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Apple Surpasses Microsoft. Sort Of.

"When it comes, the landscape listens,
Shadows hold their breath;
When it goes, ’t is like the distance
On the look of death."

-- From "There's A Certain Slant of Light," by Emily Dickinson, circa 1861

Microsoft (Nasdaq: MSFT  ) could have written those lines today as a longtime underdog rolls over a software giant much like Dickinson's dreaded winter.

I'm talking about Apple (Nasdaq: AAPL  ) , which, depending on how you look at it, just passed Microsoft in terms of market cap following a stellar Apple performance and lackluster Microsoft numbers. That's all perfectly true if you look at the numbers in a certain slant of light.

  • Counting by the total value of all available shares, Microsoft is still bigger. Do the math using each company's full share count multiplied by today's prices and Microsoft adds up to a value of $271.4 billion, comfortably ahead of Apple's $245.4 billion.
  • But the S&P 500 index by Standard & Poor's reports things differently. By the S&P's measure, insider holdings and such don't count toward the reported market cap. In that light, Apple stays close to the fully diluted cap at $243.6 billion while Microsoft shrinks to $238 billion. Sayonara, bragging rights.

Whatever measure you use, Apple's rise to prominence is astounding. Four years ago, Apple was worth a piddly $72 billion and on par with Dell's market cap instead of Microsoft's. That was before the iPad, before the iPhone, and right at the start of the Intel era for Macintosh computers. A lot of water has run under the bridges since. Dell is now worth a fraction of Apple's cap no matter how you slice it, and only ExxonMobil (NYSE: XOM  ) is ahead of Apple on the S&P 500 list sorted by float-adjusted market cap. Exxon’s place looks safe for now, but then again, so did Microsoft’s just a few months ago.

Of all the companies near the top of the U.S. market cap list, Apple continues to hold the most upside, but also a fair bit of risk. In the near term, the company will go as far as the iPhone will take it, and that could be pretty far considering a potential tie-up with Verizon (NYSE: VZ  ) in the U.S. and expanded partnerships in key overseas growth areas.

In the long run, the company will need to find ways to keep the enormous, $600 iPhone selling price (the cost carriers pay) well above its cheaper rivals. Recent reports from Qualcomm (Nasdaq: QCOM  ) and Nokia (NYSE: NOK  ) show that prices on smartphones are already facing significant downward pressure. In the not-too-distant future, the iPhone will have to compete with a sea of Google (Nasdaq: GOOG  ) Android phones being offered at the enticing price of zero dollars and zero cents.  

Still, I'd tip my turtleneck to Steve Jobs if I had one, and could figure out how to tip it. I've been critical of Apple before (and I still think the stock is getting ahead of itself), but in a certain slant of light even this skeptic has to bow to the master.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. This article could only have been written during National Poetry Month. Intel, Microsoft, and Nokia are Motley Fool Inside Value choices. Google is a Motley Fool Rule Breakers recommendation. Apple is a Motley Fool Stock Advisor recommendation. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a buy calls position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

Read/Post Comments (4) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 23, 2010, at 4:31 PM, TEBuddy wrote:

    Well, but Apple has a lot more operating expense selling hardware, vs Microsoft sells software primarily. Youre looking at a software company vs a hardware company. Who is going to have more inherent value? And who is likely to have higher margins?

  • Report this Comment On April 23, 2010, at 4:33 PM, TEBuddy wrote:

    Oh, and I forgot, look at the huge price to earning ratio on AAPL, that too expensive, market correction coming soon. Meanwhile softy is sitting on a reasonable ratio and will rise through higher income and margins throughout the next couple years

  • Report this Comment On April 24, 2010, at 12:16 AM, beetlebug62 wrote:

    "In the long run, the company will need to find ways to keep the enormous, $600 iPhone selling price"

    Let's just say that Apple has kept the iPhone ASP above $600 for 3 years running. The way you write it, it's as if Apple has been struggling to do it.

    "if you look at the numbers in a certain slant of light."

    And, another turn of phrase that can be considered pejorative. What gives? It's not like S&P came up with an adjusted float to accommodate Apple so that Apple can toot its horn. There was no horntooting, and S&P has been using adjusted float forever. Those additional shares MSFT has, are not yet available to be publicly traded as they are probably tied into option compensation for top employees at MSFT. Why are there so many option shares tied up? Now that's a question people should be asking.

    While the total float impacts EPS calculations, there's also the supply-demand effect on shareprice, and when those options are exercised, and the shares do become publicly tradable, they will have a depressing effect upon the shareprice.

  • Report this Comment On April 24, 2010, at 9:27 AM, wick23344322 wrote:

    Dickinson was more than likely talking about a migraine in this poem...

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