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Google, Microsoft, Apple, IBM: Who Is The King Of The Tech World

December 5th, 2009

Google, IBM, Microsoft, Apple: Search TrendsGoogle (GOOG), IBM (IBM), Microsoft (MSFT) and Apple (AAPL) are the stalwarts of technology industry today. Google is a relatively young player in this group, while IBM is the seniormost. Let's take a brief comparative look at their current financials.

Microsoft has the highest market capitalization at $266.2 billion dollars. Surprisingly Google is next with a market capitalization of $185.6 billion. Apple is at $174.1 billion while IBM is the lowest at $167.2 billion.

In terms of revenue IBM is the highest with $95.53 billion, while Google is lowest at $22.68 billion. Microsoft is at $56.3 billion while Apple is merely $36.54 B.

The high revenue of IBM doesn't reflect as much in net income because of the human resource intensive nature of business. In terms of net income Microsoft is still the highest at $13.77 B with IBM a close second at $13.04 B. Apple has $5.704 B while Google has the lowest: $4.929 B.

Personally I am very interested in revenue / employee ratio of a company. Revenue per employee is a measure of how efficiently a particular company is utilizing its employees. In general, rising revenue per employee is a positive sign that suggests the company is finding ways to squeeze more sales/revenues out of each of its workers.

Labor needs vary from industry to industry, and labor-intensive companies, like IBM, will typically have lower revenue per employee ratios than companies that require less labor. Hence, a comparison of revenue per employee is generally most meaningful among companies within the same industry (like Microsoft, Google and Apple), and the definition of a "high" or "low" ratio should be made with this in mind.

Google has the highest revenue / employee, currently pegged at $1.153 million. Apple is next at $992900 while Microsoft is at $605300 only. IBM's is lowest ($239800) but that is normal considering the labor-intensive nature of its business.

Not surprisingly the Price to Earnings ratio (P/E ratio) of Google is highest at $37.48. Google's stock is currently at %584.99, which also is the highest as compared to the other companies we are comparing today. Apple is not far behind.

Company P/E Stock Price
Google 37.48 $584.99
Apple 30.21 $193.39
Microsoft 19.47 $30
IBM 13.02 $127.29

The P/E ratio, which is also referred to as an earnings multiple, is a core measure of a company's stock price in relation to its earnings.

The P/E ratio indicates how much investors are willing to pay for each dollar of a particular company's earnings. In general all things being equal, most investors prefer to purchase stocks with low P/E ratios as opposed to stocks with high P/E ratios.

The other notable data is that in 5 years Apple has given investors +487.99% returns while Google has given +231.83%. The 1 year data is in favor of Google with +113.24% returns while Apple is close behind with +113.24% returns.
Data Source: Wolfram Alpha

While Microsoft is still the leader, albeit by a slim margin, purely in terms of net income as well as net profit margin (27.66%), the fundamentals of Google (net profit margin 27.57%) looks strongest, not to mention highest P/E ratio, and is the most likely incumbent in 5 years time to the throne of King of the Tech World. As for IBM the picture will be clear in the next 2-3 quarters as to how well it coped with the recession and the changed economic landscape wrt. professional services and outsourcing.

Do you think the article or the conclusion is controversial? Let me know in the comments below or on Twitter (@angsuman).