Remembering a time when Microsoft was Apple's underdog

Long long ago, in a galaxy really not so far far away, Apple's yearly revenues used to be four times higher than Microsoft's. No kidding.

I've been analyzing companies' revenue per employee from 1990-2010. That may become a blog post in itself but today I want to focus on Apple vs. Microsoft.

Last year, much was made of Apple of passing Microsoft in terms of revenue and capitalization.

What struck me looking at this diagram is that 20 years ago, Apple's revenues were almost five times larger than Microsoft's!

I'd grown so used to thinking of Apple being David to Microsoft's Goliath that I'd forgotten that this wasn't always the case. To be fair, in those early days Apple thought of itself as David to IBM's Goliath. As IBM went from being the PC vendor (in the 80s) to just another PC vendor (from the 90s onwards), and Microsoft's fortunes rose, Microsoft replaced IBM as Apple's main competitor.

High revenues are good, but profits are (at least in the long term :-) better. Apple was barely making money before 2005, while Microsoft was always profitable during this time period.

Here are Microsoft's and Apple's employee counts.

So what of revenue and net income per employee? Surprisingly Apple's revenue per employee has almost always been higher than Microsoft's. The latter's consistently larger employee base impacts this metric. Since 2005 Apple far surpassed Microsoft. Last year, each Apple employee generated 1.3 million dollars. Wow. (Google, BTW, was at 1.16 milion dollars per employee).

Looking at net income per employee however, Apple's only recently surpassed Microsoft.

The 2004-2005 period is the turning point in Apple's fortunes. All four metrics (Revenue, Net Income, Total, and per Employee) are on the rise reflecting a growing demand for its products. And remember the iPhone wasn't even out yet.

The market certainly reflects this. In 2005 Apple's stock price exceeded Microsoft's for the first time in almost 10 years.

All this makes me wonder...
  • Can Apple keep growing its revenue and income faster than employees? (They hired over 10,000 people in fiscal year 2010)
  • The market obviously values and rewards trends (i.e. first & second order derivatives). How much of a hit will the stock take when Apple's growth slows?
  • When a company's revenue, income, rev per employee, and income per employee are all rising and keep doing so for a few quarters... Is it high time to buy the stock?

Whatever the answers, let's hope Apple behaves itself well as our new Technology Goliath.