Big Apple v Big Oil
Apple briefly becomes the world’s largest public company
Aug 13th 2011 | SAN FRANCISCO| from the print edition
BY ANY standards it is a remarkable achievement. In the space of 14 years, Apple has transformed itself from a computer firm on the brink of bankruptcy into a stockmarket superstar. On August 9th its market capitalisation surpassed that of Exxon Mobil, making it the world’s largest public company. Not for long: by the end of the day’s trading, the tech giant was $1 billion smaller than the oil giant: $347 billion to $348 billion. But Exxon’s lead is fragile. If the oil price falls further, Apple will surely outstrip it.
Oil remains a vital raw material, and Exxon can extract it from difficult places more efficiently than any other firm. But Apple’s rise reflects the growing influence of the digital industry, and the way that industry has changed. It used to be dominated by companies such as IBM and Microsoft, which made their billions selling software and services to corporations. Apple has leap-frogged both of them by delighting consumers.
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En route, it has made computers cool. Trendy folk around the world not only snap up the latest gizmos displayed in Apple’s alluring stores. They also show them off to their friends. Every few months, Apple stages the technology equivalent of a fashion show, where Steve Jobs, its boss, teasingly unveils the latest collection of iPhones and iPads. (The next version of the iPhone is eagerly expected in the autumn.) Exxon’s technology is just as impressive, but harder to wear around your neck. Apple is fantastically profitable in part because it can charge far more than its competitors for quite similar products. Exxon’s petrol costs the same as anyone else’s.
Investors are breezily bullish about Apple’s business model. Last month the firm revealed that in its latest quarter its profits had more than doubled, to $7.3 billion, while its revenues rose by 82%, to $28.6 billion. The biggest cloud on the horizon is Mr Jobs’s health; he has been on medical leave since January. Apple also faces stiff competition from Google’s Android operating system, and various legal battles—on August 9th it won an injunction to stop Samsung selling its Galaxy tablet, which resembles an iPad, in Europe. Many people are betting that Apple will continue to pump out profits indefinitely. But what is cool today may look clunky tomorrow.