I picked Macintosh, not surprisingly.
I'm thinking long term here, and I mean longer term than probably even me. As we all know, nothing lasts forever. Not even Apple or Microsoft. Sooner or later both companies will meet their demise, but I expect that Apple will outlive Microsoft and most of the credit will go to the legacy of the OS. Microsoft is an old brittle company that is already failing. It just doesn't look like it because of their strong cash flow and immense cash hoard.
"But Bull," you say "that sounds like they are winning to me."
It does, but that isn't the way the corporate world works. Microsoft (NASDAQ: MSFT) is not a growth company and hasn't been for some time. The last little spurt of growth came out of their X-Box project, and it cost big time. Now that it's out there, it's slow to no growth for the X-Box. Within the past few years, it has been one expensive failure after another. WGA, WMA and PlaysForSure, Zune, WinCE and Windows Mobile, the Tablet PC and the biggest of them all, Windows Vista.
They couldn't even close on the highly publicized Yahoo! acquisition.
The truth be told, Microsoft's management team, even with Bill Gates at the helm, has yet to hit one out of the park with the exception of their mouse and keyboard division. Yes, the X-Box was a success, but in a very expensive launch with little profit rewards to follow. It is not a hit out of the park for management to showcase to shareholders. It is more of a lasting diversification within the company, that makes it less vulnerable to potential loss of revenue from the software division.
This company exists for one reason, ... IBM gave away the keys to all the profits for every PC they sold. Bill Gates was the beneficiary because he was in the right place at the right time. He had enough business sense to recognize and secure his fortune. Since then, he's been riding the coat tails of innovation from other companies.
Brittle. Crumbling. Gates is gone now. Left at the helm is "I love this company" Steve Balmer.
Microsoft's Balmer Monkey Dance - Celebrities Gallery
Ballmer Throws A Chair At "F*ing Google" - John Battelle's Searchblog
Apple, on the other hand, is taking market share. Last quarter saw a 40% increase in Macintosh sales with gains in the US leading the way. It has been awhile since Apple has had a new product flop. Not since the return of Steve Jobs has this happened. The iMac, iBooks, MacBook Pros, iPods, MacBook Air and yes the iPhone, were all out of the park hits. The company has made multiple strategic acquisitions that leveraged their strength in software for photo, music and movie management and editing. They are on a roll even with a bad economy. They're still growing with a total shareholder's equity of $19.6 Billion.
Y/Y Growth - Product Category
41% - Macintosh unit sales
12% - iPod unit sales
265% - iPhone unit sales
It's just a matter of time. If Microsoft doesn't compete to create new markets and products and earn a return on shareholder's investment the investors will take their money elsewhere. It's already happening. MSFT is trading at around $25 a share and in the past year has only been up to $37 and change.
As the stock slips, the company increases its dividends trying to keep investors. Paying more dividends taxes the balance sheet. Without new revenue streams to make up the difference, the company can slip into becoming simply a cash cow for investors, or can be raided as stronger companies see opportunities. And, you can bet that if Vista stagnates with another disappointment, corporate IT departments will go shopping for another OS to hang their hat on.
Apple is performing. Microsoft is not. Apple will outlast Microsoft. It really is that simple.