Apple vs. Microsoft

It’s been the battle of the century for the tech industry. Microsoft and Apple, both hungry for equal competition and eager to take a bite out of every industry from hardware to gaming, have seemed to be at it since their beginnings.

It is said that anyone aiming at the same consumer dollars that you are is your competitor. In this light Microsoft and Apple met their respective opponents. Apple wanted to work from hardware to software getting the whole planet to use their operating system, while Microsoft wanted monopoly in software ensuring that every hardware company use its software.

The rest is history. Both companies have fought hard, from Apple’s firing – and rehiring – of Steve Jobs to Gates’ mind-game with the Department of Justice, while at the same time creating fortunes for their respective shareholders.

When one seemed to soar the other seemed to be gaining. Today, its Apple’s day in the sun. But how long will it last?

Lets compare, and we’ll use ticker symbols for brevity.

Earnings: MSFT’s market cap is more than double the size of AAPL, but at the same time brought in 12.5% return on market cap last quarter. AAPL’s earnings were close to 5%.
Dividends: AAPL offers no dividend. MSFT offers one that’s 29% of its earnings per share.
Valuation: With AAPL at 42 times earnings, it’s hard to say what can possibly raise the stock further. Meanwhile, with MSFT at 22 times it should be considered less risky than safe. Due consider that both enterprises trade for more than 8 times book value. Nothing in the realm of safety in the books of value investing.
Cash: Both companies have zero debt and hold about the same percentage of cash on their balance sheets.
Sentiment: It would also seem plausible to note how there seems to be far more anticipation for a higher stock price for Apple than for Microsoft. The down side therefore bears the elements of risk.

Would I buy either right now? I gather not. Which one would I short first? Apple, no question.

In other news, security researcher Dino Dai Zovi declared the Mac OS to be less secure than Vista. (That grinding you hear is the sound of Steve Jobs gnashing his teeth).

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