WSJ: Microsoft stock may be better in long-term than Apple stock


Office on tablets may be a new income opportunity for Microsoft, The Wall Street Journal says.

A new article from the Wall Street Journal begins with an interesting fact: if someone had invested $10,000 in Microsoft 10 years ago and reinvested the dividends from that stock, he or she would only have $13,000 today. By comparison, a person who did the same with Apple's stock would have $700,000.

Clearly the last decade has been good to Apple. While Microsoft hasn't exactly suffered, it has seen the value of its closest competitor skyrocket to previously unknown highs. According to that same Wall Street Journal article, however, that may change soon.

That's because Microsoft has several major products that are "sticky" products – products that users are hesitant to switch from, article author Brett Arends writes. One of those products is Microsoft's flagship productivity suite, Office. Microsoft is now attempting to expand Office's dominance by including it in Windows RT products, Arends says, which "makes the tablets credible replacements for laptops for businesses, allowing users to work on robust spreadsheets and data presentations."

At least one major investor agreed with Arends' theory. Steve Russell, chief investment officer of London's Ruffer & Co. investment firm, said Microsoft's prospects are looking better than Apple's.

"[Microsoft is] a so-so company making OK profits with nothing expected to change," Russel said. "But they are currently launching a key set of new products that might just change all this."

Apple, by comparison, doesn't have a broad range of products that contribute to its success. Instead, iPhone and iPad sales are estimated to account for 80 percent of Apple's gross profits this year. Much of that income comes from the large profit margins of Apple devices. As the smartphone and tablet market becomes more crowded, it's also becoming increasingly more necessary to either innovate or compete on price, Arends writes.

Little has changed with Apple's two key products in recent years, however, and the company also doesn't appear to be changing its high profit margins anytime soon. In fact, Apple's shares have fallen from an all-time high of $705 to $515 in recent weeks, Arends notes.

Source: The Wall Street Journal | Image via Microsoft

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LookitsPuck said,

The issue w/ iOS (and Apple in general) is that the platform is only that: iOS. It doesn't create a transition from one platform to the next. iOS developers aren't likely to create for OS/X. Apple doesn't have a web platform in any capacity (no language, no server) nor any database technology. That leaves web developers, enterprise developers, and even desktop developers favouring Microsoft.

The developers in the cross fire are mobile developers for iOS and Android. And if Microsoft can gobble (pun intended ) them up for use in Windows 8, the last cog is Windows Phone 8. Can THAT happen? Not sure. Time will tell.

A lot of iOS developers create apps for OS X and also vice versa. This is one of the biggest reasons why some best OS X developers don't developer for other platforms. They're quite happy with the iOS/OS X platform base. Apps like Coda, Jumsoft money, xScope, Skala Preview are only on these platforms.

LogicalApex said,
Too early to tell. If Microsoft can't stop the exodus of developers to iOS and other platforms then they'll be severely crippled in the future....

what "exodus" would that be? Sure, in the USA there is a movement towards Mac, but out here in the rest of the world Apple sales are still counted in the Other category they're waiting to crack the magic 2% market share. In China, for example there is literally zero Mac development and Apple can't seem to get past the 0.1% hurdle.

Globally over 60% of all software development is directly on the main Microsoft plaform. Another 20% is in embedded software where Windows CE is strong amongst Asian ODMs. In Office software it's a whitewash where Google can't even give away their competing products.

On mobile Apple is at the top of their curve and falling. A combination of Win 8/WP8 Live Tiles and HTML5 are both starting to undermine the credibility of old-fashioned dumb apps. It's only a matter of time.

Apple still does blaze trails and certainly leads the world in apps that make fart noises though.

szo said,

A lot of iOS developers create apps for OS X and also vice versa. This is one of the biggest reasons why some best OS X developers don't developer for other platforms. They're quite happy with the iOS/OS X platform base. Apps like Coda, Jumsoft money, xScope, Skala Preview are only on these platforms.

What you say is true, but you are missing the bigger point the OP was making.

These companies produce for OS X and iOS, but on the backend of things they are using non-Apple companies to make their products work. Database and other server cloud features are going to companies like Microsoft that have the tools and features to support the backend the iOS and OS X client software needs.

Remember, even Apple themselves still use Microsoft servers for many things and have iCloud features running on Microsoft Windows Azure NT cloud servers.

This is why Microsoft doesn't even need to have Windows on the desktop or phone to survive. Apple needs to have iOS and OS X products to survive.

Microsoft could contract their operations to Xbox and Office or just their development tools and compilers or just their server based services and be ok.

Apple doesn't have this ability as they have too narrow of a product focus and keep relying on 'pop out' products that create a new market that they do have the ability to create sustained revenue. This is why they are suing everyone, as they know they can't keep the Phone/Tablet market as it isn't a sustainable product line and they are hoping to get a piece of everyone or shove them out of the marketspace.

Apple depends on the creation of an iPhone/iPod/Mac/AppleII every couple of years, and they never have been able to do this, and they do not create a sustaining model for the times they have done this.

Contrast this to Microsoft's successful products. How many have 'gone away'? Nothing significant. Windows 'popped' in 1992/1993 and yet 20 years later they still have 90+% of the computing market. Their database and server technologies and compiler technologies all 'popped' 20+ years ago, and yet they are all still the major players in their markets.

The closest MS that came to losing a minor product was the Smartphone that they popped with in 2002/2003 and almost completely lost to Apple and Google, but have beyond the odds come back with a viable product that has its own niche for OEMs and users in WP7/8.

In 20 years, even with more resolutions and more 'colors' and new 'headphones' do you think Apple's current products they depend on will be viable or even remembered?

The VCR revolution was big, do you remember the companies that got rich from it by name or the specific products? The only one most people remember is Sony Betamax, and they remember it because it lost and hurt a lot of consumers because of Sony's hubris.

thenetavenger said,

The VCR revolution was big, do you remember the companies that got rich from it by name or the specific products? The only one most people remember is Sony Betamax, and they remember it because it lost and hurt a lot of consumers because of Sony's hubris.


Philips!
Although Sony won the battle in the end
And with the light bulb disappearing (illegal in the EU for example), CD's in a dying market. Philips basically lost their entire consumer market. And Sony still has a large chunk of the Consumer Electronics market.

ultimately, apple is going nowhere. google is DESTROYING THEM in the phone space and they are falling faster than gravity in the tablet space.

the golden days of apple are gone and it is only a matter of time before wallstreet realizes apple is the most overvalued company on earth.

neonspark said,
ultimately, apple is going nowhere. google is DESTROYING THEM in the phone space and they are falling faster than gravity in the tablet space.

the golden days of apple are gone and it is only a matter of time before wallstreet realizes apple is the most overvalued company on earth.


They do have over a $100 billion in cash.

WaqasTariq said,

They do have over a $100 billion in cash.

...and a lot of poisonous proud feelings and the image of luxury brand that will never change, which cripples its power to compete in prices.
Cash is nothing if it doesn't come back to shareholders in form of good real investments or dividends.

Luis Mazza said,

...and a lot of poisonous proud feelings and the image of luxury brand that will never change, which cripples its power to compete in prices.
Cash is nothing if it doesn't come back to shareholders in form of good real investments or dividends.

They paid over $2.5 billion in dividends last week! Shareholders are happy! The stock price fluctuates because stockholders sell at high prices to reap prices. When the price decreases, new shareholders buy the stock and the price increases once again.

szo said,

They paid over $2.5 billion in dividends last week! Shareholders are happy! The stock price fluctuates because stockholders sell at high prices to reap prices. When the price decreases, new shareholders buy the stock and the price increases once again.

Trust me, I know the drill. But if the shareholders are selling, that's because prices were too high. Going from $ 705 to $ 515 is no profit taking movement only. Competition is high and I agree with the WSJ regarding the fundamentals on Apple's shares.

Luis Mazza said,

Trust me, I know the drill. But if the shareholders are selling, that's because prices were too high. Going from $ 705 to $ 515 is no profit taking movement only. Competition is high and I agree with the WSJ regarding the fundamentals on Apple's shares.

The stock market is very volatile and unpredicatable and that's why I really don't care much about the stock prices. It doesn't dictate much since Apple and Microsoft have billions in cash. The market is just a game and the low mediocre stock price of Microsoft doesn't mean it is a worse company than Apple. In fact, I think Microsoft has more of an upper hand than any other company including Google. They're deeply embedded in every field whether it be the web, desktop, mobile, gaming, tv, enterprise or anything else. I'm sure Apply has plans to diversify and go into sectors, but one of the reasons that Apple makes so much money is because it focuses extremely on few products thus reducing productions costs and increasing profits.

szo said,

The stock market is very volatile and unpredicatable and that's why I really don't care much about the stock prices. It doesn't dictate much since Apple and Microsoft have billions in cash. The market is just a game and the low mediocre stock price of Microsoft doesn't mean it is a worse company than Apple. In fact, I think Microsoft has more of an upper hand than any other company including Google. They're deeply embedded in every field whether it be the web, desktop, mobile, gaming, tv, enterprise or anything else. I'm sure Apply has plans to diversify and go into sectors, but one of the reasons that Apple makes so much money is because it focuses extremely on few products thus reducing productions costs and increasing profits.

If you don't care about stock prices and want to "play" (as you say) in the stock market, then be prepared to lose money. Anyway, somebody has to lose for others to win. Good luck with your passions.

Luis Mazza said,

If you don't care about stock prices and want to "play" (as you say) in the stock market, then be prepared to lose money. Anyway, somebody has to lose for others to win. Good luck with your passions.

I said the I don't care about stock prices DEFINING a company's worth or possibility for future success. Ofcourse, if I was investing, it would be a different story.

Luis Mazza said,

...and a lot of poisonous proud feelings and the image of luxury brand that will never change, which cripples its power to compete in prices.
Cash is nothing if it doesn't come back to shareholders in form of good real investments or dividends.

There are benefits to being considered a luxury brand...

I'm no Apple lover, but their business model isn't that bad for them... lol

And they do offer dividends now (Though small).

M_Lyons10 said,

There are benefits to being considered a luxury brand...

I'm no Apple lover, but their business model isn't that bad for them... lol

And they do offer dividends now (Though small).

Being a luxury brand is good if the company has low costs and high profits. That's the case with Apple. But there's a limit for growth, because on the consumer POV, those products are expensive and they don't necessarily return more benefits because of a higher price. And if the luxury brand becomes more popular, the brand loses appeal, which is not very interesting in this type of business model.
Their business model isn't bad, sure, but it is overvalued regarding all of those reasons I stated (including competition) from now on. And that's how the stock market evaluates those companies: based on predictions of future expectations.

szo said,

They paid over $2.5 billion in dividends last week! Shareholders are happy! The stock price fluctuates because stockholders sell at high prices to reap prices. When the price decreases, new shareholders buy the stock and the price increases once again.

Yeah, sure. Apple's share price has fallen and about 20% of the company's value has been written off in the last 90 days - possibly the greatest loss of shareholder value in histrory. And you think shareholders are happy?

neonspark said,
ultimately, apple is going nowhere. google is DESTROYING THEM in the phone space and they are falling faster than gravity in the tablet space.

the golden days of apple are gone and it is only a matter of time before wallstreet realizes apple is the most overvalued company on earth.

Here is a prediction for you... In about 5 years Google's Android will be where Blackberry is today. Apple will retain their usual 5-10% of the total market and Microsoft will be the major phone OS provider.

Sound crazy? This has happened so many times in just the last 30 years of tech history that it is written on the wall, with Google playing the role of the company that lost every single time and repeating the same mistakes along the way.

Look at giants like IBM, Wordperfect, Novell, Lotus and where are they in consumer technology today? They all did the same things that you see Google doing today with how they control their product, their market and how they work with other companies.

Apple will always be the closed product and Microsoft will slip in and create a hardware and software ecosystem that is too easy for OEMs and consumers to ignore.

All the big names above that have no real role in consumer technology today thought they couldn't fail, and were horrible to work with and gave a lot of competitors and even 'beneath them' companies the finger along the way. Heck, Wordperfect not only gave Microsoft the finger, they truly forced Microsoft to move up their production of Word that was compatible for Windows 3.0, because Microsoft begged Wordperfect to create a Windows version of their product and was counting on it being the dominant word processor.

If you look at Google, they are giving people the finger on the hardware side, on the software side and to all their competitors.

Why is this so much different than say, Microsoft?

If you notice one thing Microsoft doesn't do, is let politics affect their working relationship with a company.

Microsoft still produces their products for iOS and Android, and even deeper, they still work with IBM, Intel, and Apple, even though there is a lot of bad blood.

Notice that Sony still sells PCs with Windows, and yet Xbox and the PS3 are still punching it out for the growing gaming/entertainment market. Microsoft and Sony still work together on other projects all the time.

thenetavenger said,

Here is a prediction for you... In about 5 years Google's Android will be where Blackberry is today. Apple will retain their usual 5-10% of the total market and Microsoft will be the major phone OS provider.

What exactly do you mean with Google giving the finger? Looks like Google is doing what Microsoft did for Windows 30 years ago, but is now open source.
If every vague prediction that you made really happen, then be prepared for Google to win.

szo said,

The stock market is very volatile and unpredicatable and that's why I really don't care much about the stock prices. It doesn't dictate much since Apple and Microsoft have billions in cash. The market is just a game and the low mediocre stock price of Microsoft doesn't mean it is a worse company than Apple. In fact, I think Microsoft has more of an upper hand than any other company including Google. They're deeply embedded in every field whether it be the web, desktop, mobile, gaming, tv, enterprise or anything else. I'm sure Apply has plans to diversify and go into sectors, but one of the reasons that Apple makes so much money is because it focuses extremely on few products thus reducing productions costs and increasing profits.


Stock market is false anyways.
Microsoft is by far the largest technological company in the world, and has been dominating the technological world for the last 2 decades.
They produce the most software, obtain the highest revenues. (think of it considering MS has divisions that have a higher revenue then the revenue of other companies in the same top 10.
list.)
Microsoft is a stable company, many of us are raised with Microsoft products, many of us will die with Microsoft products.
Because this stability, even though MS is by far the numero uno, the stock prices are allot lower.

Microsoft has done a lot of work to lay a solid foundation for mobile computing. We'll see if they screw-the-pooch or not.

LaP said,
I would not buy either to be honest.

Your loss. Nokia is up over 22.8% in the last week alone, and both Microsoft and Apple are setup for major gains as well.

apple is playing in a field that sooner or later goes upside down. it is too innovative to not be that. they produce nothing too necessary, profit from lifestyle and still enjoy a sphere of awesomness. this is beginning to crack a little.. just a very little...

anyways, so yes in the long run microsoft will still exist, apple might not. if i had to invest, i'd invest in microsoft.

Everyone should also remember a lot of Apple's cash hoard isn't in the US, or necessarily even in dollars. Bringing it home requires either investing it in something to make more money, or getting taxed to high hell on it.

...in other news, bears do crap in the woods.

Anyone that follows Apple and financial information should already know this. Apple creates a new niche market product, and then fails to keep repeating this creation cycle, as it is not sustainable.

In comparison to Microsoft and the recent stock and company value switch that had a lot of basis on Apple's cash on hand, very few people looked at the real numbers. For example: If Microsoft had NOT PAID dividends for the last 10 years, they would have more money on hand than Apple. (Apple didn't pay dividends in this period.)

Apple created the personal computer market, and stop sustaining any advantages. They created the first consumer GUI based computer and stop sustaining it. They created the iPod/iPhone/iPad and are now unable to sustain continued return let alone growth.

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