The Greatest Company in the History of Tech

By May 1998, Microsoft (Nasdaq: MSFT  ) had grown so powerful that the federal government determined it was a monopoly that couldn't be checked by capitalistic means. It had to be broken up, said Judge Thomas Penfield Jackson in a ruling that was later limited by an appellate court and then limited again by a settlement.

For all the drama and silliness that surrounded the case, there's no disputing the truth that competitors and partners feared Microsoft. That company was nothing like the unfocused Mr. Softy value investors have come to appreciate in recent years. That company was a terror, tearing into enemies like a pit bull to raw meat.

And yet compared to today's Apple (Nasdaq: AAPL  ) , the Microsoft of old looks slow, poor, and generally unremarkable. Have a look for yourself:

Microsoft*

March 1998**

March 1997**

Change

Revenue $13,664 $10,438 30.9%
Gross margin 91.8% 89.6% 220 basis pts.
Return on capital 32.3% 33.1% (80 basis pts.)
Free cash flow $5,928 $4,048 46.4%
Cash and investments $16,444 $9,905 66%

Source: Capital IQ, a division of Standard & Poor's.
* All metrics calculated over the trailing 12 months.
** Numbers in millions.

Impressive, right? Microsoft's massive Windows, Office, and Internet Explorer franchises had rendered the Mac OS all but irrelevant, destroyed Netscape, gutted Novell (Nasdaq: NOVL  ) , and had set its sights on Sun Microsystems, which today exists only as a memory after being subsumed by Oracle (Nasdaq: ORCL  ) . Consider all that and then look at what Apple has done over the past 12 months.

Apple*

March 2011**

March 2010**

Change

Revenue $87,451 $51,123 71.1%
Gross margin 39.1% 41.3% (220 basis pts.)
Return on capital 31.5% 29.5% 200 basis pts.
Free cash flow $23,283 $12,136 91.9%
Cash and investments $65,767 $41,704 57.7%

Source: Capital IQ, a division of Standard & Poor's.
* All metrics calculated over the trailing 12 months.
** Numbers in millions.

Apple is:

  • Growing revenue and cash flow twice as fast.
  • Blessed with nearly four times as much in cash and investments.
  • Producing near-equivalent returns on capital.

If that Microsoft was so dangerous that regulators had to act, what is this Apple? A robber baron? A potential bailout fund? A cult with cash? How about the heir apparent? The numbers speak for themselves. In the 1990s, Microsoft was the Greatest Company in the History of Tech. Today, it's Apple that deserves that title.

Do you agree? Disagree? Please let us know what you think about Apple's earnings report and place in history using the comments box below.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple and Oracle at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. 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 owns shares of Apple, Microsoft, and Oracle and is also on Twitter as @TheMotleyFool. Its disclosure policy is the Great Disclosure Policy in the history of disclosure policies.


Read/Post Comments (9) | Recommend This Article (7)

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 21, 2011, at 5:27 PM, Emperor2 wrote:

    This has to be one of the most inane articles you have ever written. Why did everyone want to break up Microsoft? Was it because of their profit or because of their share of the market? That's correct, it was their market share that got everyone's thongs in a wad. Now, what market does Apple have a monopoly, or even a near monopoly, on? Come on, I'm waiting.

    How about MP 3 players? They were late to the game but executed better than anyone else. And considering that this is a dying market, does anyone care.

    Tablets? Here they have a first mover advantage. They basically invented the category. Apple's market share will continue to decrease as others turn their vaporware into actual products (if, in fact, they do).

    Phones? Here is their big profit generator yet they only have less than 20% of the market.

    The only reason I can think of as to why you wrote this article was someone told you that you had to write an article of "X" number or words and it had to be due by a certain date. You must have really been out of any intelligent thoughts to have come up with this bit of absurdity.

  • Report this Comment On April 21, 2011, at 11:24 PM, DoctorLewis4 wrote:

    I liked the article. There is a big change in tech that's just beginning if you care to look. Go ahead and load up on Microsoft, Dell and Cisco. I'll play the Apple side of that game thank you very much. It's been working out quite well for the past few years. (when all the IT guys in the office switched to MAC ... um... let's just say it caught my eye)

  • Report this Comment On April 22, 2011, at 4:07 PM, racchole wrote:

    To Emperor2, and other Apple-supporting posters across the Internet: Apple did not invent the category of tablets. Once again, another technology that Apple "seized" and took advantage of.

    Objectively, I think Apple is currently one of the greatest companies in the world (mostly in terms of revenue.) But the "innovation" going on at Apple is nothing compared to the likes of true research entities such as IBM, etc. Apple takes good ideas, and spins them on consumers. Plain and simple. Without the flock of blind consumers running around trying to waste their money, Apple is no more. Unlike other companies, that actually provide a service or a product that people, companies, or societies need to be more productive or function better. I've said it before and I'll say it again, your life would be just as good without an iPad/iPhone/iPod. The world does not need Apple. The only people who need Apple are the ones who collect their paychecks from the company.

  • Report this Comment On April 22, 2011, at 7:42 PM, HectorLemans wrote:

    I think my opinion on Apple falls somewhere between Emperor2 and racchole.

  • Report this Comment On April 23, 2011, at 2:58 PM, asshat wrote:

    to racchole:

    If by "innovation" you mean developing new kinds of basic technology, then yes - IBM is better than Apple (although you might look at the enormous amount of research talent MSFT has been acquiring while IBM increasing concentrates on business).

    But to dismiss the amazing job Apple has done with the efficient production of some of the best designed consumer electronics ever - is ludicrous.

    Saying you don't need an iPad is like saying you don't need a TV, camcorder or tickets to the Yankees game. Actually, its worse, because the iPad is increasingly used by business, and they are creating a whole new economy of incredibly low-priced, competitive software apps.

    If you actually spend some time with someone who uses them you might get a better idea of why "blind" consumers are flocking to them.

    To the extent this model is replicated and mutated, it is arguably Apple's true innovation - more so than a well-designed user interface.

  • Report this Comment On April 23, 2011, at 3:14 PM, mhy729 wrote:

    I love reading comments on anything to do with Apple...it elicits such strong opinions from both sides of the love/hate spectrum.

  • Report this Comment On April 25, 2011, at 10:28 AM, renitentInv wrote:

    "Saying you don't need an iPad is like saying you don't need a TV"

    Well seeing as I don't really own a TV and only subscribe to broadband internet... I guess I don't need an iPad.

    Granted I consider myself outside the norm here. I wouldn't invest based on my own practices. The point remains though, an iPad is not really very useful as a productivity tool.

    Most of the people I see using it in grad school to "take notes" are usually playing Angry Birds or using some other trivial app.

    I've heard of medical communities picking up iPad's for the office. Thats almost scary. I can just picture people walking around saying "Here take this pill" while playing Angry Birds.

    "Oh crap! Did you swallow that pill already?!"

    But I still would never bet against Apple as a cash machine.

  • Report this Comment On April 25, 2011, at 1:52 PM, fRiSKybizness wrote:

    "it is arguably Apple's true innovation - more so than a well-designed user interface...."

    wrong again...see Xerox PARC...

    Apple's true innovation is in getting the true believers to jump off the cliff lemming-like year-after-year-after-year-after...but, by all means, make a buck on them...

    Steve Jobs = a skinny PT Barnum

  • Report this Comment On April 25, 2011, at 2:22 PM, Borbality wrote:

    i've been so late to the AAPL game (wasn't investing til around 2009), but imma load up on a bunch of QQQ instead (apple has 20% weighting because it's so much bigger than the rest of the nasdaq 100).

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