Microsoft now third-most valuable tech company behind IBM, Apple

By Tom Warren, on 30th Sep 11 10:57 am with 55 Comments

Microsoft CEO Steve Ballmer

Microsoft dropped to third position in the most valuable tech companies on Thursday.

The software giant dropped behind IBM for the first time since 1996 this week. IBM’s market value closed at $214bn (£137.4bn) on Thursday, Microsoft fell to $213.2bn (£136.8bn). Bloomberg reported the values and claims the shift is a reflection of industry trends moving away from personal computer use.

Microsoft hit a market capitalization of more than $430 billion in July 2000, according to figures from Bloomberg. Microsoft dropped to $135 billion in March 2009 following the economic dip. Microsoft recovered alongside the market over the past two years. The majority of Microsoft’s profits come from its Windows and Office sales. Microsoft is facing tough competition from rival firms like Google and Apple who are tempting users over to mobile devices.

The general tech trend towards mobile computing is a market that Microsoft is attempting to play catch up with. The software maker shipped its Windows Phone 7.5 software to existing devices earlier this week, an update to its recent Windows Phone devices. Microsoft shipped Windows Phone 7 less than a year ago and the response has been slow from consumers. The company’s hopes are pinned firmly on Windows Phone 7.5 and a range of new devices on the horizon, including Nokia’s new smartphones running Windows Phone software.

Microsoft is also readying its iPad and tablet response. The company unveiled its Windows 8 operating system at the BUILD developer conference earlier this month. Windows 8 includes a Metro style user interface that is designed with touch in mind. Application developers will be able to write apps that target all Windows devices, including tablets and touch screen form factors. Microsoft is expected to ship a final copy of Windows 8 in mid to late 2012.

  • http://www.facebook.com/people/Pedro-Roque/100000194503830 Pedro Roque

    Yeh, because we all know we can trust the stock market…

    • Anonymous

      +1,000,000. They obviously dont know what they are doing.

    • Guest

      Not year to year, but usually over a long period. MS stock has been a dog for more than a decade. At some point the “market is irrational” theory stops passing the sniff test and you have to entertain the possibility that MS has the wrong strategy.

    • Anonymous

      When you are posting record profits, market cap is irrelevant. IBM still makes less than MS. PROFIT is king.

    • Guest

      Uh huh. Tell that to MS’s shareholders, or those of any other company. I don’t think you’ll find a receptive audience.

  • http://twitter.com/AndrewOneDegree Andrew Smith

    Not sure how they come up with these valuations, especially as a lot of what IBM does runs on Windows based machines….

    • Anonymous

      I was thinking the same thing. And since when is a tablet not a Personal Computer???? it has input, output, ram a processor, a display, a GPU, its just a New OS .

    • Anonymous

      it’s based on stock price. IBM is a service company now which has higher margins and allows for faster profit growth.

  • http://shareourideas.com/ Naga Harish

    May be Win 8 add some more points to bring to (3 to 1)first in next year result….. ;)

  • Joel Job

    Good time to buy. When Ballmer goes it wil skyrocket.

    • Jinge

      I totally agree on “good time to buy”, but for the skyrocket, I am not sure it will be related to Ballmer.
      MS has one advantage, it does not rely on the web financial bubble ;)  All other companies keep on increasing their value, but having almost the same results as 3 years ago. MS keeps its results but keeps its value quite stable too. With the new politic of end-user relationship, MS had done a big step forward, and may be rewarded soon, more or less 1 year, depending on financial crisis… But if W8 sells well, its market value will skyrocket, due to its whole ecosystem consistency.

    • Anonymous

      Microsoft is in its dividend phase. Most companies that have a dividend do not tend to skyrocket. Slow even growth may occur, but not skyrocketing, not from a dividend issuing company.

    • Guest

      IBM is a dividend issuing company as well, and has seen its value increase dramatically over the last five years.

    • Anonymous

      Dramatic increase in value, yes, but I’m not sure I’d call it skyrocketing. 100% over the last two years is amazing though.

    • Guest

      For a day or two. Then go back down and probably even lower based on the extra uncertainty introduced.

    • Guest

      No, the market is about to collapse. MS, and just about everyone else, will be way cheaper in a few months.

    • Peter

      S&P 950 before April, baby! MS <$20.

    • Anonymous

      AAPL > 500

    • Guest

      iPhone, iPod touch And iPad Make More Money Than All Of Microsoft’s Products Put Together

  • Anonymous

    Get rid of Ballmer

    • OMG55

      We cannot keep saying get rid of Ballmer everytime wallstreet execs decide to devalue MS stock price. Most of them want to be different and use apple product at home to simply be able to say they have something different. We also have to look at the fact the MS has its funds spread over various technologies, not just the personal PC, therefore some of these technologies will take time to become profitable; an investment doesn’t have any value unit MS or any other company recovers their inital investment in the product. So, as of right now MS has a lot of outgoing cash with no ROI; ex. Bing, WP7, Win8, assure, etc. But these investment are gaining ground fast and should be reflected by the end of 2012.

    • Guest

      Right. We should ignore everything that has gone wrong under Ballmer and instead blame Wall St for noticing.

    • Guest

      “But these investment are gaining ground fast and should be reflected by the end of 2012.”

      MS has been making massive investments and using that excuse to justify them every year since the early 2K’s. Yet a decade later, >90% of MS’s reported profit in 2012 will come from the same three businesses that supplied it in 1999.

  • phil jay

    I’m a developer, I want cool and clean code, I don’t care about any microshitty financial crysis.

  • http://twitter.com/maciejbesler Maciej Besler

    Valuations are based on potential. When biggest corporation (90k employees) can’t provide relevant search results worldwide, or rollout their services like every other company does – something is fundamentally wrong. These valuations show it. MS is incapable of acting fast enough, even though theoretically – they should be real zippy.

    • http://www.facebook.com/people/Pedro-Roque/100000194503830 Pedro Roque

      Clearly, you don’t know what you’re talking about.

    • Guest

      What part? Almost everything he said is accurate, with the exception that valuations are based on *perceived* potential.

    • http://twitter.com/maciejbesler Maciej Besler

      Enlighten me then.
      Please tell me on what are these valuations are based.
      People (brokers, investment firms, etc) are simply looking at how company fares, what are their perspectives for the future, how is it perceived + bazilion other variables – in short, their potential.
      The bigger their potential, more people believe in it, there are more buyers, stock goes up. Other way around - stock goes down. Here - it stalls. So, they know MS won’t die, but they don’t really see it killing Apple. Simple as that.
      I have WP7 and I almost love it (cutting features that should objectively be there is plain stupid), I have 3 windows 7 machines, one developer w8 machine and xbox.

      Sorry for spelling but I’m using IE9 and it doesn’t have spellchecker. That’s how competitive they are.

    • http://twitter.com/laserfloyd Lewis McCrary

      Who is every other company?  What’s the right way to roll out services?  Large companies are anything but zippy.  Small companies can turn on a dime.  Large companies just have lots of dimes.

    • http://twitter.com/maciejbesler Maciej Besler

      Look at Google and their service coverage.
      Even Apple is better on rolling out their features internationally – language support etc.

      Simple example: Bing vs Google. In US Bing might be awesome, in UK it migh be good – for the rest of the world it just does not work. Look at the headlines – they just added floor plans for airports. Did you see even biggest international airports there? That is a super awesome feature, BUT 90% of the world won’t care.
      Another example – Zune (uneven distribution, not available in full in most countries). Xbox Live. There are tons of little things that just show MSs’ attitude – we’re big, we don’t care. Markets see that and they react – because that type of attitude just never ends well.

    • Anonymous

      Examples of non-relevant search results and slow rollouts? Cites?

    • Guest

      Bing in most countries outside north america. Nodo.

    • http://twitter.com/maciejbesler Maciej Besler

      Look at my reply to Lewis.

  • Anonymous

    Reading the comments, it seems people don’t understand that there is a difference between valuation and market capitalization. This article refers only to market capitalization.

    Market capitalization is a simple calculation. Stock price * number of outstanding shares.
    Valuation is the perceived value, and this will vary from person to person. Many people have their own specialized formulae for calculating company values.

    The market cap does not always reflect real value, nor does it always equate to perceived value (valuations). There are many companies that are undervalued (read about Warren Buffett), and there are those that are overvalued. Never mix the two as it leads to poor investment decisions.

    Currently there are reports of Apple being valued at $540/share. The price is currently about $400. Valuation != market cap.

    • Guest

      Your explanation confuses as much as it clarifies. When people “value” Apple at $540/share, they’re not valuing the business objectively as one would, for example, before buying a private company. Instead, they’re projecting a future stock price valuation. They’re effectively projecting a future market cap.

      MS has been a dead stock for a decade because it started the period at a very high PE and that PE has subsequently declined faster than either their ability to grow EPS or reduce shares out. The reasons for that are multiple, but net out to a less than average confidence in MS’s future.

    • Anonymous

      The valuation methods used are what keep people guessing and seriously confused. This is why, as I stated, many people have their own specific formulae for calculating company valuations. There is no science to it, as predicting the future cannot be written as a testable method.

      P/E (profit to earnings ratio) is just one indicator often included in valuation formulae. EPS (earnings per share), current price, price history, 52 week prices, 5 year prices, competitor stock value comparisons, % above or below industry average, outstanding shares, exercised or un-exercised options…

      The list of variables is too great, and they all add to the general confusion of those not in finance. There is no simple explanation for how to value a public company, and nobody’s formula has been proven 100% correct yet.

      Valuing a private company is so much simpler. Profit history and profit projections are the most important (and often the only) criteria.

      I can’t apologize for the confusion, as that’s the nature of the beast…

  • notePAD

    Where does google stand on this list? They are number one on some other list. Confusing!

  • raikkonen

    >The software giant dropped behind IBM for the first time since 1996 this week

    WTF? First time? Again???
    I read that news May,23 2011 )))

    http://chuiko.com/finance/4799-ibm-first-time-in-15-years-surpassed-microsoft-in-terms-of-capitalization.html
     
    http://rcpmag.com/blogs/scott-bekker/2011/05/ibm-passes-microsoft-in-market-capitalization.aspx

    • Guest

      Yeah, IBM has been worth more than MS a couple of times so far this year. But they may be talking about on a closing basis this time vs intraday.

  • http://twitter.com/sparkedfire sparkedfire

    The world would collapse if Microsoft went away.  No other company can replace them without significant time.  Computer companies would go out of business.  Apple couldn’t make enough computers to compensate  Companies that build software would be rattled.  If Apple dissapeared, the would wouldn’t be impacted so greatly.  They don’t have the scope of products or services Microsoft does.

    • Anonymous

      Exactly, MSFT is more of an infrastructure company, Apple is more of a toy company.

  • Anonymous

    Why? because stupidity in Wall Street. I don’t know what made of those people but I know they screwed up the whole world. Don’t you see that?

    So, MSFT making more money every year, stock still goes down. What’s the Wall Street telling you? They say the world belongs to mobile now. And MSFT is not in it. I am tired but I still Like to repeat what I said another time.

    Stock market is what Wall Street think the future is, not what the reality is. Lets take a look,

    In 2007, Vista story started out. I said the Vista story is the biggest lie in tech media. Regardless, that’s the starts of Wall Street morons became morons. In the meantime, something called netbook became hot. Everybody in Wall Street say that thing was going to eat msft alive. Then Windows killed Linux on network within less than two years. Also the netbook cannibalization story turned out none factor. A lot of people don’t even know about this, why, because the media didn’t mention it. 

    Also start from 2007, and peaked in 2010, there was a cloud movment. Everyone, not just Wall Street say Cloud is the future. Sounds like every enterprises will eventually be running on the cloud. And everybody else is in the game, Microsoft is not. Do you here the media still talking about cloud much? I mean the real cloud, the enperprise cloud, not consumer cloud. Consumer cloud started as long as the internet, that has little to do with the cloud movement they talked about. No, they don’t talk about it now, because 1, they are not that sure about it now and 2, Micosoft is at the front of cloud computing with Azure.

    So, what’s the argument now, yes the mobile: the phone and tablet. I don’t what those peole going to say if msft conqored mobile space next year.

    They made up stories. They tell lies. They even coin a word called Post-PC Era. That’s funny. Even last year, a lot media still writing “Microsoft is dead” story.

    To me MSFT should be in mid $60 at the moment. We just have wait that to happen.

    • Guest

      “To me MSFT should be in mid $60 at the moment. We just have wait that to happen.”

      I hope you’re young, because that isn’t going to happen for decades if at all. You’ll be lucky to see $30′s again. $40′s would be a stretch and would require a turnaround in mobile, tablets, and search. $50′s and $60′s are pure fantasy.

    • Anonymous

      I am old, but I don’t think I need more than 2 years to see that. Want to bet?

    • Guest

      Sure. But let’s make it a gentleman’s bet. I don’t want you to lose twice.

    • Joe05

      So here is not a made up story -The Mac business generates more Revenue than Windows -iOS powered devices generate more revenue than all of Microsoft’s products put together-Apple’s revenues grew 413% since Q2 2007 while Microsoft’s grew 26%

  • Guest

    Hey Tom,

    Possible headline for end of day today: MS surpasses IBM in market cap.

    Then go on to talk about how it means a move away from hardware and services.

    Developing…

    • Guest

      Looks like IBM eked out the win. There’s always next week.

  • OMG55

    This has a very simple explanation: Much of Microsoft Capital is spent investing in new and future technologies. So, of course until those product are profitable, they will be shown as a loss thereby reducing their value. I really blame the stock market gurus, because when you invest a stock they believe will gain market share, base that companies stock on its potential or the amount they estimate it to be value at. Most of these people probably use product outside of MS so of course they don’t want to add any value to MS. Just hang in here for a little bit and MS stock will gain value because WP7 is starting to get buzz since the Mango update and Win8 slates should gain ground when they arrive due to its unified cross-device/network functionality which is a value for all corporations knowing that all of you settings, data, etc will be available now matter what device your using (Computer, Laptop, tablet, or slate/pad).

    • Guest

      Yes it does. And here it is: MS’s investments mostly haven’t been successful, while Apple’s and IBM mostly have. And MS has spent more than both combined and then some.

  • Anonymous

    Check Marketwatch.com, MS’s MCap is $215.07B….more than IBM’s $213.24B…..

    • Guest

      They’ve traded places several times today and a couple times over the last few months. The important issue isn’t the static picture but the trend. IBM has increased 120% over the last five years while MS has decline by 10%. It’s not a pretty picture.

  • Guest

    I guess those who warned over the last decade that MS was turning into IBM were actually too optimistic.

  • Guest

    I’m not sure why the market thinks IBM is worth a premium to the market price/earnings multiple. But a discount to that for MS seems appropriate given the record of the last decade, the increasing threats they face, the large ongoing losses in search with no end in sight, and the recent high profile and embarrassing misses and subsequent glacial responses in mobile and tablets. Ballmer’s plummeting employee approval ratings on glassdoor aren’t helping either. Nor is speculation that MS will be forced to buy some or all of Yahoo in order to preserve its search partnership there.

  • Guest

    “Microsoft Annual Meeting of
    Shareholders. November 15, 2011″

    Tick tock…