Apple becomes most valuable company ever – or does it?

Aug 21, 2012

Tech giant overtakes rival Microsoft’s 1999 record – but not when you adjust for inflation

DESPITE disappointing quarterly results last month, Apple yesterday became the most valuable public company in history, surpassing the record Microsoft has held since 1999.
On Monday, with shares up 2.6 per cent at $665.15, Apple’s market capitalisation rose to $623.5 billion, exceeding Microsoft’s historic $616.34 billion.
However, Horace Dediu of Asymco told the New York Times that Microsoft’s 1999 market value was still far higher than Apple’s when adjusted for inflation. The 1999 Microsoft would be worth $850 billion today.
But while Apple continues to make great leaps forward, Microsoft’s value has dwindled to $258 billion. Apple’s worth also outpaces other long-term rivals such as ExxonMobil ($406bn now, down from $486bn last December) and Sony (down from $18bn to $12bn now).
In July, Apple issued disappointing Q3 figures after potential customers put off buying new phones until the new iPhone5 is launched while competition from Samsung and other Android mobiles also took its toll.
The new surge comes as consumers prepare for the mid-September launch of the iPhone5 and rumours circulate of a new, possibly smaller, iPad. Shares in Apple have now increased by 64 per cent so far this year.
Over the longer term, the milestone is remarkable because Apple veered perilously close to bankruptcy 15 years ago.
Today, in the United States, Apple is responsible for almost half of the IT sector’s stock market growth per year. As the Financial Times reports, stock market returns from IT were 20.3 per cent at Friday’s close, but 11.9 per cent excluding Apple.
Charlie Wolf, an analyst at Needham & Company, said: “It has been an absolutely remarkable transformation”.

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Something else has changed as well: share prices (back when Microsoft was biggest) were based on complex calculations about expectation of the company's income. These days, they seem mainly based on the attraction of the shares to speculators looking for a quick (and short term) profit. The market has lost all interest in long-term prospects, and just cares about the current quarter,