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Subscribe to Portfolio magazineApple is worth more than Google. Huh? This doesn't make sense to me.
Let's start with the obvious: Google makes more money than Apple does. It had earnings of $10 billion over the past 12 months, compared to $8 billion for Apple. And while both companies' earnings are growing fast, Google's are growing faster.
But here's the clincher: Google's earnings were on less than $20 billion of revenue -- that's what I call a profit margin. Apple, by contrast, needed more than $30 billion of revenue to get its $8 billion of gross profit.
Of course, when it comes to stock valuations, the present doesn't matter nearly as much as the future. So what does the future hold for these two franchises?
They're both strong technology giants with very large "moats." But Google is stronger, and its moat is bigger. It owns search, certainly in Europe and the Americas, and it's making strong inroads into display advertising as well. Sam Gustin might be kvetching about "the toll being inflicted on Web advertising by the slowing economy," but the growth rates are still pretty torrid for what is now a reasonably mature industry: Karsten Weide, an analyst at IDC, told Bloomberg that online ad spending grew 18.9 percent in the second quarter, a growth rate 7 percentage points lower than a year ago. Were it not for the slumping economy, web ad spending would have grown by more than 20 percent, she said.
19% market growth? I think Apple would be very happy with that. And remember that Google is increasing, not decreasing, its share of total online ad spending. Over at Apple, by contrast, the iPod/iTunes duopoly can't help but see its market share eroded going forwards, as DRM-free online music stores start competing on price, the record labels try to cut Apple down to size, and the marginal utility from buying your fourth or fifth iPod starts to decline.
Apple's phone business looks great right now, but the industry is notoriously cutthroat, Apple doesn't have the degree of control it's used to elsewhere, and in any case handset margins are never going to be as big as margins on iPods or MacBooks. Yes, the iPhone app store is a very promising business model -- but it's going to be quite some time, if ever, before it makes a significant contribution to Apple's bottom line.
And then there's the computer business. Macs are selling well, at very high margins. But Google's muscling in on the computing business too: over the long term, it makes sense to do all your computing in an ever-improving cloud than it does on specific, individually-owned pieces of hardware which always, eventually, break. The more important the cloud, the less important the computer, and the less important the computer's operating system, too.
Howard Lindzon, by contrast, thinks the stock market is right, and that Apple should be worth more than Google. Two of his arguments are weak: that "social search" will make Google obsolete (I'll believe it when I see it), and that "MacBooks are getting cheaper" (no they're not: Apple's entry-level laptop has been priced between $1,000 and $1,100 for years, and it's going to stay there).
Howards best argument is that a falling Google share price could become self-fulfilling: "if the stock lingers between $500 or worse yet, drifts lower, you will see a brain drain of epic proportions," he says. Google's competitive advantage has long been that it was smarter and richer and one or two steps ahead of the competition. As it matures, it might not have the same ability to attract the very best and the brightest.
But if Google has job risks, Apple has Jobs risk -- which is much bigger and probably just as imminent. No one at Google is even as important to the company as Jonathan Ive is to Apple, let alone Steve Jobs. If I'm holding a stock as a long-term investment (which is the only sensible way to hold a stock) then I don't want to run the risk that the company will founder the minute the CEO exits.
And talking of the long term, the option value of all those crazy Google projects which never make any money is huge. There's a good chance that, eventually, one of them will take off in a big way, and if it's energy-related, it could make Google's present business look positively puny.
Google stock is volatile, just as the founders said it would be in their prospectus. But if I was going to sleep today to wake up in ten years' time, I'd be much happier with Google stock under my mattress than Apple.
: Photo: AppleApple released its first iMac on Aug. 15, 1998. The cute, translucent blue, all-in-one PC was easily the most influential personal computer of the 1990s, heralding a return to simplicity and ease of use and briefly sparking an industrial design fad around clear, colored plastic.
It also marked the return of Steve Jobs as the visionary, design-obsessed leader that Apple desperately needed. Its strong sales reversed Apple's dire mid-1990s financial situation and enabled the company to get back on the road to relevance.
Over the years, the iMac's trendsetting arc has continued, with a total of four distinct models (and a close family member), some of which shipped in a handful of flavors.
Here's a look at the evolution of the iMac: past, present and future.
Left: The iMac wasn't Apple's first PC to feature a display and motherboard integrated into the same case; the original 1984 Macintosh (top center) shared a similar form factor. Apple resurrected its quiet, appliance-like qualities 14 years later.
The Power Mac G3 all-in-one (lower left) was the closest Apple ever came to a beige iMac. Released in early 1998, its specs were similar to the iMac's, but were available only to educational institutions.
The haughty design of the 20th Anniversary Macintosh (1997, lower right), foreshadowed later LCD-display iMacs. With a $7,499 price tag ($10,277 in today's money) and limited-edition status, it stood conceptually opposite the universally accessible iMac.
: Photo: AppleReleased in August 1998, the original "Bondi blue" iMac (its color reportedly named after the waters off an Australian beach) blew beige boxes out of the water. Among its novel technical features, the iMac ditched the then-ubiquitous floppy drive in favor of built-in home networking. It also introduced USB to the masses. But the G3-powered computer's greatest innovation lay in its eye-catching appearance. Apple designer Jonathan Ive took PC industrial design to new heights with the iMac's colorful teardrop case. Amazingly, much of the consumer design world came along for the ride.
: Photo: AppleBondi blue wasn't good enough. In 1999, Apple introduced five new color schemes for the iMac: blueberry, strawberry, lime, tangerine and grape.
The next time you see an appliance with a translucent plastic case, or available in multiple candy colors, you can thank Apple. Everything from vacuum cleaners to paper towel dispensers to George Foreman grills stole a page from the iMac's design playbook. Apple has since moved on to new design motifs, but the early iMac's influence still echoes in the industrial design world.
: Photo: AppleNever content to stand still, Apple continued to cycle through various iMac colors until the end of the G3 line in 2003. Along the way, the iMac gained a few significant external changes. While the original iMac contained a fan, later iMacs were convection-cooled -- making them blessedly silent. Apple also replaced the iMac's tray-loading optical drive with a slot-loading model in 1999.
Seen here are two of Apple's most-whimsical designs (top), called "flower power" and "blue dalmatian" (2001). Stretched across, below, is a line of new colors released in 2000: indigo, ruby, sage, graphite and snow.
: Photo: AppleAfter revolutionizing the PC design world with the original iMac, Apple struck again: this time with a PC that bore an uncanny resemblance to a table lamp. The company unveiled the radically novel iMac G4 in 2002. It featured a flat-panel LCD display mounted on an adjustable metal arm, which, in turn, connected to a sturdy base containing the computer's other components. Somehow, the design actually worked, though it was not without controversy.
Tiring of the multicolor iMac parade (by then widely imitated), Apple chose a clean, frosty white color scheme for this new PC. Through its lifetime, the iMac G4 was available in three different display sizes (seen here from left to right): 15-inch, 17-inch and 20-inch.
: Photo: AppleThe iMac G4's flat-panel display bumped the computer's price just beyond the reach of the educational market in which Apple traditionally flourished. Apple's solution was to place the iMac G4's guts into an all-in-one PC with a less-expensive CRT monitor. The result was the eMac ("e" for "education"), a critically acclaimed Mac released in 2002.
The eMac shipped in two slightly different cases: The original 2002 design (left), and a 2003-on version (right) with a milky-white appearance and white speaker grilles. Apple sold the eMac until 2006.
: Photo: AppleWith the long-awaited iMac G5 (2004), Apple turned back the clock to a time before swing-arms and released a monolithic flat-panel PC that mimicked the traditionally white iPod in appearance. It was, by far, Apple's most minimalist computer design to date, and it sold in two display sizes, 17-inch and 20-inch (bottom).
The iMac G5 later included a built-in iSight camera, although that model was indistinguishable from the one you'll see next.
: Photo: AppleIn early 2006, Steve Jobs dropped a bombshell: Apple would be migrating to Intel processors across its entire computer line. The switch was shocking enough without any major exterior design changes, so Apple stuck with what worked: a white enclosure nearly identical to the iMac G5 before it. And unlike the original iMac G5, these models contained built-in iSight cameras above the display.
The iMac Core Duo was available in three display sizes (bottom): 17-inch, 20-inch and the iMac's largest display yet, a monster 24-inch LCD.
: Photo: AppleAs 2007 rolled around, Mac fans speculated on what sort of wild new iMac design Apple would unveil next. Then Apple raised the curtain on the iPhone in June, which quickly stole the spotlight from any potential iMac upgrades.
In August 2007, Apple announced a new iMac design sporting an Intel Core 2 Duo processor, a thinner form factor, aluminum and glass construction, and a black and gray color scheme similar to that of the iPhone. It's currently the latest in the iMac line, and it's available only in 20-inch and 24-inch display sizes (bottom).
: Illustration: Nuno TeixeiraWhat does the future hold for the iMac? Frankly, no one knows but Apple. The company's notorious love of secrecy means that it's left to the imaginations of Apple fans to fill in the gaps. And fill the gaps they do -- many with photorealistic computer renderings of Mac concepts; new ones tend to proliferate just before Apple product announcements every year.
Seen here is a fanciful design dubbed the iView by its creator, Nuno Teixeira. It imagines an iMac with a large curved display that would envelop the user and eliminate the need for disjointed dual-display setups.
: Strawberry, tangerine, grape, lime, Bondi Blue -- no, we're not talking about Lifesavers, but rather the iMac's 1999 lineup of G3 computers. Sporting a 15-inch screen and 333MHz processor, the 40-pound boxes of colorful joy were more popular in school computer labs than people's homes.
: When the iMac adopted the G4 chip in 2002, it ditched its fruity color scheme for a more widely approved silver-and-white aesthetic, looking something like a sexy desk lamp. The iMac G4's most distinguished feature was its highly adjustable swivel flat screen, allowing you to angle it however you wished.
1877: Thomas Edison suggests using the word hello as a telephone greeting. The idea catches on.
Edison invented a lot of things, for sure, but one thing he didn't invent was the telephone. The brass ring for that one goes to Alexander Graham Bell, although Elisha Gray filed his patent for a similar device the same day. But they never called it Ma Gray, did they?
Edison's contribution to the "improvement in telegraphy" was giving us the salutation now used the world over, in one form or another. Bell's famous first words spoken over what we now call the telephone -- "Mr. Watson, come here. I want to see you." -- were delivered without any greeting at all.
When he did weigh in on the subject, Bell proposed using "ahoy, ahoy," the age-old seafarer's hail. And, in fact, ahoy was the first greeting used, until Edison suggested hello.
At the time, the phone was conceived of as a business machine that would connect two offices with a permanently open line. Some people toyed with the idea of an alarm bell at each end to alert one office that the other office wanted to speak. On Aug. 15, 1877, Edison wrote to a friend who was setting up a phone system in Pittsburgh: "I don't think we shall need a call bell as Hello! can be heard 10 to 20 feet away. What do you think?"
Contrary to some accounts, Edison did not coin the word. Halloo and variants had been used for ages to urge on hunting hounds and to shout to people at a distance. Edison was tinkering with a prototype phonograph in 1877 and used a shouted halloo! for testing. Early gramophones and telephones alike had pretty low signal-to-noise ratios.
Hello itself turns up in a number of places prior to 1877, including Mark Twain's travelogue, Roughing It, published four years before Bell called Mr. Watson. Earlier references to the word also exist, one dating back to at least 1826.
In any case, hello caught on quickly and entered the dictionary in 1883, and when was the last time you had to look up that spelling?
Source: Various