Apple Vs Microsoft. A Face-off for the Long Run
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A face-off between some of the giants in Silicon Valley is inevitable! It becomes more intriguing with this face-off between Microsoft and Apple; both do have a long history of bitter rivalry. That being said I personally feel that Microsoft (NASDAQ: MSFT) is fighting a tough battle purely because of the fact that it’s up against Apple (NASDAQ: AAPL) , a company that has been considered as the market benchmark for all products they deal with.
As per the present market trend, portability is the name of the business and Microsoft is sadly trailing behind Apple by light years; this is solely because of the fact that Microsoft failed to enter the tablet and phone market at the right time. So why are the shares for Microsoft and Nokia still soaring high you may ask?
The answer for the same is pretty simple. Microsoft as a company has the ability to execute! As a result of which a whole array of catalysts will account to a higher stock value. But the million dollar question is will Microsoft shares keep growing? For quite sometime maybe. As of now statistics show that Microsoft still owns 92% of the world market when it comes to PC sales; that figure proves domination but when you know that this figure used to be 98% percent six years ago, we know that Microsoft is slowly and steadily loosing its ground in the PC sector. And this reduction in the market share represents the steady rise of the Mac line with its Mac desktop, Macbook Air and Macbook Pro.
An area that Microsoft is failing miserably is the smart phone market; here Microsoft only has a market share of less than 2%, while Apple owns about 33.2% percent and with the Apple-Samsung verdict, Apple's market share could increase considerably.
According to Forbes, by the end of the year 2015, Apple shares will be priced at around $1650. Here are the facts to back the same:
Apple has a wider range of products for customer attraction; namely: Mac, iPad, iPhone, iTunes.
Mac: A hugely underrated and ignored product from Apple, this product has grown astonishingly faster than the whole of the PC industry. Their Y/Y growth in the last quarter is 26% percent as opposed to the 22% in the last financial year. At this growth rate, we are looking at a 55 million units sales for Mac by the year 2015.
iPad: This is one product from which Apple creates 20% of its total revenue. This is an amazing feat considering the fact that Apple created this category from scratch 2 years ago.
iTunes: Another revenue generating avenue for Apple. This resulted in about $2 billion net sales in the first quarter of 2012. According to Forbes, by 2015 the iTunes is said to rake in about $32 billion; of course this would be possible only via the sale of iPads and iPhones.
Figures according to StatCounter show that Microsoft will crush Blackberry maker Research In Motion by November. What happens to Microsoft and Nokia (NYSE: NOK) will hugely depend on the performance of their Windows 8 phones. But if Windows 8 phones perform similar to Windows 7 phones, I dont think there would be any light at the end of Nokia's tunnel!
There are a lot of reasons why market analysts say what they say! And believe me you seriously don’t have to be a market guru to come to this conclusion.
The main reason is the fact that Apple has a superior profit structure when compared to all its competitors. Apple makes profits from both the hardware and software side of the product, while Microsoft makes its profits solely from the operating system alone. To make this point a little more clearer, Apple clsaims about 70-75% profits of the whole cell phone industry while only owning about 7% of the global market share. This clearly shows that Apple has an upper hand when it comes to profit building.
Wall that is bound to block Microsoft
A major reason that could result in Microsoft’s downfall will be the fact that it doesn’t have a lot of juice under its hood. It just doesn’t have that number of features which will propel Microsoft to the top. All it has is Microsoft Office and Xbox (unfortunately all Xbox is doing is providing Microsoft a meager living room success) ; the reason why I call this an important feature is because of the fact that this is an app that every office dweller's work depends on. This is the only leverage Microsoft has over rivals Apple and Google. The bigger question that will taunt even the greatest marketing gurus is will this feature alone be all that Microsoft needs to propel itself to the top?
All of this suggests that Microsoft can’t satisfy a feature savvy market like ours! Surely if Google had released the Android platform as a paid platform, Microsoft would have been a real threat for Google. But then again, this isn’t the case. When comparing Microsoft with Apple, Microsoft’s bug filled platform simply doesn’t stand a chance when it’s up against the near-perfect iOS. If you still feel that Windows will take over the mobile market with the release of Windows 8, here’s a reality check for you!
I own a Nokia Lumia which runs on Windows phone 7.5 software. It was pretty impressive but what really brings down Windows is its hopeless Marketplace. I would have to say that Microsoft should be ashamed of such an app store simply because it doesn’t have enough relevant apps.
I did a search for a music app called “Pandora” in the Windows app store and guess what my results were? It gave me a huge list of knock-off apps which go by the name “Pandoras” and “Pandora’s wallet” (of course, these are only a few from the results) all of which are totally unrelated. I guess the problem with Microsoft is that they are trying to make up for the quality and relevance of apps they don’t have with a whole list of junk.
The Apple app store has more that 550 thousand apps while Windows has about 100 thousand apps of which quite a few are simply fake apps with no particular use. Apps are what software suites were 10 years ago; if Windows cannot deliver here, their chances of creating a dent on the smart phone market is slim.
Microsoft’s chance of standing on top of Apple will largely depend on the performance of Windows 8. So do you still feel that Microsoft still has what it takes to get on top of Apple?
ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.