Tag Archives: business

Will Apple surpass Exxon to become the world’s biggest in market capitalisation?

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The relative trends in share prices of the two companies suggest that the oil company may be knocked off its top spot – and possibly as soon as next week

If past trends are any guide, then some time in the next few months, Apple will become the largest company in the world by market capitalisation – passing the mighty Exxon corporation, which is presently valued at $331.2bn, compared to Apple’s $274.2bn. (Microsoft, since you ask, is valued at $219.3bn.)

Remember that market capitalisation isn’t about profit; it’s about the share price multiplied by the number of outstanding shares (which is how one reaches a valuation for Facebook, or any small company when venture capitalists buy a chunk; or for any publicly-listed company). It can be described as the market’s guess at the net present value of the total future profits of the company.

In the case of Exxon, it’s been a tough couple of years; its share price has drifted down. Meanwhile Apple, with the iPod, iPhone and most recently iPad, has been going from strength to strength. (Apple has even passed PetroChina, formerly the world’s biggest by market cap, presently worth about $262bn.)

How will we know when it’s happened? Well, Apple has 913.6m shares outstanding (issued); Exxon, 5.092bn. A quick bit of maths shows that when Apple’s share price reaches or exceeds 5.573 times that of Exxon, its valuation is also greater.

At present, it’s sitting just below the 5.0 mark – so the differential needs to grow by another 10%, though WolframAlpha suggests that that could happen by January, based on current trends. (The picture shows a “random walk” forecast based on the share prices’ previous movements.)

Exxon has of course come a long way down from its peak – in 2009 it touched about $500bn in market cap. But for Apple, it’s been an enormously long way back from 13 years ago, when it was valued at just $2bn in May 1997, “reflecting Apple’s loss of market share in an increasingly Windows-dominated world.”

How things change. Though of course for Apple if it does take on the mantle of the world’s most valuable company, there’s only one way to go subsequently.

And meanwhile we might wonder: if Exxon is falling, where is the new energy company – based on wind, solar, nuclear or something else – to replace it? When there’s a suitably big company that doesn’t rely on extracting fossil fuels for its revenue, we’ll know we’re in a new energy paradigm.

But for now, keep watch on that Apple/Exxon ratio. No doubt there will be some glasses raised in Cupertino if it hits 5.5. And with Apple due to announce quarterly results on Monday evening – during which it will announce how many more million iPads and iPhone 4s have been sold – it might be worth watching that ratio when the US markets open on Tuesday lunchtime.

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DWP spending data: Pensions department spends £4.59bn with suppliers

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Department for Work and Pensions – the government’s biggest-spending department – has released its top suppliers, thanks to a Guardian FoI request. See what the DWP’s data says

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As Sir Philip Green releases his report into government waste, with a critical focus on buildings and IT, the Department for Work and Pensions has released a list of its largest suppliers – led by buildings and IT.

In first place, Telereal Trillium, DWP’s facilities management provider – which means providing and managing buildings – received £782.9m in the 12 months ending last March. In second place, HP Enterprise Services, which until September 2009 was known as EDS, received £656.9m.

Further large sums go to other IT and telecoms suppliers, including BT
(£232.8m, the fourth largest supplier) and Atos Origin (£150.8m, the
seventh). This may not all be on IT, but given the suppliers, most of
it probably is: in 2008-09, the department said it spent £987m on
computing. There’s more on the spending with IT suppliers at
Kable.co.uk.

Royal Mail was the fifth largest supplier to the DWP, receiving £175.3m in 2009-10, although the department uses commercial delivery firms as well: UK Mail got £17.7m while TNT received £16.5m. Other state sector recipients included HM Revenue and Customs (£36.3m), the Office of National Statistics (£7m) and a few local authorities, led by Dudley metropolitan borough council (£9.1m).

The amounts paid to suppliers are huge, but so is the department. It runs Jobcentre Plus and the Pensions and Disability and Carers Service; is the responsible department for the Child Maintenance and Enforcement Commission and the Health and Safety Executive; and administers the National Insurance Fund on behalf of HM Revenue and Customs.

According to its accounts for 20009-10, published in July, every working day the DWP receives more than 10,000 job vacancies, handles 1.1m online job searches, provides more than 4,000 pension forecasts, processes more than 20,000 new benefit claims and pays around 2.8m benefit payments.

In the year, DWP made gross social security benefits of £149.5bn. Sending that out, in relatively small regular amounts, incurs significant costs – hence the nine-figure amounts paid to the eight suppliers at the top of this list.

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Adobe and Microsoft: an acquisition that wouldn’t make sense for either side

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Rumours that Adobe might be bought by the software giant don’t stand up to examination – because the two sides have more to gain apart than together

Adobe has declined to comment on a report in the New York Times that its chief executive met Steve Ballmer, head of Microsoft, to discuss tactics relating to Apple – and a possible takeover.

In the story, the NYT reported:

“The meeting, which lasted more than an hour, covered a number of topics, but one of the main thrusts of the discussion was Apple and its control of the mobile phone market and how the two companies could team up in the battle against Apple. A possible acquisition of Adobe by Microsoft were among the options.”

Adobe stock spiked by 11.5% in investors’ faintly desperate hope that it might come true.

In a statement on Friday, Adobe said: “Adobe and Microsoft share millions of customers around the world and the CEOs of the two companies do meet from time to time. However, we do not publicly comment on the timing or topics of their private meetings.”

This is what is known in politics as a “non-denial denial”: it doesn’t say whether they met or not, and it doesn’t say what they talked about if they did. So it’s a non-denial denial about a non-meeting meeting.

The NYT adds that it

“learned about the meetings through employees and consultants to the companies who were involved in the discussions that took place or familiar with their organization, all of whom asked not to be identified because they were not authorized to speak publicly by Microsoft or Adobe. Those involved in the meeting, from its logistical set up to the discussion that took place, were instructed to stay quiet about the two companies holding council.”

Adobe is valued at $13.5bn on annual revenues of $3.2bn; Microsoft certainly has enough money to buy it, but the question is whether it would want to. Doing so could put a dent in Apple’s prospects, because Mac users are still a significant proportion of Adobe buyers because of its Creative Suite products. Buying Adobe and forcing the CS suite over to Windows-only could be a way to hurt Apple. But it would hurt Adobe more rapidly, because Apple users would simply hold off updating, and buy faster machines instead. And it would let Quark, which has been badly hurt by the adoption of Adobe’s InCopy publishing and layout product over Quark Xpress, back into the market.

Plus Microsoft really doesn’t need any more computer revenue. It does pretty well out of Windows. The real threat that Microsoft, and Adobe, face from Apple is in the mobile phone arena. That’s where Adobe has been hurt by Apple’s insistent non-adoption of Flash technology on the iPhone and its push instead towards other web standards, such as HTML5. And Microsoft has seen its mobile phone franchise eaten up and spat out by the iPhone – which is why it is relaunching its entire game with Windows Phone 7 on Monday 11 October.

Yet oddly enough the first versions of WP7 won’t have Flash (it’s based on the IE7 browser, and doesn’t have that plugin or Silverlight). Which leaves open the question of quite what Microsoft would want to buy from Adobe. If there’s no merit buying the company, then what’s left? Buying Flash? Adobe does nicely out of that, so it wouldn’t want to sell.

When you weigh it up, the idea that Microsoft would want to buy Adobe just doesn’t quite hold water. It has Silverlight, which is a Flash competitor. It has enough revenue from Windows, and wouldn’t greatly increase it by buying Adobe (which would probably bring about a monopoly investigation, called by Apple if nobody else).

Then read Kara Swisher’s report, from “sources” within the two companies, who call the idea “nonsense”. Her strongest point? If you’re talking about an acquisition – which is the sort of thing that requires lots of hush-hush negotiation and hotel room meetings – then the person you don’t get to turn up at your headquarters is Steve Ballmer. He’s not what you call the quiet type.

Still, it’s a pity. Among the names being considered for the merged company (within Google): Microbe. Can you do better?

Charles Arthur


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