\In the beginning, there was Microsoft, blazing a trail into the world of personal computing. But soon Apple entered the fray, and with an insular operating system and emphasis on style, Macs were suddenly making Microsoft’s market share dwindle. When Google joined the race, things got even more muddled.
Now Microsoft’s annual revenue hovers around $110 billion, and Alphabet (Google’s parent company) around $120B. Apple, meanwhile, has revenue exceeding $250 billion a year. Thanks to highly sought-after iPhones, plus iPads and more, Apple is king.
But revenue alone doesn’t tell the whole story, nor does it capture the turn around that is taking place at Microsoft. Under the leadership of CEO Satya Nadella, and with collaboration and acquisition their modus operandi, Microsoft may one day soon snatch back that crown.
“[Nadella] made a pronouncement on day one — the world is about cloud first, mobile first… He never mentioned Windows one time…. What he was telling the world was we at Microsoft have to be ready to embrace the cloud, and we at Microsoft have to be more about our technology running on all platforms.” – Microsoft Chairman John Thompson
A Brief History of the Battle
The battle for dominance between these tech giants has spanned decades, with 1997 the turning point in Microsoft’s time on the throne. It was then that Apple’s brilliant branding campaign began to make their tech products “must haves”. Though Microsoft’s revenue and market penetration in the world of corporate PCs remained high, Apple’s push into the portable, personal computing devices redefined the boundaries of the kingdom.
Google didn’t enter the race until 2011, with the introduction of the Chromebook. But they did give rise to the Android operating system and a multitude of applications. Adsense, Adwords, the Google search engine, and even the Chrome browser are all fruits of Google’s labors. They’re also examples of how Google took a page out of Apple’s book and reshaped the market so they could get a bigger share.
In terms of simple numbers, Apple’s position in the space is apparent. As of this writing, here are the “big three” companies’ market capitalization:
- Apple – $1.06 trillion
- Microsoft – $868.12 billion
- Google – $ 821.25 billion
But, as always, there’s more to this story than just the current market cap.
Different Strategies, Different Avenues of Growth
For Google, it was all about making the Chromebook less expensive yet very functional. Sure, there are snags when it comes to Android apps, and sometimes image quality on certain devices may be lacking. But it’s hard to argue against their path to success when their company name is now part of the lexicon as a verb that is synonymous with “search”.
For Apple, the strategy involved forging ahead into the world of phones. Launched in 2007, the iPhone quickly became one of the most sought-after computing devices ever. By 2010, the iPhone has accounted for more than half of Apple’s revenues. Since then, it has continued to represent between 55 and 70 percent of Apple’s earnings.
The iPhone isn’t the only reason Apple has enjoyed success. In contrast to Microsoft, Apple chose to create devices that were stylish and sleek. Sure, their products also come with a premium price tag. But given the almost-nonexistent need for virus protection, and less repair and maintenance, Apple products have consistently enjoyed strong consumer support.
Microsoft’s Nadella Strikes Back
Though Windows 10 helped secure stability in the PC market, it was not enough. So Nadella began pursuing cloud computing services through its cloud-based platform, Azure. Azure now ranks second in this $15.6 billion industry — just behind Amazon Web Services. In addition, Nadella also advanced its software subscriptions, including that of Microsoft Office 365.
In developing its various Windows OS products, Microsoft has worked with numerous PC makers to ensure access to their products. Dell, Hewlett-Packard, and Lenovo are just some of the companies with which Microsoft interacts with selling its offerings. In addition, Microsoft has decided to work with Samsung to develop additional products in the future. Nadella’s new strategy is for Microsoft to be more open and collaborative, thus allowing greater opportunities for diversification and price reduction.
Acquiring LinkedIn and GitHub has also helped expand Microsoft’s reach.
In terms of quantifying Microsoft’s movement within the market, and its slice of the consumer pie, consider their market cap numbers since 2014. As the below graph shows, it has steadily risen, nearly tripling in that time. Sure, Apple is king… but you can’t argue against growth like that.
The Road Ahead
Google’s challenge will be to include further developing their Chromebook and Chrome OS using Android applications. If this materializes, then the Chrome OS will offer higher performance and powerful browsing capacities. Similar to Microsoft, Google is actually actively advancing its cloud services and artificial intelligence systems. These will likely have major impacts on the computing industry of the future.
Apple’s advantage continues to be its reliable operating system, as well as the advances it regularly creates in its iPhone and iPad offerings. Still, despite these advantages, Apple has yet to enter the cloud services sector. Apple is also not a major player in artificial intelligence development. They are also very proprietary in their ecosystem.
In the last quarter, Microsoft revenues were over $30 billion, with earnings-per-share climbing nearly 25 percent over the year. Yet what was once a desktop PC market has rapidly evolved into a mobile- and cloud-based services model. The next wave will involve not only AI but also virtual reality, according to Nadella. As a result, Microsoft is moving away from devices and hardware and is doubling down on its diversified subscription-based strategy.
Will Microsoft Reclaim the Crown?
Ultimately, Nadella’s goal is to create a cohesive experience for customers across multiple devices and services. This move means ensuring the Windows experience can be enjoyed anytime and anyplace using any application desired.
By using Azure and cloud-based software, Nadella seeks to move Microsoft revenues into market leadership in the short term. And by investing in AI and VR technology development, he hopes to drive Microsoft revenue.
Google, Apple, and Microsoft each have the potential to shake up the future of the computing sector. However, based on recent trends and future pursuits, Microsoft may well be in the best position to make this claim.
To learn more about Nadella and his Bold Leadership over Microsoft, read our Bold Leader Spotlight of the week article featuring him.