Apple’s (AAPL) market cap is now$148 billion. Google’s (GOOG) is only $143 billion.
The disparity between the two numbers does not make sense. Google has been the faster-growing company, at least historically. Hardware companies like Apple have modest margins because of their cost of goods. Google’s gross profit is about 60% of its revenue. Apple’s is only a little over 30%. That gives Google a huge advantage in generating profits and cash flow.
Apple has $23 billion of cash and short-term securities on its balance sheet, but Google has $19 billion. Both are adding to those arsenals every quarter.
If the market is right about the value of the two companies, and it often is in these matters, the value of the firms is based to a very large extent on their prospects. Apple has shown that it really has no competition in the iPod and iTunes businesses. It has also shown that it can take market share from PC companies with its Mac, and take browser share from Microsoft (MSFT) with its Safari product. The Mac also dominates the high end of the PC market where machines go for more than $1,000 dollars.
The iPhone has already proved that it is a formidable challenger to almost any other smartphone in the world. The one billion downloads from its App store make the product more useful to consumers and businesses as each day passes.
Google, on the other hand, has a multitude of problems. It core search business is not growing as fast as it once did. It business of selling desktop applications is poor and its YouTube operation losses money.
Douglas A. McIntyre