How Apple Outgrows Microsoft By 2010

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Includes: AAPL, MSFT
by: 10layers

Could Apple (NASDAQ:AAPL) have a shot at outgrowing Microsoft (NASDAQ:MSFT) within the next 5 years?

Both Microsoft and Apple have seen healthy revenue growth in the last 5 years. Microsoft’s revenues have grown approximately 60% from just under $30B in 2002 to over $44B in 2006.

However, while Microsoft has grown linearly for this period, Apple has accelerated with revenues of just under $6B in 2002 growing to just under $21B in 2006. An impressive 250% revenue growth! In other words, Apple has been growing much faster than Microsoft.

The graph below shows the quarterly earnings for the companies between 2002 and 2006:

aaple-vs-msft-1

The graph below shows an extrapolation of Microsoft’s linear and Apple’s almost exponential revenue growth. The revenue figures are for the trailing 12 months to provide data to base trend lines on that is insensitive to seasonal variations. (Such as the Christmas quarter normally being a stronger one.) The trend lines selected where the ones providing the best fit: a linear one for Microsoft and a second order polynomial one for Apple.

aaple-vs-msft-2

As you can see, a pure extrapolation shows that Apple could catch up with Microsoft as early as 2010 or 2011, given the current growth rates.

Of course, an extrapolation is just an attempt at predicting the future based on the past. Caveat emptor etc. It is clear however, that it is likely that Apple will give Microsoft a run for their money. So to speak.

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