Apple vs. Microsoft: Battle of the Brands
Posted Apr 9th 2007 9:10AM by
Brian WhiteFiled under:
Products and services,
Consumer experience,
Competitive strategy,
Microsoft (MSFT),
Apple Inc (AAPL),
Marketing and advertising,
International Business Machines (IBM),
Battle of the BrandsThis post is part of our
Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.
It seems that the competition that has been brewing between
Apple Inc. (NASDAQ:
AAPL) and
Microsoft Corp. (NASDAQ:
MSFT) has never really died down from the late 1970s, even as both companies have had ups and downs in the stock market and in the consumer products market as well. The battle between Apple and Microsoft has been (and will be) a perfect case study for future business textbooks at the best universities, as the fight between the two has been nothing short of amazing in the past 25 years or so.
Apple
Apple's start began with Steve Jobs (visionary guru) and buddy Steve Wozniak (tech guru) trying to find a way to get customers buying the personal computer before the market and world even knew what a personal computer was. Steve Jobs was trained in calligraphy and wanted the PC experience to be just as much an art and visceral, visible experience as a technical, computer program-interface experience. With that vision, and with a little help from friends, the two Steves started selling Apple's first PC products out of a garage about 27 years ago in the Southern California area, after Jobs dropped out of college due to lack of funds and general boredom.
What transpired throughout the early 1980s was the rapid growth of Apple Computer Inc. as the PC powerhouse at the same time it was grabbing the attention of MicroSoft (later renamed Microsoft Corp.) founder Bill Gates, who had dropped out of Harvard to pursue his vision of coming up with a PC operating system that he could "license" to all the big hardware manufacturers to use on their machines. But, Gates needed a nice interface to ensure his product was better than Apple's.
There is endless debate on whether Gates and company stole designs from Apple, but that's another post. Jobs and company went on to dominate the PC industry they largely helped create throughout the early '80s and into the late '80s. Jobs himself was booted from the company he helped found, based on his erratic and perfection-obsessed personality, in 1985 as top Apple employees became severely alienated. Apple, though, continued on, but lost its magic until Jobs returned in 1997 at a time when Apple was completely floundering in the marketplace. Since 2002, it's not that hard to see where AAPL shares have gone -- from below $10 to over $94 today, with a split in 2005 as AAPL shares were going nuts with the incredible success of the iPod.
Microsoft
Bill Gates was apparently obsessed with more of a business decision to license his software to other manufacturers while keeping control of the software code itself, unlike Apple which wanted to keep control over both the hardware end and software end of its business. That decision by Gates created not only the largest computer software company on the planet, but also propelled Gates to the richest person in the world as well. While seeing very limited vision with large companies like
International Business Machines Corp. (NYSE:
IBM), Microsoft was able to convince IBM and others to sell its hardware to the public using Microsoft's software. In doing so, the "IBM clone" market exploded as the commodity parts needed to make an "IBM-like" PC became easy to find and make, and hundreds of companies joined in the fun of making ultra-cheap PCs running Microsoft's DOS (disk operating system).
During the late 1980s and all through the 1990s, Microsoft grew at a rapid clip as Apple was sliding down the hill with a lack of vision and uncompelling products. It was no match, as Microsoft's licensing strategy easily overwhelmed Apple's proprietary strategy, and soon almost every U.S. home had a PC. Based on such rapid growth, Microsoft split its shares several times in the 1990s, making millionaires out of secretaries and helping propel the PC to an everyday appliance like a toaster or oven. There are persistent arguments that Gates and company made many illegal deals with PC makers to ensure its operating systems (now called "Windows") would be the only choice offered on new PCs, but one thing remains undisputed as a thought: did Microsoft single-handedly create the PC marketplace and allow billions of customers to connect with personal computers, creating a revolution in the process? There's a debate for a whole volume of books, yes?
MSFT shares have never been above $32 a share in the past five years, while sinking to lows of $22 in the same time frame, even as Microsoft has tried to goose the price of its shares with heavily promoted buybacks and other strategies. Meanwhile, Microsoft continues to sell plenty of its operating system software, as well as loads of business software for servers and internet commerce applications. Translation: Microsoft isn't going anywhere fast, although shareholders probably want that notion wrapped up into a steadily climbing share price.
So, who's the champ here? Well, that is a very hard call (like always). There are ardent fans of both Apple and Microsoft these days, and at this time Apple seems to have the "popularity" edge in the marketplace with its stylish designs, easy customer experience, and superior marketing. In fact, Apple's marketing is superior to almost every company in any industry, which is saying a lot. But from a share price perspective in the past five years, Apple wins that prize as well, while not winning the revenue and profit battle, which goes to Microsoft.
