Microsoft has earned this week the title of the most valuable tech company from Apple – at least briefly – and the shudder in the scoreboard says a lot about how companies are heading and who leads them.
Right now, investors seem to have much more faith in Satya Nadella than Tim Cook.
And probably for good reason. Underneath, Microsoft has found another act. He made a big and courageous cloud bet and pays off.
Meanwhile, Apple Cook left the shareholders who were interested in what another story the company has over the iPhone – if any.
Apple's concerns have been particularly acute since the beginning of this month, when they announced their latest results. Although the company's revenues and profits continued Wall Street, they sold fewer iPhones than expected and offered a somewhat disappointing outlook for the holiday quarter. Worse, it announced that it would soon stop reporting the number of iPhones and other devices it sells each quarter, and many fear that sales will begin to decline significantly. Since then, these concerns have become more prominent.
Potential decline in iPhone sales is a huge problem for investors because Apple is basically a telephone company; iPhone has more than 60% of its revenue and has been for years. As iPhone goes, Apple goes.
Apple did well under Cook, but he is not a product guy
Cook may be a little confused about the seemingly sudden loss of faith in his leadership. After all, Apple has done exceptionally well since it was taken over by Steve Jobs seven years ago. During this time Apple's revenues and profits more than doubled. The company has returned hundreds of billions of dollars in cash to shareholders for redemptions and dividends. It has become the most valuable and most profitable company in the world and at its peak market capitalization exceeded $ 1 trillion.
But in fact, the concerns about Cook are long. Apple is a product company, but Cook, as Jobs so memorably told his biographer shortly before he died, "is not a person's product." It's great in operations. He proved to be a good manager, but not a visionary of the product.
It's not like Cook did not try. In fact, he repeatedly tried to expand Apple's business with new products. For many years, iPad has been pushing another major Apple product line. Apple launched Apple Watch. The company has made extensive investments in cars, television, expanded reality and media streaming under its leadership.
But little of it paid off – or at least nothing was big enough to make Apple significantly less dependent on the iPhone. After the initial boom, iPad sales fell and then stagnated. Apple Watch was, at best, a minor hit. Apple TV has never been a "hobby" for the company.
And failures and disappointments continue to accumulate. Apple Music is lagging behind behind Spotify on a global basis. The streamlined videocommunication series that the company has released so far has been broadly strengthened and Apple's great rumored efforts to remake the television industry have never materialized. And who knows when or sometimes we will see Apple's car model?
Cook says Apple's next law is in service
In spite of all this, Apple has managed to pick up because the iPhone has continued to be a cash bank, and the company has repeatedly found ways to sell juice, whether registering new transport partners, supermerising the equipment, or raising prices. But these are marketing and business innovations – not really products. And now that Apple seems to be exhausted, Cook's flaws on the front of the product are back to the forefront.
The company's response to what comes next is that it becomes a "service" company. It is increasingly capable of persuading customers who own their phones and other products to sign up for services such as Apple Music or iCloud Storage or AppleCare Warranty. Many analysts expect Apple to launch a streaming video service next year and potentially link it to some other monthly subscription offerings.
However, Apple's previous success in transforming itself into a service company has been limited. Last year, it received approximately 14% of its revenue from services. That was from 13% in the previous year and 11% in 2016. That's nothing to bite, but it's not exactly a corporate man.
And the company's service efforts might prove to be difficult if its sale of phones begins to decline. Fewer customers in the device would probably have fewer customers for warranties and other services.
Nadella showed she was a visionary
The fact that Apple is in this position at the moment is rather ironic. Last time, and Microsoft knew the title of the most valuable tech company – in 2010 – it was Microsoft, whose future investors have questioned.
At that time, when Steve Ballmer was CEO, Microsoft was big, missing and slow. Just like Apple and iPhones under Cook, Ballmer Microsoftu dominated one company – the PC industry – but repeatedly failed to develop new business lines and missed major new trends.
But then Nadel came. In a sense, for Microsoft, what is Jobs for Apple. He turned the company, and not only gave direction, gave her a new act.
Nadel, whom he took over in 2014, bet on the cloud, and he was inexorable – even reckless – for Microsoft to focus on this work. It is a shaken company, management, organization and product line to redirect Microsoft to this opportunity.
Read this: Microsoft Cloud Transform is on its way to another $ 1 trillion
And it's paid – big time. In the last fiscal year, 23% of the total revenues from cloud computing products and services came from Microsoft. That was just 3% four years ago. This may look like a fast transformation.
Azure cloud service for Microsoft has proven to be a huge rival of Amazon Web Services and grows twice as fast. Meanwhile, he becomes the leading player in another part of the cloud market to host applications in the clouds
Investors are betting to come more. Today, Microsoft is valued roughly the same – and sometimes even more – than Apple, despite its revenue for the last fiscal year accounting for less than half of iPhone makers, with a profit of less than a third.
This is a good indication of the investors' belief in Nadel and their enthusiasm for the future of Microsoft. It's also a certain sign that they think that Cook may be the best days of Apple.