Microsoft Catches Amazon as Second Most Valuable Company

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Apple Inc. (NASDAQ: AAPL) is the most valuable company in America based on market cap and is unlikely to let go of that position in the foreseeable future. However, the race for second place has tightened as Microsoft Corp. (NASDAQ: MSFT) has caught up with Inc. (NASDAQ: AMZN).

Apple’s market cap is currently $854 billion. Microsoft and Amazon are within a percentage point of one another at around $723 billion. A critical difference between the two racing for the spot is that Microsoft’s stock has been just shy of flat in the past five days, while Amazon’s has dropped almost 6%.

The battle is based as much on the differences between the two companies as their similarities. Each has a large foothold in the cloud computing business, with Amazon Web Services in the lead and Microsoft’s suite of products among the top several companies vying to pass it.

Amazon’s core business remains e-commerce, both in the United States and abroad. It also has entered the streaming media service business and produces some of its own programs, a very expensive proposition. The Amazon membership program that includes media and free delivery services is called Prime and has 100 million members worldwide.

Amazon’s e-commerce business continues to have low or no margins, a situation that has vexed some investors. Last year, Amazon North America had operating income of $2.9 billion on $106 billion in revenue. Amazon International lost $3.1 billion on revenue of $54 billion.

Microsoft continues to be a powerhouse in enterprise software, PC software and hardware that includes both tablets and its Xbox game system. While Amazon struggles in its core business, Microsoft makes money on all its major products and services.

While Wall Street considers lines of business beyond the cloud, it remains the focus because of the global size of the market and the margins in the sector. Amazon CEO Jeff Bezos has forecast that his cloud business will pass his e-commerce business in terms of revenue. That as much as anything may determine which company is worth more in the future.

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