Apple’s Strength Is Its Brand

Microsoft's Prince of Darkness

Steve Ballmer describes what he'd like to do to Apple

You may have noticed that a couple of days ago, on 27 May, Apple’s market capitalisation exceeded Microsoft’s on the Nasdaq exchange in New York.

Microsoft was valued at $219.1bn, whilst Apple was valued at $244.05bn. In the days when John Sculley was running Apple, and when Steve Jobs was wondering why he’d been kicked out, this would have been unimaginable.

Steve Ballmer, Microsoft’s CEO, who was in India at the time these valuations were published, said, “I will make more profits, and certainly there is no technology company in the planet which is as profitable as we are.”

He’s probably right. Indeed, according to The Independent, “Microsoft’s revenues of $58bn last year were 59% higher than Apple’s $36.5bn,” so it’s not as if Microsoft is struggling for its life.

So why is Apple’s stock preferred to Microsoft’s stock?

In former years, IBM, Microsoft and Apple, plus a bunch of other IT companies all competed head-on. They included DEC, Univac, Texas Instruments, Compaq, Honeywell, and Burroughs. In those days, computers were moving slowly from being big calculating machines to being something useful at work which did not  require the end-user to have special training. Apple was loved with a fierce intensity by its small band of users because it was a bit different, with an easy user interface and a different ethos. The battles of the 1980s, though, have not been forgotten.

But the truth is that Microsoft and Apple don’t really compete anymore.

If you ask end-users what they think of the two companies, it’s quite clear that they think Microsoft is in software and Apple is in elegant design. If you look at their respective websites, you’ll see why. Click  here and then here to have a look.

Their markets are very different, too. Microsoft makes most of its money out of corporate licences. Apple makes its money by selling to you and me, end-users. The company still sells computers, but sales of new products, such as the iPod, is where its future lies. The recent launch of the iPad shows this clearly. Apple’s future depends upon strong ideas, elegant design and production at the right price. Whilst its software is central to its success, end-users buy its products because they satisfy a number of needs, including the desire to own part of a strong brand.

And that really is the difference.

Apple’s market capitalisation is partly dependent on its products. But it is future expectations of the power of Apple’s brand that encourages more people to buy its stock than Microsoft’s stock. If you compare the two companies as brands, Apple clearly is the stronger.