Sunday, June 20, 2010

Microsoft, Google, Apple, Yahoo revisited

In a previous article we looked at Microsoft, Google and Yahoo. In this article, we will look at these companies again. We have added Apple and Yahoo to the list to see how the tech industry is shaping up.

In the latest quarter, Microsoft had earnings of 4006 million dollars. After paying out dividends of 1139 million dollars for the quarter with a capex of 408 million dollars, Microsoft has a net accretion of 2459 million dollars. Microsoft also spent 143 million dollars for acquisitions which we wont include in this computation.

From the balance sheet, Microsoft has 39,666 million dollars in cash, cash equivalents and short term investments. Of this amount,~6000 million dollars is from short term, long term debt. Backing the debt out, Microsoft has approximately 33,666 million dollars in cash, cash equivalents and short term investments.

Google had a net income of 1955 million dollars in Q1 2010. Google spent 239 million dollars in capex in the same quarter. Google doesnt pay out any dividends - this left Google with a net positive cash flow of 1716 million dollars.

Google also has cash and marketable securities worth 26.5 billion dollars on the balance sheet. While this is not the same as Microsoft, the war chest is comparable in size while being off by about seven billion dollars.

Apple had a net income of 6452 million for the first six months of the year. Backing out the capex, the income averages to 2951 million dollars for the quarter.

Apple has cash, short term securities and long term marketable securities in the amount of 41704 million dollars.

Yahoo had operating income of 118.7 million dollars. The company had a capex of 70 million in the same period. The net cash flow was 48.7 million dollars in that period.

The company has more than 2 billion in cash and equivalents.


Microsoft has very robust revenue stream primarily from the windows and office franchises. The server and tools business has generated net income of about a billion dollars. The server and tools business is facing a well entrenched adversary in Oracle who recently bought Sun which gives it the range it didnt have before.

Apple is on the acendancy where the popularity of its iPhone platform has enabled it to gain market share with iPad tablets and also with Mac converts. Its overall cash balance is higher than that of Microsoft its net income is robust.

Google has a very strong balance sheet and continues to build its cash pile. Although it made a mistake in dealing with China, it has got a very strong international presence. Microsoft has 2 billion dollars yearly revenue from its online services division but is losing a dollar for every dollar in revenue. Google is closing in on 28 billion dollar in annual revenue which makes it about ten times bigger than Microsoft in the same space. Even taking over all of Yahoo's search isn't likely impact Google much in the search space. Google is increasingly becoming the dominant player in the mobile handset space by taking over market share with its Android OS. Android is expected to displace RIMM as the top OS in the smart phone space in the next three years.

Microsoft is competing in multiple markets and each of the markets, it is facing well entrenched competitors with huge war chests. The other companies are attacking Microsoft from the fringes which is likely to put increasing pressure on Microsoft's core franchises. The tech landscape is likely change significantly in the next several years with power shifting to different players in the tech space. This is likely to spur more innovation in the tech space and offer more opportunities to tech entrepreneurs.