Finance

Google’s market cap has surpassed that of Microsoft. Market gyrations continue, so for all we know it's possible for Microsoft to inch back ahead of Google tomorrow. But the milestone for Google is meaningful nonetheless.
Simply put, it means the PC isn’t as important as the web. The operating system is not nearly as important as content.

Google’s entire business is based around helping searchers find content, while helping publishers monetize their content.  Android is an extension of this, as is YouTube, despite most of the revenue coming from advertising in the form of Adwords (and Adsense). 

It’s hard to consider Microsoft much of a growth business anymore.  The PC is a mature product segment.  Windows OS is well established and represents more of a stable business than one with exciting growth. Same goes for the enterprise components of Microsoft’s business.

But the web? Still growing. Like crazy. Bing has been no match for Google.com, and Microsoft is nowhere in video (think YouTube) and scrambling to make up for perpetually failing to gain share in mobile with Windows Phone 7 and, soon, Windows Phone 8.  Meanwhile, Android has become the No. 1 mobile operating system on the planet. 

Microsoft is the established leader of the old world. That world consists of an expensive operating system running on cheap hardware. The new world consists of operating systems that come with mobile hardware, and run a variety of cheap apps and connect to cloud storage. Google and Apple are making life incredibly tough for Microsoft.

Bill Gates is unquestionably brilliant.  He is the king of the PC era. He always will be. And it’s rare for a technology company to hang onto its leadership as the market moves through a powerful transition, as the computing market did from desktop PC (and OS) to the web. Google is winning. The stock market is telling us this through buying and selling votes. 

It’s undeniable, and it’s exciting to see it finally happen.

 

Reader comments

End of an era: Google is now more valuable than Microsoft

33 Comments

I never thought I'd see the day that ANY IPO would have more value than Microsoft. Obviously, Microsoft isn't going anywhere but there brand has stagnated somewhat as far as growth. Google has so many entities (Android, Google +, YouTube, etc.) and it's highly unlikely that Microsoft is going to do anything vastly outside their range of Xbox or anything Windows related.

Why does everyone at my workplace use PC's/Laptops and not Chrome Books (or Mac Books)? It's easy to write of MS in the consumer space (for now) but don't forget about the enterprise space.

Everyone at my workplace uses Linux. Either Ubuntu, Kubuntu, or Redhat. Microsoft is slipping away because it lacks a lot of usability. The OS is just crappy. It is slow, heavy, and has memory leaks and security holes. With Google docs, the only reason to have Windows (MS Office) vanished. I run Ubuntu and don't even think about WIndows. Keep in mind I am a computer programmer working at a geo-spacial company. Microsoft is losing ground, not gaining it and I don't see that trend reversing. You can make the point that a lot of applications are written only for Windows but with wine you can even run .exe. The main thing is in 10 years, we won't even have desktop applications. Everything will be on the web. I wouldn't even think about writing a desktop app anymore. The only logical thing would be for games. But there will be a solution for that in the near future too (super computers on the cloud with fiber optics).

Everyone at my workplace uses Linux. Either Ubuntu, Kubuntu, or Redhat. Microsoft is slipping away because it lacks a lot of usability. The OS is just crappy. It is slow, heavy, and has memory leaks and security holes. With Google docs, the only reason to have Windows (MS Office) vanished. I run Ubuntu and don't even think about WIndows. Keep in mind I am a computer programmer working at a geo-spacial company. Microsoft is losing ground, not gaining it and I don't see that trend reversing. You can make the point that a lot of applications are written only for Windows but with wine you can even run .exe. The main thing is in 10 years, we won't even have desktop applications. Everything will be on the web. I wouldn't even think about writing a desktop app anymore. The only logical thing would be for games. But there will be a solution for that in the near future too (super computers on the cloud with fiber optics).

Microsoft Office is hardly the end all be all of Microsoft's Enterprise applications. Google Docs is good, but no where close to full functionality of the MS Office Suite. Take a look at http://technet.microsoft.com/en-us/subscriptions/hh442910.aspx and download the full product list. Microsoft's foothold is so deep in the business world it's nearly impossible for them to be up-ended now. There is no other company that offers the amount, flexibility, and integration that Microsoft does with it's enterprise offerings.

With windows 8 failure like vista i dont see MS share going up anytime soon.

Edit: this is pretty interesting when i checked this morning google and MS had 800 million difference but now its 2 billion. MS went down and Google went up.

How do you figure that Windows 8 will be a failure? I'm hoping that Windows 8 and Windows Mobile 8 will give Google and Apple a run for their money. The more competition the better.

The sad thing is....MICROSOFT HAD THIS!
Had they not let windows mobile dwindle...NOOOBODY would have cared for android.
The ROM community for windows mobile was MASSIVE!
I was there. right at the beginning. But now google is everything microsoft wishes it could be but could have been.

This. My Touch Diamond was about 6 months too late. With CE and WinMo 5 and all it's later iterations...

If MS had invested it's resources in the Mobile OS then, I'd probably still be there. They were the ONLY game in town as Palm/Trio were struggling to keep up.

"The sad thing is....MICROSOFT HAD THIS!"

Agreed!

Folks forget too easily that once upon a time not too long ago (up to 2007 to be exact), Windows, RIM, and Palm had the large market share of the mobile OS users. From 2004 to 2007, it had enough to be a major player. iOS showed up and MS got caught blindsided. So much that it took them almost 3 years to retool their whole OS. From up to 37& share in 2007 to 2-3% now.

Agreed! I and all of the tech enthusiasts wanted a Win Mobile device. Not Palm, not BlackBerry, and while the G1 was really interesting Android wasn't there yet. The iPhone really caught them napping, but so did RIM and Android with their pricing. The OG Droid, BB Curve and BB Pearl started eating Microsoft's lunch on the low end while the iPhone took the high end. HTC made some great phones for WinMobile, but man they weren't cheap!

That paints quite the story in real dollars, but let's not forget that both Apple and Google have a ways to go before they catch up with where MS was in the late 90's in terms of nominal dollars. MS back then, adjusting for inflation, would have been worth about $850 billion today. I don't doubt for second that they both will though.

Then again, nominal dollars does indicate how far they have fallen.

This is true.

You also have to realize that Market Cap is a poor indicator of the wealth of a company. It is after all merely a collective opinion about the share price, which can be inflated or collapsed on every news cycle. Market cap is not something the company can spend, and not something a real investor puts much stock in. (See what I did there?)

MSFT has nearly twice the revenue, twice the gross profit, and also half again as much free cash on hand as Goog. MSFT also has twice the cash on hand as AAPL.

If I had the time to buy another phone just to evaluate, it would be the HTC running WinMo8. Winmo8 has a real chance, and its different enough that I'd actually like to try it out, just not as my daily driver.

Thanks for actually spelling out the real logic. People grab these numbers as if the mean something and they really mean very little. Google's numbers are also rooted in an era of lavish IPOs that will never be seen again. Quite frankly, if you shifted the current market back to when Google went public, my bet is it was not fare a lot better than Facebook. The one thing I would correct though is it is Windows Phone 8 - they dropped the mobile part.

let me know when Google exceeds Apple in market value....

that's at least 25 years away... if ever... :(

WSJ predicts that Apple will top $1 trillion in value by 2015....

$1 Trillion....

Yowza!

Don't you think is due much in part to Apple starting to take share in corporate hardware and software spaces like medicine, where they used to only thrive in creative media areas? It seems to me that apple has gained a reputation for secure products in spaces like this that used to be only Microsoft territory. I see it more and more in my line of work that enterprise and corporate adoption of apple is gaining rapidly, and they don't look to Google for these services in replacing Microsoft. A lot of medical technology is using apple hardware and software. Is there any chance that google will grow into these and other types of corporate and enterprise use? I think the open and presumed (right or wrong) less secure image of google won't help to take much of this share that Microsoft is losing.

And it is nuts to think how long ago it seems that WinMo and Palm were doing so well in business mobile. I guess that was before the true monetization of mobile arrived and it was all about productivity back then.

But apple is a one horse company. One big stumble on the iPhone platform, one import ban, and they get cut in half overnight.

Its precisely stories like this one, showing Google as the new Microsoft, hitting the mainstream press that can depress stock price enough to send Market Cap tumbling.

Mr Zuckerberg has some stock he would like to sell you if you believe otherwise.

"Simply put, it means the PC isn’t as important as the web. The operating system is
not nearly as important as content."
I usually agree with most of your posts you have good analytical mind. But his I have to disagree with.

PCs matter though they are transforming and OS still are very important, but their cost has dropped to $0. The real killer of MS was Open Source. Open source browsers such as FireFox and Open Source OS like Linux put an end to MS iron grip. It was the reason MS went after Linux aggressively, unfortunately for MS Open Source does not have one face.

Now that OS costs are so low and the Web standard is so strong MS cannot control the market which gives the edge to content companies.

So because Microsoft is comfortable in the PC industry, thats a bad thing? Investors see that as a safe bet. Now for those who want to make more money and grow grow grow well Google or Apple as far as tech stocks seem like a way to go. I dont think its an end of an era though. That is overstating things.