In many people’s memory, Microsoft has always had the rusty smell of the PC era. But in the era of mobile Internet, Microsoft once again reached its peak and pulled Apple off the horse.From the late 1990s to the beginning of this century, Microsoft once occupied the throne of the world‘s most valuable company. At that time, the two pillars of Microsoft’s business were the Windows operating system and the Office office suite. In December 1999, the highest market value of Microsoft during the Internet bubble reached 614.7 billion US dollars.
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However, Microsoft’s glory has come to an end with the decline of the PC era, and it will be on the top of the world again, 20 years later.
According to data from Yahoo Finance, as of the close of US stocks on Friday local time, Microsoft’s stock price rose 2.24%, and its market value reached US$2.49 trillion. At the same time, Apple’s stock price fell 1.82%, and its market value fell to $2.48 trillion. Microsoft drove Apple from the throne of the world‘s highest market value.
Market value trends of Microsoft and Apple
In the past few years, Microsoft and Apple have taken turns to “take the house.” In May 2020, Microsoft once won the first place in market value. But three months later, Apple’s market value reached $2 trillion for the first time, regaining this crown. In June of this year, Microsoft joined Apple’s 2 trillion dollar club.
The success of Microsoft cloud computing
During the epidemic, companies around the world continued to move to work from home, and schools began to teach remotely. This has benefited many technology giants, including Microsoft. At the same time, Microsoft’s embrace of cloud computing is also a key driver of the company’s rising profits.
According to data released by the well-known market research company IDC, cloud computing is one of the fastest growing areas in the technology industry. By 2025, the scale of the cloud computing industry will grow from US$706.6 billion in 2021 to US$1.3 trillion.
Another well-known research company Gartner said that Microsoft has a 20% market share in the global cloud computing market and is the second largest cloud computing service provider after Amazon. Amazon’s market share exceeds 40%.
As of September 30, the first quarter of fiscal year 202, Microsoft’s cloud sales for enterprises increased by 36% to 20.7 billion U.S. dollars, breaking through the 20 billion U.S. dollar mark for the first time. The strong performance of the cloud business drove Microsoft’s first-quarter revenue and profit growth, helping these two data exceed analyst expectations for the 11th consecutive quarter.
Moreover, Microsoft CEO Satya Nadella (Satya NaDELLa) has reached a series of transactions for its Azure cloud computing service, which has expanded Microsoft’s success in the field of cloud computing. Azure can store data and run applications for the enterprise. At the same time, Microsoft’s online version of the Office office suite is also maintaining growth. Microsoft persuaded customers to pay for the high-end version and extend the contract.
“In the past, we used to say,’If Microsoft’s revenue growth can exceed 10%, we have to celebrate it.’ But now, their revenue growth rate has been about twice as fast as this goal,” Investment Trust The company’s Synovus Trust senior portfolio manager Daniel Morgan (Daniel Morgan) said, “Azure’s market share seems to have increased recently.”
Apple can’t escape the chip shortage
One of the direct reasons why Apple’s market value has fallen this time is that the just released fourth-quarter revenue fell short of Wall Street analysts’ expectations. This is the first time that Apple’s quarterly revenue has not met expectations since 2018.
Why did the revenue fail to meet expectations? Apple CEO Tim Cook said bluntly, “The issue of limited supply caused us to lose about $6 billion in revenue, which is more than expected.” To make matters worse, Cook expects that the restrictions in this quarter will have a greater impact on the company. Apple’s first fiscal quarter (the fourth quarter of the calendar year) is a key holiday season in the West, and shopping demand at the end of the year tends to push up the company’s performance.
“We expect that these supply constraints will have an impact of approximately $6 billion on our revenue, mainly due to the widespread industry shortage of chips and the destruction of the manufacturing industry caused by the new crown epidemic,” Cook said in a conference call. “We believe that by the end of the first fiscal quarter, the revenue impact of supply constraints will exceed the $6 billion in the fourth fiscal quarter.”
Although Microsoft is still an important company in the PC industry and will be affected by the shortage of chips, investors pay more attention to Microsoft’s cloud business. In contrast, Apple is a hardware company and is more vulnerable to chip shortages.
but,Apple users don’t seem to stop spending.Apple’s service business was not affected by the shortage of chips, and its fourth-quarter revenue reached 18.28 billion U.S. dollars, crushing analyst expectations. Analysts also believe that there is still market demand for Apple products.
“We expect the overall demand in the global market to remain as robust as Cook discussed on the conference call. If consumer demand remains in this quarter, then Apple will obviously encounter a serious shortage of iPhone 13 components during the holiday season.” Wei De Bush Securities analyst Dan Ives (Dan Ives) said in a research report.
Cook revealed that Apple now has no shortage of high-end custom chips, that is, the A-series chips that drive iPhone, Mac and iPad. Currently, the iPhone 13 is equipped with Apple’s latest A15 bionic chip, using TSMC’s 5nm advanced process technology. On the contrary, what Apple lacks are chips with relatively old process technology, which are responsible for running auxiliary systems in Apple products.
Because the latest cutting-edge chips can bring higher profit margins to foundries, manufacturers such as TSMC will give priority to supplying such chips. However, the supply of mature process chips is relatively short, and Apple needs to compete with other companies for the production capacity of this part of the chip.
Apple’s most important thing is innovation
However, supply chain issues may not be the most important aspect of Apple’s business, and the impact is only temporary. Dan Flax, managing director of the asset management company Lubomai, pointed out that the most important thing is how Apple can maintain innovation.
“Apple’s past record so far, as well as the recently released self-developed chip version of the Mac, show that they can innovate,” Flax said. “Therefore, even if innovation and the execution of the product cycle encounter supply chain shortages, the next One year is obviously more difficult. If they can continue to innovate, I think this company can create more shareholder value in the next year or two.”
Despite the loss of market value, Apple is still one of the most valuable companies in the world. If the demand for Apple’s products remains strong, then Apple is likely to regain the number one position from Microsoft soon and reach the top again, as long as they have enough chips. (Author/Xiao Yu)
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