Is Microsoft making a comeback?
Ever since Steve Ballmer quit the stock has been rallying. Many investors are encouraged by its focus on business solutions and “cloud” applications. But it’s still facing the same competitive landscape: an internet juggernaut—Google—and a host of disruptive devices at Apple. And the recent rally by Microsoft, Apple, and Google are driving the Nasdaq to new highs.
But it was only 15 years ago that Apple went cap-in-hand to Microsoft for a $150 million lifeline. With stable funding Steve Jobs was able to stabilize his Mac sales and go on to introduce the iPod, iTunes, iPhone, and iPad, sending waves of creative disruption through the music, travel, publishing, telephone, and of course PC businesses. At the time of the deal, Apple was worth $3 billion and Microsoft $500 billion. Now Microsoft has fallen to $300 billion and Apple is worth $500 billion. Jonah swallowed the whale.
At the time, Microsoft was keeping Apple’s operating system viable so the folks at the US Justice Department would have a harder time proving Microsoft’s monopoly. Bill Gates was propping up what looked like a permanent basket-case. It seemed like a brilliantly proactive legal move. What could go wrong?
It’s all a reminder of how quickly things change. We like to invest for the long-term, but sometimes, a few years can seem like a lifetime.
Douglas R. Tengdin, CFA
Chief Investment Officer