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IBM Businesses Microsoft The Almighty Buck

IBM Now Officially Worth More Than Microsoft 295

Posted by Soulskill
from the cough-i'm-sure-windows-phone-will-fix-that-cough dept.
liqs8143 writes with news that IBM's market cap has surpassed Microsoft's, making it the second most valuable tech company. When the market closed on Friday, IBM was valued at $207.52B, while Microsoft was valued at $206.52B. "At one point during the PC era, Microsoft's value climbed three times higher than IBM's. Apparently, this has been a long two decades in Armonk, N.Y., but Microsoft also is no longer the beast it once was. The guard is changing. Besides Apple, there is also Google. While Google is valued at about $170.59 billion, less than the other three, its $31 billion in annual revenue is half of Microsoft's $69 billion and less than a third of IBM's $101 billion. Waiting in the wings is Facebook, which has been valued in the private market for as much as $50 billion, on negligible revenue."
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IBM Now Officially Worth More Than Microsoft

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  • capitalism fail (Score:5, Insightful)

    by Lehk228 (705449) on Sunday May 22, 2011 @02:21AM (#36206650) Journal
    and this is why the current implementation of capitalism is fatally flawed, it is founded on fraud, deception, and innuendo. facebook is valued at $50 billion dollars even though it makes very little money and will wither and die just like every other hit social network when something else comes out.
    • Re: (Score:3, Insightful)

      by Anonymous Coward

      The question is not whether Facebook is worth $50 bn. Whether it fails or not doesn't matter if none of that $50 bn is yours (and if it is, it's your own fault). The question is whether someone will force you to invest -- i.e. whether the taxpayers will be made to bail somebody out for $50 bn. That has nothing to do with capitalism, and is just bad government. So in actuality, it's not the current implementation of capitalism that is flawed, but the implementation of government.

      • Re:capitalism fail (Score:5, Interesting)

        by dkf (304284) <donal.k.fellows@manchester.ac.uk> on Sunday May 22, 2011 @07:23AM (#36207396) Homepage

        The question is whether someone will force you to invest -- i.e. whether the taxpayers will be made to bail somebody out for $50 bn. That has nothing to do with capitalism, and is just bad government.

        There are other ways in which you can end up "forced to invest". An example is where you've got a company (or sector) that is so over-valued that pension funds feel they have to invest in it, otherwise they lag the overall market index. While the fund managers might know that the company is overvalued, there's no way that they're going to say it for fear of getting hounded out of their jobs. (This was one of the engines of the credit bubble.) Do you monitor every trade that your pension fund is doing? I know I don't; I have a real job to do. But what this does mean is that things can go badly wrong with your money.

        The basic premise, that things can go wrong which you can do next to nothing about, remains the same. I just don't see that the conclusion you draw from it — that government is the problem — is sustainable. Nor would I say that government is the solution either; that would be foolish. Hanging 10% of all senior financial types on Wall Street from the lampposts of Manhattan to encourage the rest... I'm having problems seeing the down-side of that idea.

        • Re:capitalism fail (Score:4, Insightful)

          by ChienAndalu (1293930) on Sunday May 22, 2011 @11:33AM (#36208902)

          In a capitalist society you have control over your pension funds.

          • Only if you directly control them - which most people in any society don't have time to do unless their day job is as a pension fund manager.

            Otherwise you have to trust someone. Sure, there may be a pension fund out there with specific guidelines that require investment in only green companies, or only companies that aren't Facebook. But - - - - there's no guarantee in a capitalist society that there will be a given company that caters to your specific wants.

            So no, overall I don't think most people have

      • by MrHanky (141717)

        Back here in reality, that's not the question at all.

        Facebook won't be bailed out by government when people have drifted to another social networking site, just like Myspace wasn't bailed out, and just like AOL wasn't.

      • LOL WAT? (Score:5, Insightful)

        by FatSean (18753) on Sunday May 22, 2011 @08:35AM (#36207694) Homepage Journal

        The government is going to bail out facebook? Me thinks we've got someone upset with recent elections who wants to inject his anti-government rants into this thread. Government does need some fixing...better regulation of financial markets for one. But your screed comes across as someone who wants to tear it all down.

      • by Joe Snipe (224958)

        Blatant +5 strawman

    • Re:capitalism fail (Score:5, Insightful)

      by Opportunist (166417) on Sunday May 22, 2011 @02:40AM (#36206712)

      The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations. Quite literally. The stock value of a company is tied to the analyst's expectations, not the money they earn. More bluntly, we're comparing whether we will find another idiot to sell those toilet papers to before someone notices their lack of value.

      I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

      • Re:capitalism fail (Score:5, Interesting)

        by blind biker (1066130) on Sunday May 22, 2011 @05:07AM (#36206906) Journal

        The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations. Quite literally. The stock value of a company is tied to the analyst's expectations, not the money they earn. More bluntly, we're comparing whether we will find another idiot to sell those toilet papers to before someone notices their lack of value.

        I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

        A couple of years ago I invested in a portfolio of alternative energy companies (top 1 or 2 in solar, wind etc.). ALL of these brought in tons of cash, consistently, quarter after quarter! Since then we had the GUlf of Mexico disaster and Fukushima, and the total amount of extracted oil has certainly not increased. And yet, I am down about 30% on my portfolio value.

        After this experience, I learned that there's no point in investing based on fundamentals.

        • Re:capitalism fail (Score:5, Insightful)

          by Confusador (1783468) on Sunday May 22, 2011 @06:09AM (#36207122)

          If you're investing based on fundamentals and looking at portfolio value after 2 years, you're absolutely right that you're doing it wrong. The question for such an investor should be not about the value but whether the income of those investments is what you thought it will be. If the income is still there, then they will continue to post returns for the forseeable future, hence Buffet's comment that "my preferred holding period is 'forever'."

          Yeah, the market will do stupid things in the short term (here meaning periods less than about 10 years), and you can make money based on those movements. Those aren't based on fundamentals, though, so if you're in it for the long haul then a market downturn which isn't based on that data just means it's an opportunity to buy more.

          • Buy low sell high. Too many people sell low and buy high because it is rising only to finally sell when it is low.

            Yeah, the market will do stupid things in the short term (here meaning periods less than about 10 years), and you can make money based on those movements.

            I love a stupid market. It's how a few become rich. If everyone did the exact same thing, the market would move very little and it would be hard to make a buck. As the market moves up, the sell orders would pour in correcting the rise. As the market moves down the buy orders would pour in correcting the fall.

            Go counter to the market. Buy during a selloff and sell during a bubble. It isn't

            • Go counter to the market. Buy during a selloff and sell during a bubble. It isn't difficult.

              It sounds easy, the problem is picking the right time. Look at the history of Microsoft [yahoo.com]: In the two years between 1995 and 1997 their stock price more than tripled from ~$5 to ~$15. Then it went from $15 to more than $50 between 1997 and 1999. And then it quickly fell back to ~$35 the next year. It hasn't materially exceeded that last price at any time since and has in fact slowly lost almost 30% of its value since then.

              The trouble is that it's far too easy to see a bubble and sell Microsoft for $15 in 1997

        • First, find some books by Benjamin Graham. Their a good read. He had a famous student you might of heard of - Warren Buffett.

          Second, realize that in the short term the stock market is a voting machine - or a beauty pageant. In the long run [5+ years] it is a weighing machine.

          Third, realize that the past is gone and that you are buying a company on it's future performance. Or, as Yogi Berra said "Prediction is very hard, especially about the future".

        • Re:capitalism fail (Score:5, Insightful)

          by khallow (566160) on Sunday May 22, 2011 @09:46AM (#36208106)

          A couple of years ago I invested in a portfolio of alternative energy companies (top 1 or 2 in solar, wind etc.). ALL of these brought in tons of cash, consistently, quarter after quarter! Since then we had the GUlf of Mexico disaster and Fukushima, and the total amount of extracted oil has certainly not increased. And yet, I am down about 30% on my portfolio value.

          These companies are in large part political merchants. Their profit depends on whether they can obtain funding from various governments. With the Democrat loss of the US House of Representatives, the stock market expected these companies to receive considerably less public funding (perhaps factoring in future Republican gains as well) and priced the companies appropriately.

          All I can say is that if you missed that, then you weren't investing on the fundamentals.

      • by Alef (605149)

        The stock value of a company is tied to the analyst's expectations, not the money they earn.

        The money a company earns is just a proxy for expected future earnings. Investments have always been based on expectations. And what else should it be based on? It doesn't matter if a company has made lots of money before -- the whole point of investing is that you think it will make money some time after you invest.

      • We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations.

        The market has been this way my entire adult life (I'm 41). There are a lot of good stock market themed movies from the 80s that demonstrate this nicely ( I like the one with Christian Bale as the serial killer).

      • by khallow (566160)

        The flaw is rooted much deeper. We're not comparing the revenue and industrial strength of companies anymore, we're comparing our expectations.

        It's a feature not a bug. It makes no sense to value, for purchase by us, a good or service any other way that what we expect to get out of it. If we lose money because our expectations were wrong, then the disease is the cure. That is, we learn from that experience, and have a more realistic expectation next time.

        I guess it's obvious that a "honest" company that actually produces and sells goods cannot compete with this.

        Not to me. There are a lot of "honest" companies doing just fine whether on the stock market or not.

      • by Teun (17872)

        The stock value of a company is tied to the analyst's expectations,

        Analyst's?

        In this particular case it's the speculators' tricks that cause this price.

        These guys aren't in it for the (longer term) profits, they just want to make a quick buck on the hyped value.

    • Re:capitalism fail (Score:5, Informative)

      by swillden (191260) <shawn-ds@willden.org> on Sunday May 22, 2011 @02:45AM (#36206730) Homepage Journal

      and this is why the current implementation of capitalism is fatally flawed, it is founded on fraud, deception, and innuendo. facebook is valued at $50 billion dollars even though it makes very little money and will wither and die just like every other hit social network when something else comes out.

      I don't see the fail.

      The "proper" value of a stock is the net present value of its future dividend stream. Even for stocks that don't pay dividends, you can adjust the idea for increase in book value due to retained earnings. In either case, the value isn't just based on the most recent net revenue figures, it's based on profits, and on the anticipated future profits.

      If you dig into these numbers a little more, they don't look all that unreasonable to me. Yeah, okay, IBM and Microsoft are neck-and-neck in market cap even though IBM has total revenues almost 50% higher than Microsoft, but Microsoft actually has greater profits ($19B vs $15B) which should send the cap the other way... except that IBM also has much greater assets. As far as their futures go, both companies are going to be productive and profitable both short-term and long-term, but it's unlikely that either of them is going to experience tremendous growth. So... they really are worth about the same.

      Throwing Google into the mix, Google is worth almost as much as the other two, but has smaller revenues and profits ($8B)... so maybe that's the fail? Google also has tremendous opportunity for growth. It's currently raking in the lion's share of on-line advertising revenues in the industry, but those are still just a tiny piece of total advertising expenditures -- and online advertising continues to grow really quickly. Even if Google loses market share (and there isn't really any reason to think they will), the pie they're taking a share of is growing so fast that they have lots of growth ahead of them. And that assumes that none of Google's non-advertising ventures are successful. So, while Google currently has smaller revenues and profits, it also has much better prospects for growth than IBM or Microsoft. Again, I think the market capitalization isn't at all unreasonable.

      But what about LinkedIn? Yeah, they may well represent a fail. But Lots of people said that about Google when their IPO went crazy. Investors in LinkedIn are gambling but it's not an entirely unreasonable gamble. LinkedIn doesn't have a lot of revenue, but they have demonstrated that they can generate income from their social network, and it's not unreasonable to believe that they'll find ways to generate a lot more. The bottom line with LinkedIn is that they currently have 100 million account holders. If they can find a way to extract $50 from each of them, on average, over the next 10-15 years they'll have justified their current market cap. That doesn't seem so far-fetched to me. It doesn't seem likely enough that I would buy their stock... but I also refused to buy Google for the same reasons.

      Does the market mis-price companies at times? Absolutely. Especially when speculators start inflating bubbles. But I don't really see anything so insane here.

      • by NoSig (1919688)
        It could be future earnings. It could also be the expectation that other investors are going to be willing to buy the stock for a higher price in future. I think most investing is based more on the latter and less on the former.
        • by swillden (191260)

          It could be future earnings. It could also be the expectation that other investors are going to be willing to buy the stock for a higher price in future. I think most investing is based more on the latter and less on the former.

          In the case of non-dividend stocks, it absolutely is the expectation that other investors are going to be willing to pay more in the future. That future willingness could be based on emotion or stupid decisions, or it could be based on an actual increase in the value of the company.

          If I buy Apple stock, for example, (Apple, like many tech companies, doesn't pay dividends), I absolutely do expect to be able to sell that stock for a higher price in the future. Not because I'm betting that future investors

      • by Archtech (159117)

        The "proper" value of a stock is the net present value of its future dividend stream...

        ... which no one can possibly know, because of the "future" bit.

        • Which no one can possibly know now, so they make bets with other people as to what it will be. Once the future comes, you can look back and see if your predictions were accurate.

        • by swillden (191260)

          The "proper" value of a stock is the net present value of its future dividend stream...

          ... which no one can possibly know, because of the "future" bit.

          Obviously no one can know, but it's possible to make a pretty good estimate for the near term. As you look further into the future the uncertainty increases... but as you look further into the future the effect of those profits on the net present value decreases. Bottom line, it is often possible to predict with surprising accuracy.

          Keep in mind that this isn't some sort of newfangled idea. It's a necessary feature of any society above the hunter-gatherer level -- and even nomadic hunter-gatherers have

      • by Compaqt (1758360)

        >The "proper" value of a stock is the net present value of its future dividend stream.

        Future dividend stream for how long?

        And how do you calculate the net present value?

    • by JAlexoi (1085785)
      And I think that Facebook is the right way for seeking investments. I wish all investors would be committed to their investment when investing into a company. I think that those 3 second investors are "playing the market" yet bring nothing to the table.
      Some will say that those players bring liquidity to the market, but I believe that liquidity in the market results in shareholders that care about "the quarter" and don't care about the future.
    • Capitalism sucks because consumer protection sucks. Why is facebook worth so much? Because they've locked in all their users. Same with linkedin and twitter.

      Imagine a telecom company locking in their users, so users would not be able to call eachother on different networks, or switch between networks. Now that would be an outrage.

      Consider also a telecom company that sniffs the calls of its users and sells this information to other companies. That would be an even bigger outrage.

      Why does it still work differ

      • And once it is far behind and interests have been established, it is very difficult to fix the situation.

        Not really. Many countries have gone from a monopoly telephone company to a plurality of telephone companies which allow users to call each other.

        There's no reason why a social network can't be split up. It would require a standard to be established for interchange of status information etc. And legislation to make it happen.

        • The point was that with telephone companies, consumer protection did not lag too much. Also, the technical obstacles were much lower.

          Can you imagine facebook or twitter being forced to open up their API's so they can interoperate with other similar companies? I think they are too big already for that to happen. They have already acquired too much lobbying power. And they will use arguments of the kind "our API's are much too complicted to open up". Just like microsoft did with IE, saying that they could not

    • it is founded on fraud, deception, and innuendo

      Which is why the best stuff is rarely the most popular. Applies equally throughout life (music, for example).

    • by BeanThere (28381)

      Facebook's valuation is based on demand from Goldman Sachs, whose business model is to use Federal "stimulus" money and to socialize losses - pray tell, how is that an example of capitalism?

  • Facebook Revenue (Score:5, Informative)

    by phantomfive (622387) on Sunday May 22, 2011 @02:24AM (#36206658) Journal
    In case anyone was wondering, Facebook's 'negligible revenue' is approximately $1billion, with profits of around $300million. Sources at this point seem to be mainly rumor [gigaom.com], and vary, but are in the same range.
    • by Kjella (173770)

      It might be negligible for their market cap, but I'll gladly take the small change off their hands ;)

    • by jkmartin (816458)
      Let me find another company with around $300 million in profits. Here's one: 100% rise in sales over the last 10 years, $1 billion increase in sales over the last 5 years, stock price up more than 100% over the last 5 years. Wow, this must be an exciting and dynamic company pioneering a new market...what business are they in?

      It's Family Dollar. They do discount retail. Their market cap is $6.5 billion.

      I haven't figured out how Facebook makes any money other than taking a cut on the sale of imagina
  • Facebook claims they have 500 million users. That's $10 per user.

    If I paid you $10, would you sign up for my new social networking site? We could do away with Facebook.

    • Sign up, sure. But $10 wouldn't make me stop using Facebook in favour of your network. My family and friends and my photos are already on Facebook.

  • Negligible revenue (Score:4, Insightful)

    by Arancaytar (966377) <arancaytar.ilyaran@gmail.com> on Sunday May 22, 2011 @02:42AM (#36206724) Homepage

    valued in the private market for as much as $50 billion, on negligible revenue

    1995 called; they want their bubble back.

  • by VortexCortex (1117377) <VortexCortexNO@S ... t-retrograde.com> on Sunday May 22, 2011 @03:03AM (#36206770)

    There is a bit of belly button lint that is valued at over $900 nonillion dollars! That's more money than there is in the world, many times over! I would say her naval lint is priceless, but I may consider letting someone else farm my girlfriend's belly button, If they transfered the world's wealth to me, many times over (to have destroyed -- that shit's evil, and the world would just make more money).

    Remember when Yahoo's stock value jumped because MS tried to buy them? Did you notice how much better Yahoo's service was during this time? Remember how their stock price fell drastically after the MS buy-out fell through? Remember how Yahoo's service just turned to utter shit at the same time? No? Right, because it stayed the same. These companies stock prices and Market Caps mean jack shit... it's all decimal numbers attached to feelings -- if more people feel good about having a larger number of a company's stock, then it's "worth" more, irregardless of the actual value of the products and services the companies make... It's all based on emotions! Feelings!!!

    Now, say you're AT&T. Your stock price is worth X because of your profit and loss statement. If you spend some profit to make your company worth more -- improved speeds and reliability -- then your stock price will fall because the investors see that you are not bringing in as much profit.

    Yes yes, there are Analysts, this is an over-simplification, the actual value does weigh in somewhat, but the feelings do more so -- This really does hold true in most cases. Ergo, one reason the US has shitty Internet is because of the funny-money market.

    Granted, I feel that MS should be worth less than IBM, even though I haven't seen a single IBM brand device anywhere in my house for years... Even though I don't like or own Apple products, I feel that they should be worth more than MS because their fanbois are loud.

    Is it any wonder that the feeling based values relate directly to the public's feelings and thus directly are reflected in the stock market?

    How are you feeling about the banking/mortgage industry? About as well as they are doing, eh? Wonder why that is... It's a shame we didn't learn our lesson about the funny-money market the first time... I once showed that my neighbor has spent enough money playing the lottery to have purchased things they talk about buying if they win -- C'est la vie, people are dumb.

    • by JAlexoi (1085785)
      Here are some hints. There's a TLA corp behind the scenes when :
      - you swipe your CC at a store
      - you reserve/buy an airline ticket (online or at the travel agent's)
      - you look at a lot of airport departure boards
      - you check in your baggage
      - you wait for the traffic light(in densely populated areas)
      - you turn on your XBox360, PlayStation or Nintendo console
      - you do the most mundane things that you don't even think about
    • by Kjella (173770)

      Would you consider your car's value in the second hand market to be "funny money"? That when suddenly our big SUV is a huge "gas guzzler" and everybody wants tiny hybrids instead that didn't change the value of your car even though it's the same? In case you didn't notice, the market is mostly driven what people want. To want is an emotion. Secondly they buy for the future, like how they think the oil prices will develop. That is belief. If sales are driven by emotions and beliefs, why would not stock price

    • For a very well put together documentary on the irrational nature of economic value, watch this Nova episode, "Mind Over Money [pbs.org]". (sorry, US only...otherwise try bittorrent)

      One of the funniest moments in the documentary occurs when otherwise intelligent economics students are caused to pay $28 for a twenty dollar bill. The experiment works by causing the losing bidder to forfeit his bid, not unlike the way real markets behave. The dominant economic models today assume that the consumer will rationally act

  • by trawg (308495) on Sunday May 22, 2011 @05:22AM (#36206952) Homepage

    I remember when I was a retail software sales goon, going to an IBM presentation for their voice recognition software back in 1995. At the time there was a lot of big Windows 95 stuff going on and the IBM guy was really keen to make sure that people knew IBM was a "real" computer company, and one thing that has always stuck with me was him saying that IBM was the biggest company in that market, and if was so big that if you took the next three companies and added their value together - IBM was still worth more.

    Never found out of that was exactly true, but at the time I remember it put IBM in a new perspective for me - I just knew them as a company that made a bunch of weeny boring unpopular PC software packages and did some stuff in the hardware space. The reality seems to be that they're this big, massively entrenched company that has hooks freakin' everywhere.

    • by JAlexoi (1085785)
      I believe that in a case of real national emergency in US, something cataclysmic, for the US gov't to continue to function the company they would save is IBM. I mean, they are so heavily entrenched in everything. If anything, IBM could be the predecessor of Umbrella Corporation.
  • by Archtech (159117) on Sunday May 22, 2011 @06:08AM (#36207116)

    ... to read the headline as "...IBM's market cap has once again surpassed Microsoft's..."?

    Don't forget that IBM was a $70 billion turnover company (back when that was worth quite a lot) whose chairman regularly appeared at the shareholders' meeting and apologized for any inadvertent growth during the past year? That was because everyone knew if IBM grew any bigger the DoJ was committed to dismembering it as a monopoly.

    At that point, there was no Microsoft.

    IBM basically created Microsoft as a defence against the mortal strategic threat posed to it by the Apple Lisa. Yes, that's right: to protect itself against an utterly imaginary threat, IBM itself created the only serious competitor it would have for the next 30 years. Hmmm, maybe not as dumb as you might think... at least it got the DoJ off its back and onto Microsoft's...

    • by FatSean (18753)

      IBM created Microsoft? Ha! I guess you don't know many IBMers from back in the day.

      • by swillden (191260)

        IBM created Microsoft? Ha! I guess you don't know many IBMers from back in the day.

        Yes, IBM created Microsoft. Had IBM opted to write its own operating system for the PC, or even just bought MS-DOS outright rather than licensing it, Microsoft would never have existed (the company would have, but it would never have grown the way it did).

        And, yes, I know IBMers from back in the day. I didn't become an IBMer until 1997 so I wasn't there personally, but over 14 years in the company I've met plenty who were.

  • by Burnhard (1031106) on Sunday May 22, 2011 @06:32AM (#36207210)
    Yes. It was valued at $50 billion by Goldman Sachs and as we know Goldman Sachs are experts at running little pump & dump schemes. Coincidentally, Goldman are managing the floatation. What a shock their valuation was!
  • Waiting in the wings is Facebook, which has been valued in the private market for as much as $50 billion, on negligible revenue

    Gee, where have I heard that one before? I forget. Nevermind. BUY BUY BUY!!!

  • Back in the 80's, Bill Gates & company said IBM was too much "suits", and didn't know what the customers wanted, or how to deliver it. Kind of looks like MS has done the same thing, sit back and just let Windows run the roost, and now they are behind the times. Tablet computing, MS doesn't have a clue. Phones, MS doesn't have a clue. Windows, or more importantly, the home bound PC, is on its way out and MS is about 5 years behind the times.
  • by geekoid (135745) <dadinportland @ y a hoo.com> on Sunday May 22, 2011 @10:01PM (#36213274) Homepage Journal

    IBM is once again, Officially Worth More Than Microsoft.

    Balmer is killing MS, and it's because he is too busy chasing shinys.

I'd rather just believe that it's done by little elves running around.

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