Microsoft: Back on Top

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Includes: AAPL, MSFT
by: Market Blog

By David Berman

It is interesting that the chief executive of Microsoft Corp. (NASDAQ:MSFT), Steve Ballmer, has allowed himself to be dragged into the controversy over the company losing its status as the world’s biggest technology company.

On Wednesday, Microsoft’s market capitalization fell below that of Apple Inc.’s (NASDAQ:AAPL) which raised more than a few questions about Microsoft’s performance over the past decade: The shares have gone nowhere over the past 10 years while Apple shares – a reflection of innovation and marketing savvy – have surged more than 1,000%.

Now Mr. Ballmer is in defensive mode, assuring investors that his company is exceptionally profitable. (It is: The Wall Street Journal pointed out that Microsoft’s January-March net earnings were $4 billion U.S., or nearly $1 billion more than Apple’s.)

He also could have pointed out that market capitalization is a reflection of investor enthusiasm more than anything else. While Apple shares trade at 21 times trailing earnings, making them look a touch pricey, Microsoft shares are priced like a utility – trading at just 13.4 times trailing earnings.

Either way, Microsoft didn’t lose its top-tech company status for long. On Thursday morning, its shares rose 5.1%, giving it a market cap of more than $230 billion – about $2 billion more than Apple.

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