Can Apple take Microsoft's perch atop tech pile?
SAN FRANCISCO (Reuters) - Apple's phoenix-like rise from the ashes has propelled its market value to $180 billion (108 billion pounds), raising the possibility that it could challenge Microsoft for the technology crown.
Microsoft is now the world's most valuable tech company with a commanding market capitalization of $250 billion. Its Windows software is in nine out of 10 personal computers.
It would take impressive execution for any company to unseat Microsoft (MSFT.O) at the top of the technology heap. But Apple, flush with cash and fat margins, has catalysts in the iPhone, the Mac PC and a highly anticipated but unconfirmed tablet device expected to launch next year, analysts and investors say.
"Apple's (AAPL.O) revenue growth continues to outpace, driven by market-changing innovation and sticky software offerings that lead to repeat purchases," said David Dillon, a portfolio manager at HighMark Capital Management, which owns both Apple and Microsoft shares.
He said Microsoft is more of a value-based play, with "a strong product cycle coming with Windows 7."
Apple's revenue is still far smaller than that of its arch nemesis, but it is growing at a more rapid rate. Apple's annual revenue has more than doubled since 2005 to $36.5 billion, with earnings per share up more than four-fold to $6.29.
Over the same period, Microsoft's revenue has risen 47 percent to $58.4 billion, with EPS up 45 percent to $1.62.
Barton Hooper, an analyst with Weitz Funds, which owns shares of Microsoft but not Apple, called the giant software company a "moderate growth story" with a strong balance sheet.
"The rate of growth of Microsoft isn't happening nearly as fast as it is for Apple," he said. But he noted that Microsoft still has solid growth drivers, such as the corporate PC refresh cycle and its server and tools business.
Apple trades at around 24 times forward earnings estimates, as does Google Inc (GOOG.O), which has a similar market capitalization and is viewed as another potential challenger to Microsoft. Microsoft trades at roughly 16 times forward earnings.
THE REBIRTH OF APPLE
Apple's last quarterly results blew past Wall Street estimates and sent its shares to a record-high $208.71.
While the stock has retreated in recent weeks in a broad market pullback, analysts have a price target as high as $280 on Apple, which would give it a market value of $250 billion.
Following its quarterly report last month, analysts also boosted their price targets on Microsoft to as high as $36, which would take its market cap to $320 billion.
Apple is now visible in Microsoft's rearview mirror, but a decade ago the picture was far different. Continued...
