Apple Cruises Past

By Reuters  |  Print this article Print

Microsoft's year-ago quarter was a happy one, boosted by Windows 7 sales and optimism about an economic recovery. But Microsoft missed the smartphone's rise to power and has been edged out of the tablet market by Apple's iPad.

One uncomfortable fact for Microsoft: unless it posts blowout numbers, it will have lower quarterly profit than Apple for the first time in recent memory. The last time Apple produced more profit in a year than Microsoft was 1990.

Last week, Apple announced a record $6 billion quarterly profit on strong-selling iPhones and iPads over the holiday shopping season. Analysts expect Microsoft to post profit of $5.93 billion for the same quarter. Two years ago, Microsoft's profit was almost double Apple's.

It could be a painful moment for Microsoft, which effectively saved Apple from extinction with a $150 million investment in 1997.

"It's psychological," said Parakh. "There's no doubt Apple has momentum, they've built great products that people want to buy. It's another indication of the challenges facing Microsoft."

Apple roared past Microsoft in market value last May, and overtook it in terms of revenue in the quarter ended last September. Apple now has a market value of $311 billion -- second only to oil giant Exxon Mobil Corp in the Standard & Poor's 500 index -- and well ahead of Microsoft's $243 billion.

If the company does not impress Wall Street this quarter, or show it has a realistic plan for growth, questions will be asked about the leadership of Steve Ballmer, now in his 12th year as chief executive.

A string of high-level departures has raised concerns about his efforts to revitalize the company.

Ballmer "is always on thin ice," said Forrest at Fort Pitt Capital. "Microsoft is a results-driven company."

(Reporting by Bill Rigby; Editing by Bernard Orr)