NEW YORK - Probably at one point in time it was inconceivable that Microsoft the small software firm could unseat technology giant IBM, a company which had been around in the early 1900's and a company on the Dow Jones Industrial Average. In 1986, IBM had a market capitalization of $36 billion compared to Microsoft's $850 million.
In 1992 Microsoft passed IBM and the company would eventually dwarf IBM by hundreds of billions of dollars. At Microsoft's height it had a market capitalization of $420 billion which looked down on IBM's $136 billion.
Since then Microsoft stock is down 49% and IBM's is up 54%. IBM stockholders have reversed a $270 billion gap mostly by the help of Microsoft's decline. Today Microsoft has a market capitalization of $203 billion, which is $2 billion less than IBM's. Microsoft was passed by Apple almost a year ago.
Investors are concerned that Microsoft will be less competitive as people move from software to "cloud computing" where programs run applications from the internet. Some people see an age where there is no operating system. Though Microsoft is currently recording record profits: investors are looking to the future
It must be a big hit to Bill Gates's ego to see his beloved company at number 3. Warren Buffett friend of Bill Gates will probably let Bill Gates know when his company, Berkshire Hathaway passes his friends. Microsoft will need to decide on a new vision if it will survive as a company. Shareholders hope the company does not become another Kodak. Microsoft benefits from the fact it will likely be making at least $20 billion a year for the next several years. The company will need to allocate that capital efficiently.
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