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Apple's Ultimate Victory Over Microsoft

By Alex Dumortier, CFA - Apr 5, 2013 at 10:15AM

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Is 2013 a turning point in this battle?

Today's U.S. employment data has left investors disappointed, and stocks opened lower this morning. The S&P 500 (^GSPC 1.05%) and the narrower, price-weighted Dow Jones Industrial Average (^DJI 1.05%) are down 1.15% and 1%, respectively, as of 10:10 a.m. EDT.

The shift to mobile takes its toll on Microsoft
In a report released yesterday, research firm Gartner predicts that consumers will purchase more Apple (AAPL 1.62%) devices than PCs, tablets, and smartphones running Microsoft's (MSFT 1.07%) Windows operating system.

For Apple, that would be another milestone in the company's extraordinary rise from niche player to technology standard-setter. For Microsoft, the issue is not simply being overtaken, but the chasm between the growth rates of the two platforms. Last year, Apple's consumer sales of iPhones, iPads, and Macs totaled 159 million against 175 million Windows devices; this year, Gartner expects the total for Apple to surge to 233 million (+46%) while Windows device sales inch ahead to 181 million (+3%).

It's not all bad news for Microsoft, as Gartner believes its position in the corporate PC market will support the Windows franchise for years. However, "as consumers shift their time away from their PC to tablets and smartphones, they will no longer see their PC as a device that they need to replace on a regular basis," says Gartner's Carolina Milanesi. Furthermore, I believe there is a risk that consumer preferences will increasingly dictate business IT standards if workers demand to use the same devices at work that they use at home.

For all its human and financial capital, Microsoft appears so far unable to master the shift toward mobile computing. These latest estimates illustrate the magnitude of the challenge for a company that may be disappearing before our very eyes.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,097.26 (1.05%) $321.83
Microsoft Corporation Stock Quote
Microsoft Corporation
$259.58 (1.07%) $2.75
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,825.33 (1.05%) $39.95
Apple Inc. Stock Quote
Apple Inc.
$138.93 (1.62%) $2.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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