But over the last three months I have noticed the trend of GOOG outperforming AAPL, Google continuing to race toward new highs while Apple remains stubbornly under $700/share.
How is this possible? Isn't the iPhone 5 much, much better than the best Android kit, like the Samsung Galaxy 3? Isn't Apple beating its rivals in court again and again? Weren't those enormous lines around the Apple stores after the iPhone 5 was announced?
Yes, yes and yes. But in the long run, many investors have concluded, a strong cloud beats a strong device.
Take this typical consumer. I've had an Android device for two years. I want to replace it. Should I buy an iPhone? (Full disclosure. My daughter loves her iPhone, and both my brother and sister love their iPads.)
Maybe. But I have all my contacts on Google, I use Google Plus regularly, and let's face it Google Maps are better than what Apple just rolled out.
Devices aren't just stand alone devices, like PCs were. Devices are connected by their nature. The have limited storage, compared with PCs, because you are supposed to renew them, and back them up, on the clouds.
And Apple's iCloud just isn't that big a deal. There's a store, there's the back-up, and that's about it. While Google's Cloud is global, networked, stable, growing, and has pretty much all the data a digital consumer could want or need.
Calling Google an "advertising company" is missing the point. It's a services company now, competing directly with Amazon.Com (NASDAQ:AMZN) for corporate business. It's a software company now, competing directly with Microsoft (NASDAQ:MSFT) in productivity tools. It's a products company going head to head with Apple. And if you are looking for margins, there's not much to choose between Apple and Google.
So which has the more stable profitability story? Many now say Google does. And I find it hard to argue with them. Thus people are willing to pay more for Google's earnings than for those from Cupertino, because they have more faith in them.