{"id":579284,"date":"2010-05-26T06:09:00","date_gmt":"2010-05-26T10:09:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/apple-worth-more-than-microsoft-2010-5"},"modified":"2010-05-26T06:09:00","modified_gmt":"2010-05-26T10:09:00","slug":"its-official-apple-is-now-worth-more-than-microsoft-aapl-msft","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/579284","title":{"rendered":"It’s Official: Apple Is Now Worth More Than Microsoft (AAPL, MSFT)"},"content":{"rendered":"

\"Steve<\/p>\n

Apple’s stock market capitalization (AAPL) has not yet quite surpassed Microsoft’s (MSFT), but the value of its actual business<\/em> is now higher.<\/p>\n

Specifically, Apple’s busines<\/em>s is now worth $200 billion, while Microsoft’s is only worth $197 billion*–at least by one simple calculation of enterprise value.<\/p>\n

What’s the difference between a company’s stock market capitalization and the value of its actual business (which is referred to as “enterprise value”)?<\/p>\n

A company’s stock market capitalization includes the net value of the cash and debt on the company’s books.  To figure out the imputed value of the company’s actual business<\/em>, therefore, you have to adjust for the value of those other things.<\/p>\n

As an example, consider a company with a market capitalization of $1 billion that has $500 million of cash and no debt.  If you were to buy all of the stock in this company, you would spend $1 billion.  When you bought the company, however, you would also acquire the $500 million of cash that came with it, so your net purchase price would only be $500 million.  So the company’s actual business, in this case, would have been worth only $500 million.<\/p>\n

\"chartIf the same company had a $1 billion market capitalization, $500 million of cash, and $500 million of debt, meanwhile, the company’s business (“enterprise value”) would be $1 billion. You would get the $500 million of cash, but you’d also have to pay off the $500 million of debt, so the net cost to buy the company would be $1 billion.<\/p>\n

As of yesterday’s stock market close, Apple had a market capitalization of $223 billion.  Apple has $23 billion of cash and no debt*.  Apple’s enterprise value, therefore, is $200 billion<\/strong> (per Yahoo Finance–see clarifying note below*).<\/p>\n

Microsoft, meanwhile, had a market capitalization of $228 billion.  Microsoft has $37 billion of cash and $6 billion of debt (per Yahoo Finance<\/a>).  Microsoft’s enterprise value, therefore, is $197 billion<\/strong>.<\/p>\n

So, it’s official: Apple is now worth more than Microsoft.<\/strong><\/p>\n

(And if you don’t consider this an absolutely remarkable turn of events, read this ><\/a>.  It really puts the changing of the guard over the past decade in perspective.)<\/p>\n

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* As several sharp-eyed readers note, Apple has an unusual method of accounting for some of its cash on hand, which is that it classifies $18 billion of cash as a long-term investment.  (This is because the cash is invested in Treasuries with maturities of more than a year).  When this cash is included in the company’s cash balance, Apple has $42 billion of cash on hand, not $23 billion.  This reduces its enterprise value by $18 billion or so, which still puts it below Microsoft’s, at least for a few more days.  Yahoo Finance’s simple calculation of enterprise value is defensible, but a more detailed analysis of Apple’s liquid assets shows that the market still values Microsoft’s business more highly than Apple’s. <\/p>\n

Join the conversation about this story »<\/a><\/p>\n

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