Microsoft's and Apple's Product Lines Compared: This Is Why Apple Wins

Steve Jobs

Microsoft has, for the first time, been beaten in market cap by Apple. At the close of the market today, Apple sat at $222.12 billion, a gain of 1.8%, while Microsoft went down 1% to $219.18 billion. That makes Apple, according to market cap, the most valuable tech company in the world. Yet compared to Microsoft, Apple has both less cash on hand ($23 billion vs. $35.7 billion) and less revenue ($42.9 billion vs. $58.4 billion). So the fact that the market has valued Apple higher is big news indeed.

That Apple has, improbably and at long last, passed Microsoft in market value has everyone looking more closely at the two companies. In the early years of personal computing (like, 20 years ago. Ancient history, right?), the rivalry between the two formed the basis of the industry's narrative. But now, the industry's changed in more ways than can be neatly summed up in a wistful paragraph, and it's not even a given that Apple and Microsoft are competitors. Rather than trying to examine the ever-changing facets of each business as a whole, let's look at something more concrete -- their products -- as a measure of where the two tech giants stand right now.

Microsoft is massive, and like some kind of funhouse mirror gets more massive the closer you look. But it is still essentially a software company. The two biggest product lines at Microsoft are Windows, the world's most popular computer operating system (found on nine out of 10 computers), and Office, a suite of productivity tools including Word, Excel, and PowerPoint. One of them is probably running in the background right now on your machine, PC or Mac.

Windows is the keystone of the Platform Products and Services Division, which also includes Windows Live, a service made up of mostly web apps like Hotmail, Messenger, and SkyDrive; Bing, a search engine, and the accompanying Bing Maps; the cable news channel MSNBC; the online magazine Slate; Microsoft Visual Studio, a suite of programming tools; Amalga, a healthcare information system for hospitals; and the assorted software under the Windows Server System umbrella, among many, many others. Microsoft currently supports a litany of OSes, including Windows 7, Windows Mobile 6.5, Kin, Windows CE, and Zune, with Windows Phone 7 to come shortly, not to mention that Microsoft has to support older versions of Windows like Vista and XP that can still be found on netbook or budget computers.

In the entertainment section, they've got DirectX; Windows Media Center; Silverlight, which is used for streaming video, including the most recent Olympics; and the accompanying software for their comparatively meager line of hardware. There's Zune, with its Zune Marketplace (a subscription-based digital music store), its line of portable media players, and, soon, integration with Windows Phone 7. There's Xbox, with its Xbox Live online gaming community, huge library of games, media abilities, and Xbox 360 hardware. There's Surface, a groundbreaking touch interface that's been allowed to lay fallow, living its life as little more than a perennial tech demo. Microsoft also has a well-regarded line of accessories like keyboards and mice.

Frankly, that list is barely the tip of the iceberg--Microsoft also has a serious influence in alternative energies, education, and enterprise software. The latter especially is a huge department with all kinds of analytical tools and systems. But it gives you an idea of just how all-encompassing Microsoft really is. In different departments, they're competing with entirely different companies in all corners of the tech industry.

Microsoft products are serviced in several different ways: software is serviced through Microsoft by phone or email, but hardware is often the purview of the specific hardware manufacturer, especially in the case of PCs.

Apple, by contrast, has three laptops in varying sizes, one all-in-one desktop, one mini desktop, and one tower desktop. All six run the same OS, also made by Apple, and include Apple's iLife software suite. Then there's the three mobile devices that run Apple's second OS, iPhone OS: the iPhone, iPod Touch, and iPad. Finally, there's the media hardware: the three "legacy" iPods (Classic, Nano, and Shuffle) and the mostly ignored Apple TV. Apple also sells accessories for these devices, including a wireless router, monitor, and keyboard and mouse. In terms of software, Apple has the two OSes, plus iTunes and its media store, and the App Store for its iPhone OS devices. They sell and service all of that stuff in Apple Stores. Really, that's about it. Update: I forgot one important product--Apple's line of creative software, including Final Cut Pro and Logic Pro, which are incredibly successful and can be considered the standard in that industry. Thanks to the commenters and readers for pointing that out.

Apple is startlingly narrow in their scope, at least in comparison. More focused on both hardware and the consumer (rather than enterprise) side of tech than Microsoft, Apple's product lines are thus much easier to understand. You can take a glance at the homepages of the two companies to see the difference; Microsoft's list of products runs to the dozens and includes several I've never heard of, while Apple has seven buttons corresponding to their products, all of which (MacBook, iPod, iMac, etc) are instantly distinctive and familiar. Despite a couple duds (I'm looking at you, Apple TV and Mac Mini), Apple's philosophy is both simple and focused on simplicity: "Get rid of the crappy stuff."

I barely scratched the surface in five paragraphs about Microsoft, while in a single paragraph about Apple, I feel like I've pretty much covered everything.

The New York Times calls the market cap valuation a "changing of the guard." It is--in about twelve different ways. The companies are so different these days that it's hard to know what's most momentous; this isn't Pepsi overcoming Coke. Is it simple scope defeating broad? Consumer over enterprise? A triumph of superior marketing? The power of a cult of personality? The answer is yes. Since the introduction of the iPod, Apple has captured mindshare in ways Microsoft only dreams of. Microsoft is an amorphous blob of a corporation, with a capital C--they make essential products, certainly, but without brand loyalty or public goodwill. Apple, through unbelievably astute marketing and the power of one Steve Jobs, has won all of those fights.

Apple isn't as big as Microsoft, and probably never will be. They don't make or have as much money. But that the market has valued Apple higher is an affirmation that at the moment, Apple is leading the tech world.

Dan Nosowitz, the author of this post, can be followed on Twitter, corresponded with via email, and stalked in San Francisco (no link for that one--you'll have to do the legwork yourself).

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21 Comments

  • Justin

    What about QuickTime? You managed to post the Microsoft alternative Silverlight, and QuickTime is a major influence to both pcs and macs.

  • Fredrik Skog

    Well, the Mac Mini occupies spot 5 and 6 on Amazon’s Computer & Accessories: Desktops Bestseller list:
    http://amzn.to/cBJmgL For a computer that hasn’t been updated for a long while, that is quite a feat. I wouldn’t call it a failure.

  • Robin Monroe

    Apple wins because there are people out there with more money than brains who don't care how much they spend for "easy." Apple runs on 65 hour work weeks for salaried employees, confidentiality agreements that make it impossible to even tell your spouse what you are working on, and on the back of a whole lot of employees that are just waiting to "cash out" or "make bank on their signing options." Yay Apple!

  • Tom MacKnight

    A few thoughts...

    I think this is really about stock market value, right? This is more akin to a sports event, Go Apple, Yea Microsoft from some long ago competition when their market segment overlapped to a greater degree in the PC realm.

    I don’t really see the two as strict competitors. Their common market is their respective operating system. However, I prefer to think of Apple’s operating system as one of many UNIX variants. In market segment terms I think of UNIX variants vs. Microsoft Windows. As an example, the competition to Apple’s iPod isn’t Microsoft, it is LG and Motorola. How would you equate the comparison of stock market value? Apples compared to so much of a percent of Microsoft, so much of LG, so much of Motorola, etc. What I getting at here is that the metric isn’t really “apples to apples” so to speak. So, I’m in full agreement with you.

    Much of the recent growth of Apple which nudged them past Microsoft’s value is based on the iPad tablet device. I think in the long run, this will be short term boost. Some industry analysts are saying Microsoft needs a killer Windows 7 tablet. Well, its only a matter of time before someone builds such a device. Since Microsoft doesn’t keep their OS to themselves and Apple does more and more competitors will crop up. Some there will be dozens of manufacturers building them and Apple will again be buried by competition. This is the fallacy of the Apple keep it all to themselves scheme. Its kind of a market form of kill the man with the ball. Man, their going to get creamed every time. Much of Apple’s marketability is based on brand hype. In the long run, such market strategies aren’t sustainable.

    Now days Apple’s operating Mac OS X is built on a UNIX core, progenerated from AT&T Unix > FreeBSD > Steve Job’s NeXT > Apple’s open source Darwin > to Mac OS X. They, in fact, did not write the entire operating system. So when you say, “All six run the same OS, also made by Apple”, this might be misleading. There are a lot of closet UNIX nerds out there and Apple picked up a few new fans by going this route while they also reduced their overhead costs and recovered from several failed attempts at home-grown OS’s. In effect they have written a wrapper for a UNIX operating system, much, but not all of which was written by Apple to a IEEE POSIX specification. POSIX allows Apple to leverage software developed for other UNIX variants. Apple ties it operating system to only the PCs and devices they build and sell. Based on market hype, Apple has been able to demand a premium price for PCs and devices that, for the most part do not provide significantly better functionality.

    Microsoft writes their operating system from the bootstrap up. This gives Microsoft a huge advantage in the control of their product development. Microsoft basically sells its operating system to others and they don’t sell PCs. Off of the top of my head, I can only think of the Zune as a device sold by Microsoft.

    Oh, then there is that Google crud where they try and sell that all apps will be in “the cloud.” I say BS to that. Data may reside in the Cloud, but never the operating system or critical apps. Google’s apps don’t reside in the Cloud, they are, regardless of their hype, loaded onto your computer. Chrome, Sketchup, they are all loaded on your local drive.

  • dafoink

    in these comparison articles, they only talk about Microsoft's client products (like office, windows, etc.). why is there almost no mention of products like Exchange, Sharepoint, SQL Server, and the Dynamics product line? These products run a good amount of corporate messaging and communication.

  • Willy Chu

    Dan, you list a large number of Microsoft's endeavors outside of their core Windows and Office, but how much is each of these adding to the bottom line?

    Microsoft would do better to take the money they've invested in these far flung enterprises and invest it in improving their OS, both desktop and mobile. It seems MS has too much money sitting around and no idea how to spend it. MS stock is languishing because the company has not shown any GROWTH potential.

    See this article: http://www.businessinsider.com...

  • joe belkin

    BTW, they also have some $18B in T-bills that they don’t count as cash on hand but future earnings? That’s why sometimes you hear the $41B being bandied about ...

    Also for the “non-success” of the AppleTV, they have sold about 8 million at $200+ or another billion dollar line that’s dismissed but that’s more sold then MS Zune sales ...

    While the MINI is not a huge success, it’s certainly not a failure – as with every other Apple product line, it’s priced and intended for a precise reason - to draw in PC users who can carry over their monitor, keyboard, mouse, hard drive, etc ... Just getting rid of the CPU – an “easy” change to a Mac. And priced at around $599, psychologically, it seems like it’s just a casual purchase.

    But hopefully if you step into an apple store, the dazzling imac monitors with faster everything entices you to spend an additional $800+ but if not, Apple has brought you into the OSX fold and your next computer will likely be another mac.

    The big difference is the differece in ‘arrogance’ if you will – Apple believes they deign their products so you cannot look away and you have to buy it as it’s the best – Microsoft wants you to buy because you have no other choice. That worked fine for MS pre internet when they could lock up distro deals physically but post internet, the internet is the dsitribution – MS cannot compete and is still fighting the last war as an old general. Microsoft is a GREAT Enterprise company but shareholders have to ask why after ZERO conusmer successes in the past 15 years? (The Xbox division has spent about $35B to make $20B - nice math). Or the "genius" Bill Gates who insisted on cramming the full windows into a mobile phone. Bill Gates is a smrt guy but he has ZERO ideas about consumers - just doesn't understand them since he doesn't watch movies, read novels or listen to music or text or talk on a phone or surf the internet "for fun." His role the last few years, people PRINTED out reports for him to read ... MS should stick to the enterprise market.

  • Chris Reich

    The cult of personality has been overlooked in this article.

    Bill Gates was wise to vacate the CEO's chair early enough in life to take it back should the company go into free-fall. It hasn't. So the line of succession and the culture at Microsoft will sustain the company.

    Apple on the other is umbilically tied to Steve Jobs.

    Apple runs on creative grit. Microsoft's strength is in being 'the standard'.

    In my opinion, it's easier to remain a standard because there is a lot of inertia to overcome to bring about a change. It's much more difficult to create new and exciting, must have, game changing products. I do not think Apple can do that without Steve Jobs. He did, after all, pull Apple out of a ditch a few years back.

    Rumors about Mr. Job's health always send the stock downward so long term my guess is that Microsoft is a better bet.

    I do wish upon a star that someone could make an operating system totally 100% compatible with all Windows based software---not using emulators that slow everything down. Then it becomes choice rather than change. When new versions of software come out, such as Office 2007, there is sufficient frustrating difference to call it change, people would choose a different package if they could save money and maintain total compatibility.

    Compatibility has always been Microsoft's edge. From the earliest "IBM compatible" computers to today's "Windows compatibility", Microsoft has held us hostage. Given a choice, the monopoly will crack.

    I'd like to address the tolerance consumers have for defects from Microsoft. They can sell us a buggy product, restrict how we use it and then charge us to unravel a problem they've created. The EULA for software is an incredible farce for a product such as Word. But we'll save that for another time.

    Chris Reich
    www.TeachU.com

  • Sheena Medina

    This article is specifically comparing product lines and explains how each company's products define them in the market.

    However, if you want to get into a deeper discussion regarding "culture" and personality, I think the "cult of personality" is exactly what this article compares- the "personality" of the two companies.

    The market has spoken and deemed Apple the superior...for now anyway. To place complete responsibility of success and failure of an entire organization on one person is not only a ridiculous model, but an obviously short sighted strategy destined for failure. I don't think either company would embark on such a model. Apple wins now because of their simplicity, and this is what I believe will keep them winning for a long time. As our world becomes more and more cluttered, Apple products will continue to feel like a breath of fresh air.

  • Snailboy

    "I barely scratched the surface in five paragraphs about Microsoft, while in a single paragraph about Apple, I feel like I've pretty much covered everything."

    You failed to mention Apple's professional creative software which has become industry standard for Film and Audio.

    Final Cut and Logic anyone?

  • James W

    By definition, a marketing company goes out to the market and listens to the market and builds products for that (existing) market. That's NOT what Apple does. Yet, every marketing-illiterate tech writer loves to announce that Apple's (insert adjective here) marketing has gotten them to where they are today. It's true they are more effective marketers than many others, but that's because it's aligned with their product line and the reasons WHY people want to buy their products.
    At the end of the day, Apple is an engineering company that executes better. And their engineering successes allow them to create new markets, innovate product categories, and execute human-centered design people seek.

  • Zia Khan

    You make a very good point, but I would argue that latter part.

    Apple is a design-driven company that engineers great products. Design embodies everything they do - the way they think, make and act. Remember their slogan: Think Different. Their genius lies in taking the risk and doing things that others did not know were possible. And delivering an extraordinary experience that masks the brilliant engineering.

  • Archille DuCharme

    Design Driven, but not always quite the best. I recall Steve Jobbs holding an iphone and letting everyone know that the users were at fault for dropped calls because they did not know how to hold a phone...

  • Ian Duncan

    According to the Reuters story on this, Apple was actually bigger than Microsoft back in 1989 http://www.reuters.com/article...

    I point it out mainly to be pedantic, but it's also interesting that back then Apple was a very different company than it is today.

  • Thom Mitchell

    Apple's resurrection from its mid-90s nadir is extraordinary, as has their continued string of successes with the iPhone, App Store and iPod Touch and now iPad. But you glossed over the revenue and profit numbers - which tell a very interesting and different story and one that is very favorable for Microsoft. As an investor it's hard to make a case to purchase Apple at it's current stock price while Microsoft could be seen as under-valued.
    You also gave short shrift to the ongoing shift by Microsoft to cloud services - a place that it is far better positioned to take advantage of than Apple is. Finally much of Apple's narrative of success is intertwined with Steve Jobs - witness the stock price gyrations based on his health concerns. What will happen to Apple if Steve Jobs isn't at the helm? It sure will be fun to find out what happens in the next 5 to 10 years.

  • Sheena Medina

    Thom, you make some valid arguments regarding the connection of a company's success relative to its leader, and it's true AAPL stock waivers along with the ebb and flow of Mr. Jobs's health. Maybe this idea further cements the argument that Microsoft needs Bill Gates back: http://www.fastcompany.com/mag... What do you think?

  • Clive

    How successful the two companies are depend on the view point. Apple is very good in multiplying investment made by the investors. So, hail Apple.

    But as 90% of world computers are PC (IBM PC clones) and software is Windows, right? Mankind progress because computers are cheap thanks to IBM and Microsoft.

    Just think where we will be if there are no IBM PC clones and Windows.

    So, long live IBM and Microsoft.

  • CurtisMSP

    90% of the world computers are Windows because most of the world installed unlicensed copies of Windows -- something that used to be very easy to do. The 90% market share number is deceiving, because much of that 90% generates no revenue for Microsoft. Apple, on the other hand, is poised to make substantial profit on all of the product it sells, even in the developing world. That is why the outlook for Apple is so good. Even if its share of world computers is relatively small, its potential to generate profit on future products is much higher than Microsoft.