Apple Overtakes Microsoft -- the PC's Death Knell?

When Apple passed Microsoft to become the most valuable tech company in the world, it signalled much more than the financial rise of one company and the stagnation of another. It also means that when it comes to innovation and cultural buzz, the days of the PC are past, replaced by portable gadgets of all kinds. That spells danger for Microsoft, and good news not just for Apple, but for Google as well.

Yesterday at the end of trading, Apple's market capitalization topped Microsoft's for the first time, $223 billion to Microsoft's $219.3 billion. They may trade places for a while, but it appears that the trend is clear.

That switch in market capitalization recalls an earlier one that was also greeted with great fanfare --- the day when Microsoft's total value surpassed that of its neighbor in Seattle, Boeing. Back then, it symbolized the end of manufacturing as America's dominant industry, and the rise of technology.

Apple surpassing Microsoft symbolizes that dominance has shifted again, away from the desktop and onto portable devices including smartphones, pad computers, portable media players, and devices not yet imagined.

As I've written in "Is PC innovation dead?", it's been years since there has been innovation in PCs or PC software. Meanwhile, smartphones come out at a pace that is far more dizzying that even during the salad days of PC innovation. Similarly, Web apps and portable apps are where the innovation is.

The New York Times points out that smartphone sales are growing five times faster than PC sales. I expect that to continue.

This leaves Microsoft in serious trouble. It generally owns the desktop, but when it comes to Web apps, Google has it beat. And when it comes to mobile devices, Apple and Google (via Android) have it beat as well.

This doesn't mean Microsoft is going away. It's still a far more profitable company than Apple. The Times reports that "in their most recent fiscal years, Apple had net income of $5.7 billion, while Microsoft earned $14.6 billion."

If Microsoft doesn't fix its problems in mobile and the Web, though, that will change. The arc of Apple and Google is up. Microsoft's is flat. It will certainly continue to rake in loads of cash via Windows, Office, and other core businesses. But it knows that it has to figure out what to do about mobile, which is why Microsoft shook up its mobile business.

The upshot? If Windows Mobile 7 doesn't succeed this holiday season, there won't be a lot of celebrating in Redmond.

This story, "Apple Overtakes Microsoft -- the PC's Death Knell?" was originally published by Computerworld.

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