Google’s stock is on a rocket ride while Apple’s stock seems to be floating in the doldrums. Again. With both Microsoft and Google on a stock price joyride and ringing in the profits, how is it possible to argue that they’ve blown it? And what did they blow?
The Present Is Not The Future
Allow me to avoid the ridiculousness of the stock market, which is little more than legalized gambling where only the house wins, where good companies are penalized for being profitable, while executive charlatans milk investors at every turn, and focus on what I see are the signs behind the smoke screens emanating from Microsoft and Google.
Both Microsoft and Google have missed the future by not performing in the present. Over the past dozen years or so, Microsoft has missed one technology revolution after another, most of which are dominated– at least in the all important profit-share category– by Apple.
Microsoft missed where Apple succeeded. Apple Stores vs. Microsoft Store. iPod vs. Zune. iTunes Music vs. whatever Microsoft has. iPhone vs. Windows Phone. iPad vs. Surface. i (Apple made more money in the first quarter of Watch sales than Microsoft did with the so-called successful Surface).
PC sales are down and Microsoft has been forced to giveaway the company’s cash cow, Windows, to compete with the likes of Linux, Chromebooks, and OS X. It’s not pretty. Apple owns the profits of the industry while competitors scramble for table scraps. So far, Microsoft’s reinvention of itself as a cloud player with subscription services for Windows and Office has yet to bear fruit.
Even search engine giant Google has missed where Apple succeeded. iPhone vs. Android. The former owns more than 90-percent of the smartphone industry’s profits, while the latter owns the lion’s portion of marketshare– a bullet point which has yet to translate into any real profits for Google (the company has spent billions of dollars more than it has made in profits).
Alright, from those perspectives both Microsoft and Google blew it. How and why?
The key to those apparent but not yet fully public failures lies in the difficulty both companies have in diversifying from their successes. Even though 70-percent of Apple’s revenue comes from the hot-selling iPhone business, everything at Apple makes money. Mac, iPod, iTunes, Apple Stores, Apple TV, App Stores, iPad, Watch.
Microsoft? Windows is a dinosaur and cannot be counted on to bring in the billions in profits as it has in the past. Office? Who needs it? Competitor apps– OpenOffice, Google, Apple– are free. Everywhere else in Microsoft’s product line you’ll see financial failures. Why? Misguided executives devoted more time to rearranging the chairs on the deck of the Titanic than they did paying attention to the changes Apple caused throughout the technology industry.
Google? About 90-percent of everything the company makes in revenue and profit comes from search engine advertising, which has yet to translate into a cash cow on mobile devices? Why not? Mobile is not the desktop, thanks to all the apps foisted onto the mobile scene by Apple’s App Store. Google just isn’t necessary on the mobile devices which are used the most– iPhone and iPad. What of Google’s R&D? Glass, self-driving cars, internet balloons, and other high profile products of the future? That’s the problem. Google has difficulty bringing new products to market. R&D is one thing. Product sales are something else; something in which Apple excels.
Google’s product development moonshots– including robots, driverless cars, space elevators, Wave, Buzz, Lively, Glass, Google +, and even Android– have been highly public financial failures. What makes these failures more acute is where Apple’s R&D expenditures compare to the companies which spend the most on R&D. Of the top 20, six are automobile manufacturers, seven are health care or drug companies, four are electronics companies.
Apple is not on the Top 20 R&D spenders yet has more to show for their research and development dollars than any competitor. Why the disparity? It’s actually simple. Apple ships new products that customers can buy and use; products which are well integrated into the company’s product mix. Apple remains a highly copied company in every product category except methodology.