Apple> is suddenly America's third-largest company by stock market value. Over the past three years, its shares have more than doubled in price, while those of No. 2 Microsoft (MSFT)
That is surely one of the most dramatic corporate turnarounds in history. Cupertino, Calif.-based Apple wasn't quite near bankruptcy, as is sometimes said, when Steve Jobs returned 13 years ago as its chief executive and a $150 million investment by Microsoft provided the company with fresh operating cash. But its future was much in doubt.
"I'd shut it down and give the money back to the shareholders," said Michael Dell in 1997 to an audience of several thousand information technology managers. Today, the computer maker that bears Dell s name ranks No. 78 among U.S. companies by stock market value. Roughly speaking, Apple is worth eight Dells.
Of course, just where Apple ranks by size depends on how one defines size. If sales are a better measure of economic weight than stock market value (they're definitely a less fickle one), then Apple is No. 42 -- four spots below Dell. Perhaps that's not a fair comparison, though. Apple turns a whopping 29 cents of each sales dollar into operating profit, versus a nickel for Dell. However, even ranked by net profit, Apple isn't among America's top 10 companies.
That raises a common question about the stock: Have its popularity and price gotten ahead of its underlying economic value? To some, Apple shares look too expensive. But not to Wall Street's prognosticators. According to a Thomson poll, 37 of 43 analysts who publish recommendations on the stock currently advise investors to buy. Among those fans are 15 who strongly recommend a purchase.
If this overwhelming majority is right and Apple indeed becomes America's largest company, it will mark a fascinating transition. During the 1980s, the No. 1 spot was held by IBM (IBM)
Apple is unlike any of these companies for at least three reasons. First, the overwhelming majority of Apple s sales are made to individual shoppers, with businesses, governments and institutions playing a small role. Second, the company not only lacks monopoly control of most of its key markets, it also lacks leading market shares. Third -- and those who defend Apple against perceived criticism with near-religious zeal will have to forgive me -- its products are things we can do without. That is, there are other products that perform the same functions and sell for much less. For example, I have a MacBook Pro notebook and find it sleek and clever, but it costs several hundred dollars more than a Dell with the same guts and slightly clunky but nonetheless capable software.
Previous No. 1 companies were vital to making America's mainframes whir, its telephones ring, its cars rumble and its sea of home and business computers speak a common language. On the other hand, Apple makes it a little easier and a lot cooler to browse the Internet, manage media and make telephone calls. The marvel isn't just that a computer maker that rivals had counted out is now nearly the largest company in the land. It's that it became so by selling indulgences rather than needs.