Apple Overtakes Microsoft As Biggest Tech Firm

This week marked a historic, albeit merely symbolic moment in technology history. For the first time, Apple is worth more than Microsoft. The statistic in question is the market capitalization of the two companies, namely the current stock price multiplied by the number of shares.

In theory it's the price you'd have to pay to take over the company -- though in reality, either the sellers or buyers controlling the deal would ultimately affect the takeover price.

As of the end of trading on Wednesday, Apple's value was $222 billion, overtaking Microsoft's $219 billion. As well as taking the top tech spot, Apple became the second most valuable of all US companies, behind only oil company Exxon Mobil Corp. (Source: huffingtonpost.com)

Microsoft Still Ahead On Most Measures

It's important to note that as well as market capitalization being a very fluid figure (it changes from day to day in line with stock price movements), it's arguably not the best measure of how well a company is actually performing. For example, when it comes to the latest figures for revenue, Microsoft has a $58.4 billion to $42.9 billion lead. (Source: nytimes.com)

As for pre-tax profits, Microsoft is way ahead with $20.4 billion compared with Apple's $11.7 billion. And Microsoft's total assets -- the value of its buildings, machinery, stock and intellectual property among other things -- is almost 50 per cent higher than that of Apple.

The real significance of the market capitalization is the way stock prices change. On one level, it's very circular: people buy stock because they think the price will rise and that demand causes the price to rise. But beneath this, investors also buy the stock because they hope to get big dividend payments, which derive from big profits.

Figures Based On Expectations

Apple's rising market value is an indicator that investors believe the company has a strong outlook. That may be because Apple is doing a better job of diversifying and keeping up with new market sectors.

There's no dispute that Microsoft still utterly dominates the market for full-scale computers. But Apple is doing as well or better with other devices such as smartphones, portable media players and, most visibly in recent months, tablet computers.

Microsoft won't exactly be devastated by the news: it's still a gigantic company with a huge turnover and whopping profits. But it may feel under pressure to make sure market perception doesn't turn into real changes to momentum.