International iPad debut paves Apple's roadmap for even higher market cap
Whether the "Windows era" is genuinely over for PCs is a matter of some debate; but the last week in both US and international markets is making clear that the dominance of PCs as technology platforms is now fully challenged by mobile devices. Today is premiere day for Apple's iPad in Europe and Asia, and though early sales numbers have yet to be tabulated, when China Daily touts the success of the premiere as an event, it looks pretty likely that sales will live up to expectations.
This morning, Reuters cited RBC Capital Markets analysts as estimating Apple could ship as many as 8.1 million iPads alone by the end of this year, with nearly half a million of those expected to be shipped to Japan, one of the countries where iPad premiered today.
Many financial analysts were quick to pour cold water on Wednesday's news of Apple's market capitalization exceeding that of Microsoft, noting that market cap is not a complete indicator of a company's size. Just at the beginning of this week, Seeking Alpha estimated the market cap gap Apple needed for it to catch up with Microsoft at about $15 billion. As of now, Wikinvest estimates Apple's price-to-earnings ratio (P/E, the quotient of its price per share and its earnings per share) at 24.9, with market cap at $230.53 billion; Microsoft's P/E ratio at 13.5, for market cap of $227.86 billion. That means Microsoft earns nearly $17 per share, compared to Apple at about $9.25.
Usually the winner of a market cap battle is the company that wins the perception game. Right now, that's clearly where Apple has the lead. Undaunted by the whole "I-left-my-iPhone-4-at-the-bar Affair," Apple is going forward with its carefully measured product rollout plans, with milestone after milestone. The worldwide iPad launch soon behind it, Apple now looks forward to the launch event for iPhone 4 at the Worldwide Developers Conference in San Francisco a week from Monday. And now there's indication from overseas suppliers that they're filling orders for CDMA iPhones, for use on the Verizon Wireless network in the US in November.
With the Windows 7, Windows Server 2008 R2, Windows Azure, and Office 2010 launches now behind it, and with the momentum suddenly dying down for Windows Phone 7 releases later this year, Microsoft's roadmap ahead sees fewer and fewer milestones -- fewer key moments for investors to look forward to.
As veteran tech industry journalist Wayne Rash observed today in CTOEdge, making market cap events meaningful is a matter of managing market perception. "I'm sure it's surprise. After all, who'da thunk that Apple would ever be bigger than Microsoft? After all, Microsoft is running on something like 90% of the computer platforms on the planet. Apple is running on something like 6%. Of course, Apple is getting its numbers from the iPhone and iPad rather than its small share of the computer market. I'm sure it's also part of Apple's skill at self-promotion. Its stock is worth a lot because people believe it should be worth a lot. After all, Apple has the iPad. What does Microsoft have? In reality, Microsoft has a lot, but that's kind of beside the point. Today's story is Apple's huge jump in market cap."
On the other hand, if one's truly surprised by this, then perhaps she's not an investor by trade. In December 1999, during the thick of the antitrust trial that threatened to break up the company, Microsoft's market cap topped $600 billion.
Maybe the question isn't really whether Microsoft is a sinking ship, or whether the world is ending for anyone. But it does appear that Microsoft's fortunes are tied to platforms that are just treading water rather than taking off like a rocket.