No amount of chest-thumping can cover for the fact that Microsoft is behind on mobile.
Not that anyone at this late date needs another reminder that the internet has arrived. But if the tech industry were a troop of australopithecines, a grizzled old alpha ape has finally been shoved off the second-highest branch on the tree.
As the markets closed Monday, fast-rising Google (GOOG) shares finally put the search giant’s value ($249.1 billion) higher than Microsoft’s ($247.2 billion). This milestone comes despite Microsoft’s healthy performance over the past year, in which shares are up nearly 20 percent even though the company reported its first-ever quarterly loss since going public.
But investors over the past three months have turned seriously bullish on Google. Shares are up more than 30 percent since the end of June, while Microsoft (MSFT) has stayed flat. (Ten-ton gorilla Apple is the only tech company worth more, with a value greater than that of Google and Microsoft combined.)
The enthusiasm gap isn’t hard to parse. Though Windows 8 is set to come out this month, its success depends largely on a platform that’s fading in prominence. While the new operating system is designed to be Microsoft’s first to translate tidily from PCs to smartphones and tablets, Microsoft has spent years failing to prove it gets mobile. Windows 8 looks promising, but it’s hard not to picture Microsoft as an old silverback with its arms wrapped around an old Dell desktop.
Google’s share price has soared over the last three months while Microsoft’s has stayed flat.
Google meanwhile is beating its chest with the success of Android, which runs on more than two-thirds of the world’s smartphones shipped during the second quarter of 2012. Fewer than 4 percent of smartphones shipped during that same time had Microsoft mobile operating systems.
Google doesn’t depend on Android sales for revenue the way Microsoft depends on selling software licenses. But Android keeps users tied to Google sites and services, which are on track to bring in $30 billion for Google this year — more than either Microsoft’s Windows or Office divisions generated during the most recent fiscal year. Yes, much of Google’s revenue comes from ads served to PC users, but mobile is fully baked into its way of making money and into Google’s future growth. Windows 8 will have to do something really spectacular, especially in tablets and phones, if Microsoft hopes to regain its former perch in the monkey house.