Microsoft May Move Ahead of Alphabet as Second Most Valuable Company

By Douglas A. McIntyre Updated Jan 12, 3:27PM EST · Published Jan 27, 6:50AM EST

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Microsoft May Move Ahead of Alphabet as Second Most Valuable Company — © Wikimedia Commons

[cnxvideo id=”507123″ placement=”ros”]When Microsoft Corp. (NASDAQ: MSFT) was left for dead five years ago, it was unimaginable that it could be ranked among America’s most successful companies as it had been for the two decades of Windows’ dominance. Now, with its success in cloud computing and the engines of several of its older businesses, Microsoft threatens to pass Alphabet Inc. (NASDAQ: GOOGL), the owner of Google, in market cap, as the search company struggles to find new large and fast-growing businesses.

Microsoft has come close to doing what was once impossible: becoming the second most valuable public company in America, trailing only Apple Inc. (NASDAQ: AAPL). After earnings, Alphabet’s stock sold down so that its market cap is about $565 billion. Microsoft’s rose to $515 billion.

Microsoft’s earnings, matched against Alphabet’s, show the extent to which CEO Satya Nadella has transformed the company. Microsoft’s Productivity and Businesses division had revenue of $7.3 billion. The division has both the consumer and business sides of the old Windows business. The Intelligent Cloud division is Microsoft’s huge cloud intuitive, which is large enough to threaten industry leader Amazon.com Inc. (NASDAQ: AMZN). Its revenue was $6.9 billion. More Personal Computing, the third division, had revenue of $11.8 billion. It has the legacy game segment, search and Microsoft OEM.

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Google, on the other hand, continues to rely almost completely on search, which makes it the one-legged stool that creates investor anxiety. Google ad revenue was $19.1 billion of the fourth quarter total of $21.2 billion. And the aggregate cost per click, one of Google’s most important metrics, fell 9% year over year. Its revenue from what it calls “other bets” was a mere $262 million.

As investors look for stability with large tech companies, which currently trade at historically high levels, they can only find it in public corporations that successfully operate multiple businesses. Microsoft’s shares have risen 23% in the past year, about the same as the Nasdaq, and Alphabet’s by 14%. This does not take into account stock movements after earnings announcements. At the rate of growth in stock prices, Microsoft will be the more valuable of the two companies by mid-year.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.