Thursday, April 22, 2010

Did the market cap of Apple really surpass Microsoft today?

After the market close I entered the MSFT ticker symbol in Google to see if Microsoft had reported earnings for the quarter yet and in the search results I see an interesting but odd tidbit, a Twitter tweet that says:

AAPL is now worth more than MSFT

Really? I didn't think it was true, at least yet.

That same info has been re-tweeted from here to eternity and typically links to a VentureBeat blog post by Paul Boutin that says:

The day the fanboys have waited for is here: Apple finally passed Microsoft this afternoon to gain the second highest market capitalization on the S&P 500 index. The total value of all Apple shares climbed to $242 billion, passing Microsoft's $239 billion.

(I would note that that blog post has changed each time I viewed it. The first time it referred to the S&P 500 as an "exchange". It is now a much longer post, more of a story, but still quoting the dubious numbers, without linking to sources. They at least claim that they are using some alternative calculation, again without any link to a source.)

Now, technically, I knew that the day was coming, but I thought Apple had to reach $300 or so to beat the Microsoft market cap. So, I checked both Google and Yahoo Finance which both report the Apple market cap as about $241 billion and Microsoft as about $275 billion. In other words, Apple still needs to gain about another 14%.

I did a little more searching through Google News and found that Rex Crum of MarketWatch seems to have blogged the curious claim:

April 22, 2010, 4:02 p.m. EDT
Apple passes Microsoft for second place in S&P 500
By Rex Crum
SAN FRANCISCO (MarketWatch) -- Apple Inc. (AAPL 265.40, -1.07, -0.40%)  became the second-largest company, in terms of market capitalization, on the S&P 500 (SPX 1,209, +2.74, +0.23%)  Thursday, trailing only Exxon Mobil (XOM 68.50, -0.06, -0.09%) . Apple's market cap reached $242 million, surpassing Microsoft Corp.'s (MSFT 29.97, -1.42, -4.52%)  $239 billion. Exxon still remains in the top spot with a market cap of $324 billion.

Now, in truth, I do not know what the ultimate source is for number of shares outstanding, which is the other key number besides current price needed to calculate market capitalization, but even MarketWatch's own stock quote show MSFT with a cap of 275 billion. So, Rex, what gives?

Since I read his original post he has updated it to add:

The S&P 500 is float-adjusted, so it doesn't use the full market basis for Microsoft. Apple's float-adjusted market cap reached $241.5 billion, surpassing Microsoft Corp.'s (MSFT 30.22, -1.17, -3.73%)  index market value of $239.5 billion...

Yes, it is true that S&P has a proprietary calculation for its indexes, but that calculation is not the calculation of a market capitalization. So, apparently, it is true that Apple has a higher ranking in the S&P 500 index, for reasons not completely explained, but that does not automatically give Apple a higher market capitalization.

Maybe the real source of the mis-claim is that some analyst put a $300 target on AAPL, which would result in AAPL getting a higher cap than MSFT. That's the problem with most Apple fan boys - the future is today. As they say, dream on.

The bottom line is that Bloomberg is a far superior source of information to MarketWatch.

As I finish editing this post, I refreshed the VentureBeat post and now it begins with this update:

[Update: As a few readers have pointed out, the S&P 500 index is "float-adjusted." That means it measures the value of only the shares that are available to the public for trading, rather than all shares. That takes some of the fun out of AAPL passing MSFT on the S&P. Microsoft's total market capitalization is still bigger.]

So, in summary, Microsoft has a larger market cap (for now), but Apple has a larger S&P float-adjusted cap. It would not surprise me to see Apple with a higher market cap within a few weeks. Also, note that Microsoft is continuing a share repurchase program, so their market cap would shrink even if their share price were stable.

So, why is MSFT down after earnings? Probably mostly the tradition of "Buy the rumor, sell the news." PC and Windows 7 sales are up. That's yesterday's news, so traders move on to a fresher story.

-- Jack Krupansky


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