Apple : An emerging threat for Microsoft?

Apple Inc, the famous iPhone and Mac maker was just billion company in 1998, but has reached the market value of 0 billion. Now, market analysts have started an assumption that “can Apple replace Microsoft as world’s most valuable tech company?” Microsoft Corp, the software giant is the world’s most valuable technology company with over 0 billion market cap. The company’s Windows operating system runs over 92% computers across the world.

Reasons for such assumption

The assumption to unseat Microsoft from the top position comes due to strong cash and fat margins of the Apple, besides its successful product line, apps store, expected tablet PC and the latest Snow Leopard operating system. The company’s best-known hardware products include Macintosh PCs, the iPod and the iPhone. Apple has about 250 retail stores in nine countries and an online store for its hardware and software products.

Fortune magazine reported that Apple has been the most admired company in US (2008) and in the world (2009). Analysts said that the reasons for Apple’s high growth are its market-driven innovation and interesting software offerings, which leads to repetitive purchases.

Apple has doubled its annual revenue since 2005 to .5 billion and earnings per share (EPS) up more than four-times to .29. Whereas, in the same time frame, Microsoft’s annual revenue has ascended just 47% to billion, with EPS up 45% to .62.

In the last quarter, Apple reported more than what Wall Street estimated, which sent its shares to a record-high of 9. Analysts predict that the company’s share prices will touch 0, which calculate its market value to 0 billion.

In the past decade, Apple’s stock rose by close to 900% as compared to about 35% fall in Microsoft’s shares. Also, Apple reports cash flow of .1 billion in the recent quarter and has billion in cash and marketable securities, which equals to a share in cash.

Microsoft’s answer to Apple

Various market analysts said that Microsoft has a strong product cycle coming with Windows 7 and Windows server 2010. The company has strong balance sheet and with the recent quarterly results, analysts enhanced the Microsoft’s price targets to , which would transform its market cap to 0 billion. It seems that the Microsoft’s growth story is not as fast as Apple, but the Redmond giant still has solid growth drivers with corporate product businesses.

The company’s latest efforts like Windows Starter 2010, apps store, Bing search engine, Yahoo-deal for ad-sharing, Windows Mobile 7.0, Zune platform, Windows 8 operating system and Project Natal, which will certainly compete Apple and others effectively.

Discussion

Apple trades around 24 times forward earnings estimates as compared to 16 times Microsoft’s forward earnings. Various investors see Apple to approach Microsoft in next two years, if the two companies grow with present pace. Thus, we can say that Apple is now visible in Microsoft’s rear-view mirror. Apple’s future Tablet PC will drive a lot of earning to the company and will target Microsoft’s market position.