players are iPhone, RIM and Android, with tiny Palm holding on with a good device (but enough?)
The only way for Microsoft to compete with WinMob7 is to go into the handset business, because few if any partners will be willing to follow WinMob7 now.
I'd expect Microsoft's next announcement to be that they're going to purchase a handset business like Palm or Nokia.
@iphonerulez,
Apple broke revenue and earnings records every Q during the worst recession our generation has ever seen. All while being relatively a "consumer" electronics company. Furthermore, Apple has an average growth rate 3 times the industry average. Analysts consistently called for a retraction in Apple's growth rate during that period, yet it never materialized.
I might add, Apple estimates 50% of all traffic to the Apple Stores are PC converts.
All Apple needs to do now is get into Mobile ads and their revenue could go up by 30%.
Hmmm, and where do this data originate? I doubt the veracity of this graph, except, of course, if one believes that some dweeb pulling numbers from the dark recesses of his ass constitutes uncompromised truth. A little effort to reference these figures would go along way to easing my skepticism.
isn't this all very public knowledge as they are public companies? what is there to be skeptical about?
Anyone can say the data are public knowledge, but that doesn't prove the data are real. If the data are public knowledge then providing sources to these data should be reasonable. Of course, if independent thought and analysis beyond your comprehension then believe anything you wish.
In other words, since YOU don't believe it, it must not be true?
give me a break...
A little corroboration goes a long way.
So, if YOU believe it, it MUST be true?
Isn't this public knowledge? why do you have reason to be skeptical?
Can't you read?
The source is Capital IQ, it says so on the graph.
Where does Capital IQ obtain its data?
Where can persons obtain these same data?
Are the methods of analysis employed by Capital IQ sound sound and valid?
What assumptions, if any, did Capital IQ implement with its analyses?
If assumptions were implemented how do there assumptions affect the analyses?
Are there other independent sources that confirm Capital IQ's report?
Well, do you have these answers, gullible one?
"Where does Capital IQ obtain its data?"
Publicly available information, since these are publicly traded companies.
"Where can persons obtain these same data?"
Company filings. You may have to pay to access these. (We do in the UK)
"Are the methods of analysis employed by Capital IQ sound sound and valid?"
Ask them for details on their analysis if you want. That's beyond the scope of this article.
"What assumptions, if any, did Capital IQ implement with its analyses?"
"If assumptions were implemented how do there assumptions affect the analyses?"
Who suggested they assumed anything at all?
"Are there other independent sources that confirm Capital IQ's report?"
Given Capital IQ source their information from publicly available company filings, then yes.
Although given your paranoia, you'll probably doubt the integrity of that information, too.
Repeating a ludicrous argument does not make it less illogical or illusory. If you can't or won't validate the methods of analysis then the conclusions made by Capital IQ (or anyone) are suspect. Since you have provided no other independent analysis that confirms or corroborates Capital IQ's report you have failed to support your own beliefs. Your opinion is based on one report from one group - period.
All analyses include assumptions. The questions is, "Are the assumptions testable." An honest researcher knows the inherent weaknesses of his/her study and prioritizes, explains them, and tests them. All analyses have limitations. An honest researcher is intelligent enough to know these limitations and discuss them. Are you so blind to recent the recent AGW that you continue to believe anything regardless of the strength of the evidence? You are a poor, pathetic, gullible fool.
The info is in all the companies' SEC quarterly statements. Geez. Capital IQ doesn't have to do any analysis at all. They just input the figures into an Excel spreadsheet.
You're the one with the ludicrous argument.
The onus is on *you* to disprove their "analysis", since you feel so strongly that it's inaccurate, not the other way round.
What is it about the graph that appears to be wrong to you?
In any case, your argument falls down at the first hurdle, seeing as no analysis has actually taken place here. The graph shows data sourced from the public filings from public traded companies and this information is in the public domain.
If you wish to disprove this graph, then go grab copies of that public data and show it to be false.
Until you can find such evidence to support your claim, you have no argument.
What strikes me is the comment: "This is very strange to me. The music companies own operations offer a service that is truly unfriendly to the user and has been reviewed that way consistently.”
The next major industry for Apple to sort out, now that they've made their books/print media move is TV. All TV recording/DVR/etc systems look so dated when compared to modern computer interfaces.
I'd be worried if I was an incumbent in that business (Sky I'm looking at you).
Apple TV was a false start imo.
Just because a company doesn't have a lot of liquidity doesn't mean that they are fiscally below other companies that have more short term assets. Microsoft may have LOTS of long term assets that could greatly exceed Apple. That information easily could switch how people view this graph...
Awesome, but please Apple, don't rest on your laurels. Can you do this for me ASAP on the iPhone (OS) to turn a wonderful device into a more efficient and perfect device?
1. Swipe to delete calendar and other (unwanted) items - as per the way emails are deleted?
2. Multi-tasking, so I can listen to streaming radio whilst doing other things. (I know, you want us to spend spend spend on iTunes and not use radio, but no need to be greedy. You have enough cash - as per this article.)
3. HOT: A way to disable or manually override the screen rotate. It always rotates the wrong way when one is laying down - such as in bed! So annoying!
Of course, there are various hardware wants too, but this is just software that could be released for current devices.
once again Jobs is aiming to do exactly the same thing with the print media industry as he did with the music industry. even the name - iBooks - could not be a more obvious parallel with iTunes. nor the iPad a more obvious match of iPod. like, duh, everybody.
and it may work. Google is starving print media to death by paying nothing to them for their work and then selling it to the world (the ads i mean), leaving only crumbs for them. this isn't "evil"? Jobs was in NYC this week personally offering a totally different approach (just like i'm sure he went to LA to woo the music industry for iTunes at the beginning).
once again, everyone else is gonna get "smoked."
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