Sun, Dec 02, 2018 - Page 16 News List

Microsoft overtakes Apple Inc in value

BUSINESS FOCUS:Wedbush Securities analyst Dan Ives said that amid the carnage of the past month, shares of Microsoft have held firm ‘like the Rock of Gibraltar’


Microsoft Corp has surpassed Apple Inc as the world’s most valuable publicly traded company.

As other tech giants stumble, Microsoft’s steady resilience is paying off. Under chief executive officer Satya Nadella, Microsoft has found stability by focusing on software and services over the Internet, or the cloud, with long-term business contracts. The personal-computing powerhouse is now having a renaissance moment as it eclipses Facebook Inc, Google, Inc and the other tech darlings.

Apple had been the world’s most prosperous firm since claiming the top spot from Exxon Mobil Corp earlier this decade. Microsoft eclipsed Apple briefly a few times this week, but did not close on top until Friday, with a market value of US$851 billion to Apple’s US$847 billion.

Microsoft had not been at the top since the height of the dotcom boom in 2000. Microsoft became a contender again in large part because Apple’s stock fell nearly 20 percent last month, while Microsoft has not done any worse than the rest of the stock market.

However, the fact that it has not done poorly is a reflection of its steady focus on business customers in recent years.

Microsoft lost its luster as people were shunning PCs in favor of smartphones. In 2013, PC sales plunged 10 percent to about 315 million, the worst year-to-year drop ever, according to research firms Gartner Inc and International Data Corp.

It did not help that Microsoft’s effort to make PCs more like phones, Windows 8, was widely panned.

However, a turnaround began when the Redmond, Washington-based company promoted Nadella as CEO in 2014. He succeeded longtime CEO Steve Ballmer, who initially scoffed at the notion that people would be willing to pay US$500 or more for Apple’s iPhones.

That bet paid off.

Windows is now a dwindling fraction of Microsoft’s business. While it still runs consumer-focused businesses such as Bing search and Xbox gaming, it has prioritized business-oriented services such as its Office line of e-mail and other workplace software, as well as newer additions such as LinkedIn and Skype.

However, Microsoft’s biggest growth has happened in the cloud, particularly the cloud platform it calls Azure. Cloud computing now accounts for more than one-quarter of the firm’s revenue and Microsoft rivals Amazon as a leading provider of such services.

Wedbush Securities Inc analyst Dan Ives said Azure is still in its early days, meaning there is plenty of room for growth, especially considering the company’s large customer base for Office and other products.

“While the tech carnage seen over the last month has been brutal, shares of [Microsoft] continue to hold up like the Rock of Gibraltar,” Ives said.

Being less reliant on consumer demand helped shield Microsoft from holiday season turbulence and US-China trade jitters affecting Apple and other tech companies.

US President Donald Trump amplified those tariff concerns when he told the Wall Street Journal in a story published on Monday that new tariffs could affect iPhones and laptops imported from China.

Daniel Morgan, senior portfolio manager for Synovus Trust Co, said Microsoft is outperforming its tech rivals in part because of what it is not.

It does not face as much regulatory scrutiny as advertising-hungry Google and Facebook, which have attracted controversy over their data-harvesting practices. Unlike Netflix Inc, it is not on a hunt for a diminishing number of international subscribers and while Amazon also has a strong cloud business, it is still more dependent on online retail, Morgan said.

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