> Apple is a design company selling tools that empower people. [...] Microsoft is an enterprise-focused services company focused on helping people get work done. [...]
Oh dear, what drivel. By that logic, BP is not an oil and gas company, it's logistics company helping people and goods get to where they're needed the most. And Deutsche Bank isn't a bank, it's a charity focused on making people's and companies' dreams come true (for a small fee).
I think the sentiment is true, though, that the giant tech companies are a diverse set of businesses. There’s overlap between them, but they focus on different things and are successful in (mostly) each their own market.
I agree that the broader point is true: each giant is using software (and hardware in some cases) to build massive infrastructure businesses (logistics, cloud, communications, advertising/search, etc.).
But I think this analysis overlooks the ways where these tech companies do sort of compete: search advertising is a duopoly between Google and Facebook; search has some (very weak) competition from Microsoft and Amazon; cloud services are competitive between Google and Amazon... I think the stronger pattern is Alphabet is in everything and in some way competing with every other giant.
Oddly enough, the three biggest cloud vendors by revenue are MS, Amazon, and _IBM_ (see links below).
IBM Cloud revenue is a head-scratcher. I've had to use them in the past, and while they have some unique features, it's hard to imagine anyone choosing them unless they had an explicit need for those features, or were forced into using IBM due to existing business relationships. I guess corporate inertia (possibly from the SoftLayer days) is a hard thing to overcome.
Is that really what you think? Google Cloud is far and away the best service for machine learning right now. There's a reason why basically every company that has ML training needs is switching from AWS to GCP. Not only is Tensorflow, which is the only production machine learning framework that anyone uses, basically 100% integrated with GCP, the Google Compute Engine is the only way you can get access to TPUs.
At my company, we use GCP almost exclusively with preembtible TPUs as our primary compute for training models. It's not cheap, but you can't beat the performance and quality. Plus when you compare it with how much the engineers here are getting paid, it's a drop in the bucket ultimately.
I have worked in a number of industries and rarely needed any ML (though it may be coming). Most folks need clean data and linear regressions in my experience.
If you ignore Office 365, GCP is much closer to Azure than Azure is to AWS. Microsoft's inclusion of Office 365 into its "Cloud" revenue makes their cloud platform seem to have much larger market share than what it actually has.
You must have never read anything from Neil Cybart before. The entire purpose of his newsletter, Above Avalon, is to support a long-only viewpoint of Apple. Just take a look at some of his daily updates: https://www.aboveavalon.com/dailyupdates/
McDonald's saw (see?) themselves as a real estate company.
The problem with this article, the drivel, is projecting nonsensical narratives onto these entities.
So while Google is certainly not a customer facing data services company, I still have no idea how they see themselves. Which would be useful information.
A better (actionable) external narrative is Scott Galloway's The Four. I have no idea if Galloway's analysis is closer to the mark. But at least it's self-consistent. [http://www.thefourbook.com]
What they are is what they are making most of their money at. Everything else is a hobby or supporting that business. Apple is selling iphones, google and facebook selling ads, amazon a retailer and a cloud provider. Microsoft selling software licences to businesses and cloud provider.
One thing that should be worth looking at given where we are in the economic cycle is how procyclical these businesses are. They didn't suffer much in the 2008 crisis as they were in full expension mode, but now these businesses are starting to be mature. Ads and retail are certainly very procyclical. $1000 smartphone too I presume. Cloud should be more stable, depending on how much of their income is VC funded loss making startups. Business license should be fairly stable.
yeah it can be stretched too far, but at the same time, I think in the case of Apple and MS, they had different views on what was the goal of their (for profit) business. MS rapidly tried to be the platform. Apple felt a bit closer to people usage.
The goal is to make as much profit as possible. It's the only goal that they're aiming for, and it's consistent. Everything else is just about how to get there
Due to multiple QEs and low interest rates in developed economies across the globe, a Trillion won't be what it used to be by the time these companies reach that milestone.
(Just like a Million ain't what it was anymore at family level[1]).
> a Trillion won't be what it used to be by the time these companies reach that milestone
That's a far fetched premise given several of those companies are likely to hit that line in the next few years. It's not like Apple is $800b away from the line. Their stock needs to merely move up 7%. Amazon needs to move 15%.
At a minimum Apple, Amazon, Google, and Microsoft look poised to easily hit a trillion dollars in the not very distant future, obviously barring a market crash (and nobody knows when that is coming). A trillion dollars will still be a trillion dollars, so to speak, in five years.
What GP means is presumably, $1 trillion may be say 0.00x% of the monetary supply back in 2007.
But today, $1 trillion may only be 0.000x% of the monetary supply today.
It’s true that government measures of inflation has been fairly low. But those measures (since the 2000s) have been hedonstically adjusted; meaning say a laptop that’s 10% faster is considered 10% cheaper even if the price is the same.
> a Trillion won't be what it used to be by the time these companies reach that milestone
The article mentions this:
> An arbitrary race that many have been following on Wall Street is, which company will be the first to reach a trillion dollar market capitalization? [...] the race to a trillion dollars ends up hiding a much more interesting development that has been unfolding on Wall Street
Some expect a correction to happen soon. Isn't the fact that people focus on that trillion achievement an indication that (some) investors currently don't focus on the fundamentals?
We've seen some very high volatility of Facebook and Twitter stocks last week, even when fundamentally the news triggering these drops in value was not dramatic. Is that another indication?
If there's a big correction, these stocks might get back to a point where the trillion goal is again very far.
Anyone knowledgeable willing to share further insights and opinion?
That's personal wealth, not including assets held by corporations. The fundamentals are that there's a surfeit of cash to invest globally. The predominate driver of growing wealth is the emergence of the developing world, not QE and other monetary policies. A correction will come, but it won't be so dramatic as to take the bottom completely out from underneath existing assets prices (not unless there's some global financial calamity), especially strong ones like Facebook or Amazon (Twitter is a different story). There's just too much money and not alot of places to park it with stable markets and/or high rates of return. The U.S. offers both. I wouldn't be surprised if in the next downturn stocks like Facebook remain buoyant and its everybody else that suffers.
You're right. The $100B cash held by Apple is already priced into its market cap, which is turn included in the personal wealth of all its investors. If someone were to sum up both personal wealth and corporate assets, they would be double counting.
That said, I think wahern's general point is still sound.
I'm no financial expert, but AFAIU the mechanics of securitization mean that we can assume some multiplier greater than 1x.
You can borrow against your shares at the same time Apple can borrow against its cash holdings and, ceteris paribus, the end result will be more debt than Apple's cash reserves even after considering a reduction in Apple's stock value. And this debt can be used to buy more assets. (Basically, fractional reserve isn't just a banking thing. It's inherent to the mechanics of capitalist finance.)
In addition, the ability to do this enhances capital allocation efficiency, which adds independent value to the entire system.
So there's not a simple function mapping corporate wealth to personal wealth, though you certainly can't simply sum corporate-held assets to personal wealth. I'm happy to be corrected for the implication.
It depends on how China reacts when its debt bubble pops. Personally, I'd err on the side of letting the recession play out with some intervention, but only where really needed. If they over-inflate the Renminbi the knock on effects are going to be pretty dramatic globally.
I sold almost everything. I don't try to call the very tops of markets, it's too hard. Having things ready when the pullback happens is good enough for me.
And from what I've heard myself, he says he worked in Windows and understands technical issues but his linkedin profile says he was a Business Development Rep ((who're always under the sales org and not a specific product org)).
I'll give you mobile, but how did it lose any of the others in your list? Edge + IE maintain about 25% of browser market share compared to under 10% for Firefox on desktop. Bing is somewhere around 30% of the US search market depending on whose stats you believe and generated $1.8B last year, and growing. And .NET + visual studio are still very popular in the large enterprise space. Azure (not in your list) is also doing quite well in the cloud space, taking market share away from AWS to get to about 20% last quarter.
If your measure of "losing" is "not #1" then everyone is a loser in at least one of your categories, especially Apple.
Windows is still the de-facto standard x86 and x64 OS, powering everything PC-like from home desktops and office desktops to industrial control PCs, kiosks, ATMs, cashier systems and so on. I don't see this changing in the next 20 years, unless Microsoft make a concentrated effort to completely break Windows.
They are a fairly close 2nd in cloud computing, and growing faster than AWS.
And remember that Oracle is an enormous company just by focusing on enterprise, but MS is way larger just in enterprise. Sharepoint, SQL Server, etc etc.
And even though they are a very distant second in search, that product alone produces more revenue than most companies can ever dream of. It is actually a huge financial success.
Yep. Microsoft has a huge dominance in personal computers and office suits, two of the most profitable product lines of the past 25 years, and this does not look like changing anytime soon.
I think the trillion dollar mark is actually a very important psychological barrier. I've long felt as long as this debate about which one will be the first to cross that the market is sort of waiting for permission to value a company at over a trillion. I think it will be Apple and pretty soon, but no matter which company does it, I think it's important because I think others will be quick to cross over as well and this will blow the ceiling off the equities market. A trillion is a lot of money, but it's only about 10% higher than where Apple trades now, so there's no reason why they can't carry that valuation and quite a bit higher, especially as inflation continues to rise.
Facebook needs a war chest to buy up potential competitors.
Amazon has shown that it can use its money to profitably invest in other verticals and its a capital intensive business.
Google probably should start paying dividends. They still haven’t shown they can invest money to diversify from being an ad business into other profitable verticals.
I was watching a Peter Thiel/Eric Schmidt discussion wherein Peter Thiel essentially says, "Google can't dare pay a dividend because it would mean they admit they're done innovating."
Provocative, but sorta true. The company that pretends to be the most innovative in the world might not do so well if they have the image of paying out dividends.
I would disagree that Apple is viewed as innovative. Granted, this is anecdotal based around people I know, but Apple is widely considered as non-innovative and resting on its iPhone laurels -- at least since Jobs passed away.
I'm not going to be crazy enough to say that there will never be anything bigger than the phone, but can you see anything that any company can do in the next five years that is more ubiquitous than the smart phone?
75% of the world's population has a cell phone (https://www.rferl.org/a/report-says-75-percent-of-worlds-pop...). No matter what any consumer electronic company introduces in the next 5-10 years, I doubt that it will have more impact than the consumer smart phone trend the iPhone started.
What company has been innovative in the consumer electronic space in the past decade? No matter what Apple does, I don't realistically see Apple or any other company introducing a consumer electronic product that is as successful (revenue wise) in the next decade.
I'm extremely extremely biased, but I run a company called Pavlok [1], with a goal to be more ubiquitous than the phone by 2030 (not quite 5 years).
We build technology to help people change habits, with instantaneous positive and negative feedback, and a digital currency called Volts[2] that rewards and pays people to do good habits.
Our goal is to sell the product in the initial phases (next 5-7 years), and eventually give them away to everyone in the world. One of our core products (unreleased) attaches directly to iphones and android -- I can't give too many details, but it becomes part of your phone.
Again, I'm extremely biased. But they say the best way to predict the future is to create it, so ¯\_(ツ)_/¯
What big capital intensive businesses is Apple investing in? These days it seems like all of thier focus is on chip design and software. Most of the heavy lifting and capital intensive costs are outsourced.
I don’t think they can just throw more people at intellectual based innovation. There are only so many people in the world that they can hire and hiring more people brings its own issues - the whole Mythical Man Month.
I would imagine even prototyping and developing new hardware would be done by a relatively small team.
AAPL isn't really largely owned by any of the executives. In comparison, Page, Brin and Schmidt at Google own a large chunk of stock. Also AAPL isn't trying to be as diverse as GOOG is trying to be. GOOG is trying to compete in all sorts of markets.
Wouldn't these share-owning execs also want dividends? Get their hands on some of that cash pile without diluting their holding.
(I suppose the answer will be something to do with tax treatment, and if so I'd say that in this case the taxes are all wrong and should be simply a fixed proportion of income however it is gained or earned).
Well, they may, but they might be more content with long term capital growth. The thing is GOOG isn't as much vulnerable to the pressure of activist investors for dividend (like Carl Icahn in Apple's case), as much as AAPL is.
Android and YouTube most likely make a lot of profit for Google(altough Google tries to keep things quiet).
And they are totally different businesses from Google search, sharing only a similar monetization method(ads),but that's such a small part of the whole.
Android makes Google very little money. It makes some money from advertising and app sells but until a little while ago, Google made more money from searches on iPhones than Androids.
One way to think of it is that Bezos' personal wealth is still short of what Carnegie or Rockefeller accumulated when adjusted for inflation or viewed as a percentage of total personal wealth. The Gilded Age was still more excessive than what we see today -- but not by much.
I'm not sure I believe that S&P 500 chart proves his point that we are living in historically similar times to the 1960s. S&P looks at the top of part of the distribution, not the whole distribution. If for some reason, there were more or fewer companies, it would mean something different. I will note that we did in fact break up Bell Telephone and standard oil. If we act quickly, maybe we'll never get to 1T.
President Trump ran on a slogan of "Make America Great Again", MAGA on his campaign merchandise. His actual platform consisted largely of protectionism for various old-line industries like steel, coal, and manufacturing, on the theory that this would restore jobs to the American Rust Belt, a geographic area that's been hard-hit by the shift to the information-age economy. It also included a heavy dose of anti-immigrant sentiment and opposition to policies like net neutrality that the tech industry heavily favors.
dfee is pointing out that the initials of the top-4 most valuable U.S. companies also spell out MAGA - Microsoft, Apple, Google, Amazon. And this is hugely ironic, because the employee base at these companies skews heavily towards Trump's opposition party. And is largely composed of immigrants. And they are headquartered in regions - Seattle and Silicon Valley - that are overwhelmingly anti-Trump. And he has been not all that friendly towards them.
And yet one of the greatest accomplishments he takes credit for during his presidency is the surging stock market. Which is largely driven by these MAGA tech stocks. So the actual beneficiaries of this newfound wealth are Bay Area homeowners, who hate him, and Indian & Chinese engineers, who hate him, and other young Americans who work for these companies, who by and large hate him.
Meanwhile the primary effect of the tariffs that were supposed to "Make America Great Again" has been to trigger stiff retaliatory tariffs on rice & soybean farmers, who are staunch Trump supporters. And the primary effect of his anti-immigration policies has been to deport small business owners in the Midwest or migrant farm workers in California's Central Valley, both areas that strongly support him.
Fantastic write-up, I commend you for writing the above in a way that feels factual and non judgmental. Rare to run into writing like that, that doesn't immediately reveal one's political allegiances. Got a Twitter or some other outlet of your writing that one can follow?
Its not only frustrating. After he got elected the divorces in US spiked 20%. I know few spouses that slept in a living room thats how heated it was. Obviously its totally ridiciolous. We have 3 branches so no lunatic even Trump will turn into Dictator. And he will be gone. In 2 or 6 years whatever.
We have a rule at the dinner table - no politics talk. They dont get anywhere and make us as family only fight with each other about stuff that we have absolutely no control over.
Umm, wat. Alphabet has two classes of shares that trade under different ticker symbols, GOOG and GOOGL. Together they add up to $1.6t. The fact the author has overlooked this is astonishing.
[edit: sorry, my mistake: the market cap reported is not actually outstanding shares times price, pointed out below]
You are right that there are two public tickers for Alphabet, GOOG and GOOGL, however the market cap you see when you search for their ticker is for the whole company, not the class alone.
Also, Alphabet has 3 classes of shares. A (GOOGL), B (privately held), and C (GOOG)
I assure you, the market cap is roughly $870B as of this writing.
> [edit: sorry, my mistake: the market cap reported is not actually outstanding shares times price, pointed out below]
Actually, market cap is outstanding shares times price. It is a value per company, not per class/type of shares traded. Sort of like how the same CEO would be listed under GOOG or GOOGL. You'll see the same market cap listed under GOOG or GOOGL.
Oh dear, what drivel. By that logic, BP is not an oil and gas company, it's logistics company helping people and goods get to where they're needed the most. And Deutsche Bank isn't a bank, it's a charity focused on making people's and companies' dreams come true (for a small fee).
Please spare me this bullshit.