Apple’s historic capitalization

This market capitalization (cap) is also a record, if not a tribute, to everyday technology. The exact amount of Apple’s market cap is $710 billion. This figure is twice that of Google, more than twice that of Microsoft, 2.5 times that of Wal-Mart (the American superstore), four times Bank of America, eight times McDonalds, twelve […]

This market capitalization (cap) is also a record, if not a tribute, to everyday technology. The exact amount of Apple’s market cap is $710 billion. This figure is twice that of Google, more than twice that of Microsoft, 2.5 times that of Wal-Mart (the American superstore), four times Bank of America, eight times McDonalds, twelve times General Motors, and 24 times Twitter.

Apple recorded a profit of $18 billion this past quarter on revenue of $75 billion. Its free cash flows ($30 billion) in just one quarter were more than double what IBM makes in full year. Apple’s stock jumped more than 5 percent during the same period. By comparison, Microsoft’s revenue was about one-third of Apple’s for the period, and Microsoft’s share fell by over 9 percent.
Why the historic spike in Apple’s numbers this last quarter? iPhone 6S did the trick, accounting for almost 70% of the revenue! Good for Apple; when it gains a market share, it holds it. China is on fire – I mean the explosive growth in the middle class sector, people who love and are able to afford iPhone 6S. Yep, emerging markets love those large screens; so when Apple came out with iPhone 6S, its sale went off the roof. True, Steve Jobs hated large screen phones, but Tim Cook, the CEO that took over after Jobs died, doesn’t mind them. So he produced them, receiving in return, the phenomenal revenue and profit figures, and the historic capitalization to boot.
Why are the Chinese middle class rushing to iPhone 6S and not to Samsung Galaxy Note 4, for example? The two phones came out about the same time last year. They are practically of the same screen size and functionalities. I know iPhone has Face Time, and Note 4 does not; but the phones are basically similar overall. They both support the finger print sensor.  The camera on iPhone 6S takes great pictures, but the high definition rendition in Note 4 does better justice to those pictures. The prices in the U.S., with carrier contracts, were comparable for the two phones when they came out. In fact, I was torn between getting Note 4 and iPhone 6S, but I finally settled for Note 4: it has better screen resolution, the keyboard is more advanced, the cursor is functionally superior, and there are no issues with unlocking Note 4 when compared to iPhone 6S.
The general preference for iPhone 6S over Note 4 probably has its roots in emotions rather on reasons of relativity functionality of the two products. Thus, many people buy Apple products as a status symbol rather than for functionality. Apple diehards are especially guilty of this. A question to ask then is why people are so taken by Apple.
There are several plausible reasons, the least of which is not the true passion that Steve Jobs had on his products when he was alive. Also, the legacy of iPod (iTunes) stays alive in people’s memory: iPod was so disruptive and so fun that people never forget. Steve Jobs was unusually serious about producing beautiful and fun products, allowing consumers to give Apple the benefit of doubt on any new product line.
Another interesting aspect of the Apple business model is the willingness of the company to “cannibalize’ itself. There is this quote of Steve Jobs by Isaacson, his biographer: “When the iPod was printing money, he said that someday the people making phones will figure out they can put music on phones. We have to do that first. Now, what you’re seeing is that the bigger iPhone may be hurting sales of iPads, but it was the right thing to do.” This simply means that Apple is quite willing to destroy its own products in the interest of innovation. Compare this with the apparently protective disposition of Microsoft toward its PC software: it’s highly unlikely that Microsoft would “destroy” its bread-and-butter products for an otherwise unpredictable foray into a new product line, “just for the sake of innovation.”
Finally, another factor which some believe has helped Apple is the company’s strong adherence to the principle of integrated business model, whereby the company handles all aspects of its products, from design/manufacturing of the hardware, to operating system development, and the eventual marketing and selling of the finished product. This model allows for synchronized quality control at all levels. On the other hand, although Microsoft has dabbled into hardware in the recent past, its forte has always being in the provision of the world’s operating system for PCs. Unfortunately, getting out of that mold seems to have proved very difficult for the company. (Microsoft still has some cards to play with, though.)
A natural question to ask is where Apple is headed after this massive success. The fact that only one product – iPhone 6S – brought about the current event makes the investors to be uneasy, instead of celebrating unconditionally. (I mean the company has $130 billion in the bank.) The investors’ concern is legitimate because, of all the projects that Apple is currently pursuing – wearables, Apple Pay, solar, etc. – none strikes me as avenues for serious disruption.
The bottom line Apple has attained a level of market capitalization that has not been recorded in history; a tribute to the growing middle class in China. Investors worry about a single-product business.