What a long, strange trip it's been.
Apple's market capitalization officially passed Microsoft's Wednesday afternoon, making the Cupertino company, for the first time, the largest technology company in the world.
With a market cap of $241.5 billion versus Microsoft's $239.5 billion, Apple also became the second-largest company on the S&P 500, according to Standard & Poor's analyst Howard Silverblatt. At the moment, only Exxon Mobil is bigger.
Market cap is a measure of the total value of all the outstanding shares of a company, and it's a proxy for what investors think the company is worth, taking into account future earnings and future growth. As such, it's a measure of expectations, not reality: Apple's annual revenue was $42.9 billion in the most recent fiscal year, versus Microsoft's $58.4 billion. Both look puny next to Exxon Mobil's $301.5 billion in annual revenue.
Market cap is also a fickle mistress, and fluctuates wildly depending on stock price, so Apple's position as the king of the hill may be short lived.
But it's a significant milestone for a company that looked like a has-been just one decade ago.
Ten years ago, Apple was all but written off by most expert commentators. An also-ran computer company that once dominated geeks' hearts and minds with the Apple II and the Macintosh, Apple made serious missteps in the 1990s that relegated it to a tiny niche of the overall computer market, with market share in the low single digits. It was all but certain that its share would continue dwindling until the company faded away entirely, like Commodore, Atari, Tandy and dozens of other computer makers before it.
What the commentators didn't count on was the string of hits Apple would deliver over the next 10 years. Founder Steve Jobs returned to Apple in 1996 and removed then-CEO Gil Amelio in 1997, making himself interim CEO (and then eventually dropping the interim title).
Jobs then instituted what can now clearly been seen as a far-reaching strategy to consolidate and simplify Apple's product line, while gradually leveraging the company's strengths (ease of use, consumer-friendly branding, attractive design, and high margins) to expand into new areas of consumer technology.
Jobs also carefully created a new company culture, one that's centered on innovation, control and secrecy. That approach has alienated many people — and runs counter to Silicon Valley received wisdom about the value of openness and sharing — but the proof is in the pudding. With a CEO of Jobs' caliber, at least, that kind of top-down control works.
This list of product rollouts tells the story:
- iMac (Bondi Blue) – 1998
- iBook (clamshell) – 1999
- iPod with scroll wheel – 2001
- Mac OS X – 2001
- iTunes Store – 2003
- MacBook (switch to Intel) – 2006
- iPhone – 2007
- App Store + iPhone SDK – 2008
- iPad – 2010
By 2010, Apple had firmly established its dominance (in mindshare and innovation, if not in absolute numbers) in three areas: computers, MP3 players and smartphones; the company also controls an increasingly large marketplace for music, video and applications with iTunes, which counts its users in the hundreds of millions and has served more than 10 billion songs, 200 million TV shows, 2 million films and 3 billion apps. Apple's now the largest distributor of music in the United States with 26.7 percent market share, according to a Billboard analysis.
The recent introduction of the iPad — Apple claims over a million have been sold so far — may not move the needle much in terms of revenue, but it's probably what pushed the company's stock over the top. Early numbers of 200,000 sales per week suggest that Apple's iPad is on track to outsell the Mac.
The iPad's launch epitomized the Apple way: It's a beautifully designed, precisely engineered piece of hardware, based on a software and apps platform largely controlled by Apple, and introduced through a carefully orchestrated marketing program that encompassed every detail of public relations, advertising and even retail presentation.
As a result, the iPad captured the imagination of the press and of investors worldwide, and has surely helped propel the company's stock price to its current heights.
The stuff of business school case studies, to be sure. But it's a feat that few companies have been able to pull off.
By Dylan F. Tweney