All eyes were glued to the stock market this week: not just among investors wondering if the global economy is about to jump the rails once again, but among tech media types hoping to celebrate a milestone. The obsession over charting the exact instant that Apple (NSDQ: AAPL) would become the world’s most valuable company was a bit silly, but when viewed against the passing of another historic milestone Friday afternoon, it shows just how much the pecking order of the tech world has changed in a few short years.
Thirty years ago yesterday, IBM launched the first PC. Sure, it was actually Apple who had proved there was a mainstream market for personal computers a few years back with the launch of the Apple II, but the IBM PC really kicked off a new era in which regular people started to use their own computers for both business and pleasure on an everyday basis. Thirty years of world-changing products followed that invention as component vendors, software companies, and then Internet start-ups created billions in wealth based around the personal computer.
It’s really too bad that term was affixed to a device that isn’t nearly as personal as the devices that have propelled Apple to such great heights. Just five years ago this summer, when the IBM PC turned 25, Apple’s market cap was around $50 billion. In August 2011, following the launch of the iPhone, the App Store and the iPad, Apple has added nearly $300 billion in value to its investors based on products that didn’t exist five years ago and is nipping at Exxon’s heels when it comes to market capitalization.
For all the scrutiny on the stock prices of Apple and Exxon, which retained its spot as the world’s most valuable company as the week ended, Apple had already become the most valuable company in the technology industry based on its work on iOS and mobile in general. That is even vying for the title of world’s most valuable company goes to show how much the traditional PC and cell phone makers have botched the transition to the new world of mobile computing.
Apple’s competition these days is coming from a search engine company, of all places, older cell phone companies scrambling to catch up, and traditional consumer electronics makers who have adjusted their strategies to accommodate mobile phones. Apple is the only company born of the traditional PC industry to have transformed its business: Dell is watching from the outside; HP (NYSE: HPQ) has a product but is way behind its competitors; Microsoft (NSDQ: MSFT) is finally taking mobile seriously but its legal department has had more success than its product development people.
IBM saw this world coming years ago and dumped its PC division on Lenovo, convinced that PCs were doomed for commodity status. Yet it couldn’t resist a little wishful thinking this week, claiming it was “in the vanguard of the post-PC era” because it offers back-end services to cloud-computing companies and was smart enough to get out of businesses that didn’t contribute much to its bottom line.
There’s only one company in the vanguard of the post-PC era, and that’s Apple. Even with all of its formidable technical prowess, IBM didn’t come up with software that made sophisticated mobile computing possible. It didn’t pioneer a mobile applications marketplace that is now standard practice in the industry. And it didn’t fulfill demand for a computing experience between the phone and the PC.
Apple did all of these things, and has been rewarded by the financial community for showing how those visionary breakthroughs can be translated into profits that astound veteran financial analysts, unaccustomed to watching a company this old and this big grow so quickly. It also benefits from the ham-fisted responses of its competitors: Android is a force in mobile, but Google (NSDQ: GOOG) makes so much more money from its search business that it’s valued mostly on that basis. Research in Motion (NSDQ: RIMM) and Nokia (NYSE: NOK) are floundering. Had any one of them reacted more quickly to the iPhone launch, they may have been also recognized by the markets.
But it didn’t matter whether Apple became the most valuable company in the world last week, and it won’t matter whether it does next week. That’s because no one knows what the world will value more highly than mobile computers in five years, be it oil or cancer-curing drugs or teleportation machines. And that’s because on the day Steve Jobs leaves Apple, it will no longer be the most valuable company in the world (rightly or wrongly) no matter what happens to the price of oil.
Investors care deeply about such things, of course. But those who are trying to ascertain Apple’s staying power as a mobile platform company should not be too concerned about its market capitalization. If Pfizer comes up with a cure for cancer in 2014 and vaults ahead of Apple, or if PetroChina makes a green energy breakthrough with the same result, will Apple have lost a step? Of course not.
Microsoft was the most valuable company in the world in 2003 but never regained that spot again after surges in the valuations of General Electric (NYSE: GE) and Exxon. Yet Microsoft’s current ennui didn’t really begin until 2007, when it proved just how much it didn’t understand the new world by its dismissal of the iPhone.
In other words, judge Apple against its competitors, not against energy companies or Chinese banks. PC companies are paying the price for failing to act before a 30-year-old business began to stagnate, and if any of them had capitalized on opportunities they knew were available, they might be in a position to share some of that market value with Apple.