Apple money machine trounces Microsoft -- and hints at more to come

Apple's blockbuster revenue numbers surpass Microsoft's for the first time ever -- and point to a bigger shift in the tech industry

Apple really is the king. The company's revenue in the just-reported June quarter was an astonishing $15.7 billion, well above what Wall Street expected and likely somewhat higher than what Microsoft will report on Thursday. I want to underline that development: For the first time in years -- and, likely, ever -- Apple is bringing in more money than Microsoft.

Earlier this year, there was a big flutter when Apple's market cap passed that of Microsoft. While that was interesting, it's not necessarily significant since market cap (number of shares times the stock price) can be wildly inflated. Back in the dotcom days, some no-account Internet stocks were so highly valued that companies with little revenue and nothing but red ink on the books had bigger market caps than companies earning billions of dollars a year. Ultimately, those pretenders disappeared. (Remember Pets.com?)

[ Stay up on tech news and reviews from your smartphone at infoworldmobile.com. | Get the best iPhone and iPad apps for pros with our business iPhone apps finder. | Keep up on key mobile developments and insights with the Mobile Edge blog and Mobilize newsletter. ]

But sales are another story -- and so are profits. Apple's net income jumped nearly 80 percent to $3.25 billion, or $3.51 per share, from $1.8 billion, or $2.01 per share a year ago. And that sales number I mentioned? That represents an increase of 61 percent over last year.

As for Microsoft, Wall Street expects the software giant to report revenue of $15.2 billion and a profit of $2.8 billion. If we needed more evidence that we've reached the end of Microsoft's reign, we now have it.

Microsoft: Stuck in the Windows past
To be clear, I'm not predicting the imminent fall of Microsoft -- far from it. Microsoft remains an enormously profitable company that has a lock on its core markets. Like Apple, Microsoft may well exceed Wall Street's numbers and inch ahead of its rival in sales -- but that doesn't really matter.

The driving force of innovation -- and now profitability -- is no longer the PC desktop. It's the world of mobile devices and mobile applications, which are, of course, the very skill sets that Microsoft can't seem to master.

Apple said it sold about 3.3 million iPads in April through June, the gadget's first three months on the market. Meanwhile, iPhone unit sales rose 61 percent, with a boost at the end of the quarter from the launch of the iPhone 4, to 8.5 million units.

Contrast that to Microsoft's weak-kneed Windows Phone 7, a platform my colleague Galen Gruman rightly called "a waste of time and money." Windows Phone 7 won't be raking in the bucks for Microsoft any time soon, if ever, and it's no coincidence that the company's business units not linked directly to the Windows/Office/SQL Server franchise have never made any significant profit.

It's worth remembering that Google, a company with zero experience selling stuff to consumers, tore into the smartphone market with the Android platform. While I have serious reservations about Android (particularly the uncontrolled nature of the platform), it's telling that Google could give Apple a run for its money while Microsoft is still stuck in the starting blocks.

What about Antennagate?
Tuesday's numbers tell us that the iPhone 4 was selling very well initially, but since the quarter closed at the end of last month, we don't really know how the problem with the iPhone 4 antenna will ultimately affect sales.

My guess, and that of Wall Street, is that it probably won't make much of a difference. Once Consumer Reports slammed the new iPhone, Apple, which initially reacted to reports of dropped calls with Jobsian arrogance, turned on a dime. Sure, many of us would have preferred a recall or at least a real hardware fix. However, the offer of a free bumper and full refunds to unsatisfied customers put out the fire.

We'll see what the sales numbers show us in three months. That aside, you've got to hope that Apple has learned something from the fiasco. The fundamental reason that Apple has prospered is customer satisfaction. Apple gives people what they want: a platform or device that looks good, works well, and has an obvious cool factor. Subtract any of those attributes and there's a problem.

Further confounding the Antennagate incident is Apple's conjoined relationship with AT&T. Owners of the iPhone are already disgusted with AT&T's overburdened and inadequate voice and data network. Any problem that exacerbates already subpar performance immediately and rightfully becomes a big issue.

A little while ago, I wrote that Jobs may be a jerk, but his jerkdom (as it were) is in the service of customers and shareholders. But when he initially stonewalled the dropped calls issue, he was simply being a brute -- and an arrogant one, to boot.

Let's hope that he's learned a lesson and that the great numbers his company served up this week become an inspiration to further innovation and customer satisfaction, and not an excuse to emulate the now dethroned Microsoft.

I welcome your comments, tips, and suggestions. Post them here so that all our readers can share them, or reach me at bill.snyder@sbcglobal.net.

This article, "Apple money machine trounces Microsoft," was originally published by InfoWorld.com. Read more of Bill Snyder's Tech's Bottom Line blog and follow the latest technology business developments at InfoWorld.com.

From CIO: 8 Free Online Courses to Grow Your Tech Skills
Join the discussion
Be the first to comment on this article. Our Commenting Policies