The Different Trajectories of the Tech Elite
Believe it or not, there was a day when Apple really just was a fruit (and without a missing bite), and Google and Microsoft were inscrutable words that would have induced bemused laughs even at the cocktail parties of tech executives. If you are reading this, you are all but guaranteed to have used products of at least one, if not more, of those companies to reach this page. Everyone knows the story of the social network (here’s some additional info): immortalized in the Aaron Sorkin film about the establishment of Facebook (NASDAQ: FB). As the media waxes skeptical about the still-young company’s future, I’ll explore the trajectories of the three biggest tech companies in history, all pioneers in their own right.
It is only appropriate that any discussion of the largest tech companies starts with Apple (NASDAQ: AAPL), which gained news attention when it became the most valuable listed company of all time. Apple stock is now trading at over $660 per share, a far cry from the $22 it asked for at its IPO in 1980. Apple’s record-setting market cap of over $623 billion makes it worth more than its two biggest rivals, Microsoft and Google, combine. While some analysts predict Apple’s stock to continue rising until it reaches upward of the $900, there is increasing skepticism in the post-Steve Jobs era. When Apple arrived on the scene in the 1970s, few believed the Reed College dropout could contest the behemoth that was IBM in the machines market. Jobs, however was firm in believing in his visions and convinced the world to buy his products. Apple still has some of Jobs’s ideas in its arsenal, such as the upcoming iPhone 5, as well as the Apple TV. Recent advertising campaigns have garnered criticism for being the antithesis of the visionary’s spirit, however, as they concentrate on fixing things as opposed to building them. It is still too early to tell if Apple will degenerate into a Best Buy (NYSE: BBY) type “Geek Squad” model or if it will be able to generate revolutionary works of genius in the years to come.
When one talks about Apple’s historic moment, it is impossible to ignore the company whose record it beat by reaching the largest market cap of all time. Until August 20, 2012, Microsoft (NASDAQ: MSFT) had been the most valuable listed company in history, a milestone it reached in 1999. Microsoft’s ascent was more rapid than Apple, as it reached its peak only thirteen years after its 1986 initial public offering of $21 a share. At that point, Microsoft shares were going for $119 apiece, four times their current worth. This equated to a market cap of $616 billion, which had been the top mark for thirteen years. Now as Microsoft tries to regain its perch by purchasing Skype and positioning itself in the mobile phones industry, one must understand what happened to the tech giant in the first place. Several crises led to Microsoft’s steady decline, including the troubled leadership of Steve Ballmer and mismanagement of operation with the Vista snafu. Perhaps the primary reason revolves around Microsoft’s delayed relationship with competitors in the marketplace, especially as Apple started to rediscover itself. Yet, when exploring this concern, analysts place the emphasis on a company that came and took the search market completely out of Gates’s hands.
The story of Google (NASDAQ: GOOG) took place closer to the present and is thus more familiar. Two Stanford Ph.D. students, Larry Page and Sergey Brin, commenced the search engine project in 1996 and had a working product in the years immediately following. This attracted venture capital ahead of the company’s IPO in 2004, just a year after discussion of a possible merger with Microsoft. Reflecting the changing dynamics of how tech companies were treated by Wall Street, Google released its shares at $85. After its IPO, Google had a market cap of over $23 billion, about a quarter of Facebook’s vaunted opening valuation. In the years since, Google has developed its business model well beyond search results, both in computing with its operating and browser, as well as beyond with its increasing market share in the smartphone industry. Google is full of innovative ideas for the years ahead, including its driverless car and Google Goggles. Perhaps the most underrated of its products is the Google Wallet, which has attracted criticism due to privacy concerns but establishes Google’s technological grasp as society moves toward greater acceptance of mobile payment systems.
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Disclosure: The author has no holdings in the stocks mentioned in this article and has no plans to initiate any positions within the next 72 hours. He does, however, have the intention of rating these stocks on WealthLift.com, a social media website where investment ideas are shared openly and free.