Are Apple, Google, and Microsoft Switching Hats?

If you spend much time in the financial blogosphere, you come across a common theme when things start to get shaken up: Is company X the new company Y? Right now, with Apple (NASDAQ: AAPL  ) languishing just above its 52-week low, Google (NASDAQ: GOOGL  ) sitting at its 52-week high, and Microsoft (NASDAQ: MSFT  ) presumably happy to be a part of the conversation again, there is a nice series of these comparisons to be made.

Is Apple the new Microsoft? Is Google the new Apple? And almost by default: Is Microsoft the new Google? As odd and improbable as this may all seem, particularly if we look back at where each of these companies was sitting last fall, these are legitimate questions that should be asked.

Is Apple the new Microsoft?
History is littered with tales of great empires falling due to stagnation, complacency, and bad timing. Since the stock's high above $700 per share last September, Apple shares have tumbled 40%. One of the areas in which the company has been criticized is in the lack of new innovation being seen out of Cupertino. The company has drawn attention over its rumored entry into wearable tech with the iWatch, but there is no indication of when this product might be released.

In a recent research note, UBS analyst Steve Milunovich identified the problem, but warns that investors will likely need to be patient. He also commented on the company's margins:

And a 30 percent operating margin long-term historically has proven very difficult to protect. We are no longer looking for the gross margin to move back over 40 percent this year. So while we don't see it coming down a lot, I think longer-term it is a risk.

The new Apple products slated for July are only incremental improvements over existing models. Each of these were the types of problems that caused Microsoft to stagnate for nearly a decade. The company remained profitable, just not the hot name. If Apple is to avoid this fate, it needs to up its game soon.

Is Google the new Apple?
As is the nature of empires, when one falls there is always another standing ready to take its place. While I have long maintained that Google was the true king of tech, based largely on its better-diversified business model, the company seems to have embraced this new role. As Apple shares have fallen, Google is up double-digits this year. The company has been able to successfully grow revenue across market segments, is going to market with Google Glass, and continues to whittle away at Apple's lead in devices.

While it is hard to compare a device company to a search company per se, it is Google's tenacity in expanding into new markets that's allowing it to perform as well as it is. The company was able to grow its app revenue by six times for 2012, it controls an estimated 75% of the search market in the U.S., and some analysts believe there is value in YouTube that's to yet be unlocked. When these factors are added to the increasing strength of Google Docs and new Google hardware, it quickly becomes apparent why some have set new price targets at $1,000.

Is Microsoft the new Google?
This last question may seem like the cheap attempt to close the circle, but it is more apt than it might appear at first blush. Within the last several years, Google was a new entrant to the smartphone and tablet markets, trying to make a name for itself. Microsoft, which was once the king of tech in its own right, is trying to return to prominence. With new devices like the Surface Pro and RT tablets, as well as its aggressive marketing for Windows 8, Microsoft has made a full-frontal attack on the market in its quest to return to relevance.

While you may have a hard time remembering it, not long ago, the consensus was that Google Android had no chance of competing with iOS. It now controls more than two-thirds of the market. Similar comments have been made about Windows mobile and the viability of the Surface concept (a hybrid of a laptop and tablet). IWe may all wake up one day and realize that Microsoft has reclaimed the top spot.

Shifting concerns
Despite these shifting roles within the industry, there are compelling reasons to own each of the three. Apple continues to be a behemoth despite its troubles, and represents a great value here. Google is firing on all cylinders and its expanding businesses suggest that it may avoid replicating Apple's cataclysmic fall. Microsoft is gathering momentum and making things interesting. Overall, these technology options should all have a place in your portfolio.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Read/Post Comments (10) | Recommend This Article (1)

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 March 06, 2013, at 6:10 PM, LADJ wrote:

    Apple is not the new Microsoft because Apple's products do not achieve the overall level of mediocrity that Microsoft has made its hallmark. Google is not the new Apple because Google doesn't make spectacular hardware. It relies on third parties, who will eventually do to Google what Microsoft's third party strategy did to Microsoft. And Microsoft isn't the new Google because they are continuing to do what they've always done -- come late to market, rip off everyone's ideas, and figure people will buy it because it's Microsoft. Regarding Apple and innovation -- your lack of historical perspective is amazing. It's not like Apple came up with the iMac, the iPod, the iPhone and the iPad in 4 consecutive years. Apple knows what it's doing, and there are no other Apples out there besides Apple. Period.

  • Report this Comment On March 06, 2013, at 6:11 PM, dwilh51183 wrote:

    AAPL IS GONNA BE THE NEW BERKSHIRE HATHAWAY IF TIM COOK GETS SOME CHEAPER IPHONES BUILT SO SAMSUNG CAN NO LONGER KICK AAPL'S BUTT. WHATS COOKS PROBLEM?

    HE REMINDS ME OF HERB ,WHO IS JUDITH'S WIFE ON 2 AND A HALF MEN. AAPL NEEDS TO BORROW 100 BILLION FROM BANKS AT 1.25% RATE AND BUY A CRAP TON OF STOP BACK, AND FORCE THE BIGGEST SHORT SQUEEZE YOU HAVE EVER SEEN. MR.COOK, GO TO CHINA AND SIGN CHINA MOBILE UP. THE GO GET JAPAN'S DOCOMO. AND START BUYING BACK AAPL STOCK. THIS IS RIDICULOUS

  • Report this Comment On March 06, 2013, at 6:37 PM, demodave wrote:

    LADJ., completely agreed.

    Thanks for saving me keyboard time!

  • Report this Comment On March 06, 2013, at 6:52 PM, jordanwi wrote:

    dwilh51183 - find the caps lock button. If it's lit, hit it once. Also, if you like Two and a Half men and reference it regularly, maybe find a money manager.

  • Report this Comment On March 06, 2013, at 6:56 PM, techy46 wrote:

    Apple can't be the new Microsoft because Apple has exactly zero enterprise ecosystem components and development tools. Google thinks they're the new Apple and Microsoft but Google's advertising revenue moat is only one click wide. Microsoft doesn't need to be Apple or Google but they or Apple should buy Nokia and Microsoft should give away Bing advertising for free like Google gives away Android software. If Google's giving away software for free is OK then so would giving away Bing advertising be OK.

  • Report this Comment On March 06, 2013, at 7:17 PM, Oril wrote:

    Was there a test in there somewhere or is this some kind of new guessing game for idiots?

    Does anyone know a site where one can get some real unbiased commentary?

  • Report this Comment On March 06, 2013, at 7:21 PM, applefan1 wrote:

    First off, the person who wrote this article has a JD. Isn't that a law degree? He lives in Minnesota. Typically not very good on the uptake.

    Just casting off the July products as incremental upgrades? Really? And that's based on what? and what happens if they are incremental updates? That's what everyone does when they release a computing device, incremental updates. What do you think the PC is? Over time, an incremental update from the original design.

    Corporations are starting to ramp up their purchases after they have taken a look at what's on the market and where they might have a need for tablet computing and I'm sure we'll start hearing more and more large purchases of prodocts.

    Google Glass. THE BIGGEST HYPE JOB SO FAR.

    I've been doing my own surveys amongst a cross group of people I run into and so far, no one wants them. Everyone I talk to says they look stupid and they'll probably be nothing more than a short lived, expensive novelty geek product because it doesn't really fill any need. If they try to sell them $1500, they won't sell many at that price. At $200, they'll sell more but I don't it as a long term successful product.

    apple has more room for growth in all of their markets and its just a matter of how fast the growth will take place..

  • Report this Comment On March 06, 2013, at 7:31 PM, PaulApp wrote:

    Feeding a hen with dollars so it may lay the golden eggs! Unfortunately, some hens hoarded the cash and gave out 'made in China.'

  • Report this Comment On March 06, 2013, at 7:45 PM, LADJ wrote:

    Culturally, tough for Apple to buy anyone. Their work force is far and away the most sophisticated and talented in the Corporate World. Buy one bad company with a lousy culture and it's heartburn all the way. That said, I think an AAPL purchase of VZ could be a home run. Agreed with hype on Google Glass. We'll see. Down for a short squeeze on AAPL. Stock is ridiculously undervalued.

  • Report this Comment On March 06, 2013, at 8:30 PM, DanManners wrote:

    On Google Glasses:

    I bought two pairs of fad glasses. the first one was xray glasses so i could see women naked and the second one was those that had springs and eyeballs attached. I rarely use them anymore. I suppose Google glasses will end up the same way!

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