Apple Draws Closer to Microsoft, but Google Leaves Both in the Dust

Surprise, surprise!

Gartner's latest forecast points to continued pain for the PC industry. Including "ultramobiles," which the firm defines as Google (NASDAQ: GOOGL  ) Chromebooks, PC Ultrabooks, or hybrid convertible devices running Microsoft (NASDAQ: MSFT  ) Windows 8, worldwide "PC" shipments are expected to decline by 7.3% in 2013, but should post a 1% gain in 2014. To achieve growth in 2014, ultramobile shipments are expected to grow by 96.2% and traditional desk-based and notebooks PCs should decline by another 5.2%. In other words, the appetite for highly portable PCs is expected to be robust, but will come at the expense of more "clunky" PC designs.

Once also taking into account for smartphones and tablets, the entire computing device outlook looks promising. Combined, worldwide computing device shipments are expected to grow by 5.9% this year and by another 6.7% by the end of 2014 as the world continues to embrace the mobile computing revolution.

Mr. Softy blues
Perhaps the most surprising development out of this forecast is how Apple (NASDAQ: AAPL  ) and Microsoft are expected to be neck and neck in terms of device shipments by the end of 2014. At that time, it's expected that Apple will have shipped a combined 354.9 million iOS and Mac devices and Microsoft will account for 378.1 million devices that run Windows. The storyline is all too familiar: Microsoft continues to lose its computing dominance to players that have more effectively addressed the worldwide shift to mobile computing.

Units matter
As exciting as it is for Apple to have the opportunity to surpass archenemy Microsoft, it's a small victory in the grand scheme of things. Let's not forget we live in a world where over 2 billion computing devices ship on a worldwide basis each year. Guess which company is claiming the biggest stake? Google.

Gartner expects Google Android will ship on over 866 million devices this year and well over a billion devices by the end of 2014. Naysayers will immediately dismiss Google Android since Apple "controls the majority of smartphone profits." If you fall into this camp, please be reminded that Android expands the usage of Google's lucrative search business. Last October, Google CEO Larry Page announced that mobile has become an $8 billion a year business, which represented an increase of 220% from the previous year. Considering the continued growth of Android devices since October, it's all but certain mobile is worth even more to Google. Additionally, Google makes money regardless of ecosystem or form factor, provided users continue utilizing Google Search.

The bigger picture
With over 2 billion computing devices being shipped throughout the world each year, it's become clear that computing devices have become commoditized. As a result, investors have grown unwilling to pay a premium for companies that primarily sell computing devices. It might explain, in part, why Apple trades with a single-digit P/E ratio. For sentiments to change, Apple will have to regain the faith of investors by showing them that its brand and devices aren't just a commodity.

And then there's Google, which is a more of a "pick and axe" investment that benefits from the mobile computing revolution regardless of which device or ecosystem strikes it rich. Consequently, investors are comfortable with Google trading at 41% premium to the S&P 500.

Based on price alone, I think Mr. Market has already crowned Google king.

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Read/Post Comments (6) | Recommend This Article (3)

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  • Report this Comment On July 01, 2013, at 7:42 PM, JesusQuintanaJr wrote:

    Mobile might be an $8B revenue generator for Google but very little of that is from Android itself. Around 80% or so of its mobile search revenue comes from iOS devices. Imagine what would happen to Google if Apple switches to Bing for the default browser in iOS.

    A big chunk of that $8B is from app sales. Considering that Apple has now paid out over $10B to developers and $5B in the past year alone, Apple's revenue just from the App store is about as big as Google's entire mobile revenue. Add in movies, music and books and it is clear that Apple makes considerably more on iOS that Google makes on both iOS and Android.

    Also, a good deal of the huge Android growth is in China. As Google does not operate there, much of Android's vaunted marketshare doesn't bring Google any revenue at all.

  • Report this Comment On July 01, 2013, at 8:21 PM, Henry3Dogg wrote:

    So Apple sold 355 million premium priced devices complete with OS.

    Microsoft sold 380 million OS, mainly low cost OEM versions. Someone else sold the devices.

    And Google sold a handful of Motorola devices and gave away a large number of copies of an OS that isn't good enough to actually pay money for.

    How is Google leaving anyone in the dust.

  • Report this Comment On July 01, 2013, at 8:27 PM, bobbydig wrote:

    Google is the used car salesmen of the internet.

    People are totally sick of ads, ads, and more ads. Not talking about the junk mail from Google.

    Google is one annoying company these days.

    All Apple and Microsoft do is make things for us to use. Not annoying us with FREAKING ADS.

  • Report this Comment On July 01, 2013, at 8:47 PM, commoncents33 wrote:

    Google DOES NOT ship Android devices...and it doesn't really profit significantly off them.

    So the headline and content of this article are completely misleading.

    Apple still TROUNCES Google in PROFITS ($40 B vs. 11B, TTM), despite the avalanche of misleading press.

    So Google has to outpace Apple for a very, very, very long time in profit growth for their valuation to make any sense compared to AAPL. Fact. Math. Not misleading media nonsense.

  • Report this Comment On July 01, 2013, at 9:51 PM, SRNoyes wrote:

    iOS still owns the device usage space by a wide margine and I am amazed at the number of fools think ownership of an exceedingly under-utilized platform with high unit share means anything financially.

    Until Google can get its users to:

    1) use the Internet with Android at the same level as iOS users.

    AND

    2) actually buy and pay developers for their effort.

    Android will be an also ran ripe for disruption.

  • Report this Comment On July 02, 2013, at 5:47 AM, neocolonialist wrote:

    I am sure AAPL is quite content letting GOOG put up impressive market share and unit sales numbers, all the while AAPL is the one making all the money. Last I checked money is where it counts.

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