When we compare technology giants that compete but not always directly, we need to keep the basics in mind. It’s all about money. Yes, pride, marketshare, profits, mindshare, customer base, and shareholder value are important, but all are led by money.
The end game of profit is the only true indicator of success, whether short term or long term. For a stock to retain value, profit is the carrot on the stick. Sooner or later, a profitless but valuable tech company will, well, lose value if it doesn’t make profits. Let me look at Apple and a few competitors, including Google and you’ll see the end game is the same.
Customers vs. Users
When we compare major technology companies, a number of valuable brands rise to the surface. Apple, of course, because the company has a tradition of disrupting market segments, soaking the profit out of each one, and setting the general direction for future products.
Google – For whatever the reason, Google comes to mind as an Apple competitor despite the company’s many product failures. Google is an advertising company which gives away software to users and then extracts data collected from those users. Google’s hardware technology efforts don’t amount to a hill of beans (relatively speaking, of course). The end game is profit. Google makes plenty and both revenue and profit are growing but not because the company has a long list of hardware hits. Besides, Android vs. iPhone is just like Windows vs. the Mac. False equivalencies both. Google is not well diversified (where profit is the end game) but shareholders probably don’t care as long as GOOG remains at record levels.
Microsoft – The Windows and Office maker completely missed the mobile device revolution and it doesn’t look like its ever going to compete, despite doubling down on Windows with tablet notebook hybrids and launching its own reference hardware designs. Surface sales have been dropping while Apple’s Mac remains at record levels. Yet, Microsoft has diversified somewhat with hardware, cloud services, and pushing Office and apps to both iOS and Android. Based on the stock price you would think Microsoft has found a way to compete with both Chromebooks at the low end and the Mac at the high end, yet the squeeze is on in the middle and that’s where Microsoft lives. Profit keeps the company going and the stock price elevated, but what goes up, must come down, and MSFT is at record levels. Again.
Amazon – Allow me to include the online retail giant here because the company’s CEO fancies himself as a latter day Steve Jobs without the charisma or vision. Still, Jeff Bezos deserves credit for fooling investors for more than two decades, and funneling meager profits back into infrastructure. Amazon’s retail business is dominant but has many competitors who also know how to make a buck. Bezos company wants to be the next Apple but despite a dozen or two mud products thrown against the public’s wall, nothing seems to stick. Yet, AMZN’s stock chart looks like a hockey stick.
Apple, of course, is a story unto itself. Revenue and profits are at a record plateau but APPL itself is in record territory. Again. Profits are more than Amazon, Google, and Microsoft combined, but Apple hasn’t pushed out a major new product since the iPad in 2010, and sales of the iconic tablet are going south while every product commands the lion’s share of profits.
The end game for each company is the same as it is for most publicly traded companies. Profits. And profits bring about shareholder value. That explains why each company has an enormous market cap (with Amazon’s somewhat anemic profits).