Comparing and Contrasting Apple and Microsoft

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Apple Computers Inc. was established on April 1st, 1976 by Steve Jobs and Steve Wozniak; both of whom were college dropouts. The introduction to Apple Computers would forever change way technology is used all around the world. The main goal for Wozniak and Jobs was effectiveness and efficiency for everyday computer use. The first computer created by Jobs and Wozniak was the Apple 1 in 1976 in the small garage space of Job’s home. The Apple 1 although, was sold without a monitor and keyboard. By 1980, sales reached a skyrocketing $117 million dollars from the previous $7.8 million dollars after releasing the Apple II; the first computer ever with color graphics. From then on Apple was publicly known. In December of 1980, Apple conducted a public offering of 4.6 million shares at $22 per share. In 1983 the company changed when Wozniak left due to declining interest in the day to day operations of running Apple. Jobs then hired John Sculley, an American businessman and entrepreneur from PepsiCo’s to be president. By 1985, Job’s also left the company after controversy with Sculley. Throughout the following years Apple received their highest profits yet in 1990. Credit was still given to Jobs as most of the business decisions were put into place before he left in 1985. Although Apple had great success after Job’s leaving, Sculley made a decision in 1985 that would later come back to haunt him over the course of the 1990’s. Sculley ignored a request from Microsoft to license its software. Microsoft then launched an operating system (OS) comparable to that of Apple’s and would become their trickiest competition. After doing well in the early 90’s, their market share was slowing slipping. In 1997, Job’s once again came to the rescue when he sold his operating system, NeXT Software to Apple. Job’s was then announced temporary CEO and made modifications within Apple as well as rekindled their relationship with Microsoft. To keep up with market shares to avoid downfall, Apple needed to introduce new products never before seen to excite the public as well as keep them continuously intrigued in what they were going to do next. The turning point and most profitable sector would be the creation of iBook, iPod and a media software still used to this day known as iTunes. Several years later, after the death of Steve Jobs Apple is still thriving as they create groundbreaking, innovative products every year. Current products include the iPhone, MacBook, Apple TV, Apple Watch, Air pods and several other tech accessories. (“Apple Computer, Inc.”, 2015)

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The last three years, Apple Inc. has been outstandingly profitable, shown through their income statement. From 2016 to 2018, Apple has continuously gone up in earnings relating to total revenue. In one year, 2016-2017, Apple’s total revenue had gone up over $13.5 billion dollars and from 2017-2018, $36 billion dollars. Just over three years Apple has shown tremendous growth. Progress is also shown through cost of revenue, starting in 2016 at $131 billion dollars, $141 billion dollars in 2017 and $163 billion dollars in 2018. It is safe to conclude that each year Apple Inc. generates a substantial amount cash from their costs of goods and services sold. Operating expenses are defined as expenses a business incurs through day-to-day operations but are not directly associated with the production of goods or services. For Apple their two main operating expenses are research development and selling general and administration. Yearly, Apple roughly goes up a billion dollars on each expense; this is important because it shows Apple isn’t going way over their expenses from the previous year to the next year. Apple’s highest expense is shown to be selling general and administration but still is not overpowering the expense associated with research development. For example, in 2018 research development had an expense of $14 billion dollars and selling general and administration of $16 billion dollars. After the total operating expenses, income tax expenses and more, Apple’s net income continues to rise each year. Net income is the measure of profitability which shows growth and consistency within a successful business like Apple. In 2016 their net income was $45 billion dollars and went up almost $3 billion dollars the following year to roughly $48 billion dollars. Although from 2016-2017 Apple had shown improvement, by 2018 their profit had gone up over an astounding $10 billion dollars from 2017 (Apple Inc).

As of 2019 Apple’s leading competitor is a well-known company, Microsoft Corporation. Following Microsoft are nine other competitors in order, Dell, Samsung, Lenovo, Hewlett Packard, Sony, Asus, Google, Huawei and Philips. Many are to believe that Samsung is a leading competitor, but their product range has much more variety from mobile, smartphones, computing, tv and home theatre as well as appliances. Samsung is not fair to compare to Apple since they control more markets than Apple currently services. Although Samsung and Apple often go head to head with their popular smart phones, the Samsung Galaxy and iPhone, Apple dominates year after year.

Similar to that of Apple, Microsoft’s total revenue progresses after every year. In 2016 total revenue was reported in the neighborhood of $52.5 billion dollars, and in 2017 $55.7 billion dollars, this is approximately a $3.1 billion dollar-improvement. By 2018 Microsoft bettered by an overwhelming $16.3 billion dollars to a total revenue of a little over $72 billion dollars. Microsoft’s cost of revenue goes up each year at a steady rate, not a crazy amount but never below the previous years earning. Throughout 2016-2018 cost of revenue was nearly $32.8 billion dollars, $34.3 billion dollars and $38.4 billion dollars. Like Apple, Microsoft has operating expenses that come from research development and selling general and administration. Year after year, Microsoft seems to consistently track their expenses to save money and ensure they are not going way above the amount of money spent the previous year. This is examined through their reported operating expenses from 2016-2018 that only go up around $1-$2 billion dollars annually. Over the course of three years Microsoft has gone both up and down when it comes to their net income. In 2016 net income was around $16.8 billion dollars, 2017 $20.2 billion dollars and in 2018 net income came back down to $16.6 billion dollars. The breakdown of total revenue, cost of revenue, gross profit and operating remained steady over the course of three years. The decrease of net income can be assumed by the report of total other income/expenses being $4 billion dollars in 2018, $2 billion dollars in 2017 and negative $298,000 in 2016 (Microsoft).

To compare the two companies, Apple has made about $115.2 billion dollars more than Microsoft in the recent year of 2018. Both companies have remained steady in their total revenue as their dollar amount go up each year. As for cost of revenue Apple exceeds Microsoft. An example in 2016 Apple had reported costs of goods sold at $131 billion dollars and Microsoft $32 billion dollars. Again, although Apples earnings surpass Microsoft’s, both companies consistently go up each year which shows progress. Both companies’ expenses are around the same dollar amount between $10 and $20 billion dollars. Microsoft and Apple are alike in that a majority of their expenses come from selling general and administration. After the breakdown of both income statements, it is safe to say that Apple has surpassed Microsoft over the course of the past three years. In 2016 Microsoft had a net income of $16.8 billion dollars, Apple $45.7 billion dollars. In 2017 Microsoft went up to $21.2 billion dollars and Apple $48.5 billion dollars. By 2018 Microsoft had dropped down from 2017 to $16.6 billion dollars and Apple advanced to $59.5 billion dollars.

After reviewing Apple’s balance sheet, it is evident that over that past four years they have accumulatively increased their total cash along with their total current assets. From 2016 to 2019 total cash accumulated by Apple has increased by $33 billion dollars. As for Microsoft, from 2016 to 2019 their total cash has increased by roughly $20 billion dollars. Apples overall current assets from 2016 to 2019 increased by approximately $56 billion dollars. Microsofts total current assets have improved by $35 billion dollars. Over the course of the previous year’s Apple’s current liabilities have also grown by $54.5 billion dollars in order to keep up with their production needs and consistent growth. Total liabilities for Microsoft have also increased due to higher sales by $63 billion dollars. Total stockholders’ equity has been on a direct downward slopping pattern from 2017 to the current year. Reasons for this could be that stockholders sold their shares in the company. As of today, December 5, 2019, Apple stock has gone down for the specific reason of recalling over-heating European iPhone chargers in thirty-seven countries. Unlike Apple, Microsoft stockholder’s equity has drastically increased over the period of four years. After evaluating Apple stock, it is easy to tell their stock prices have been steadily increasing over the course of 2019. In January of 2019 they were around $160 dollars per share. Compared to the current month of December their stock is trading at $260 dollars per share which is a 65% increase over the course of this fiscal year (Apple Inc) (n.d.).

Since Apple has a great amount of items to offer each product controls a certain amount of the market. I will specifically analyze the market share percentage with smartphone usage in the United States. In June of 2019, statistics showed that smartphones were owned by 81% of Americans. Because of this statistic, I feel as though comparing data relating to smartphones is beneficial in showing the market share percentage of this specific product that Apple and several other companies deliver to their customers. To analyze the data, from 2017 to the beginning of 2018, Apple continued to overshadow with shares of 37%. Reason for this can be assumed by the release of the iPhone X and how well the customers appreciated the product. Out of the three companies below, Samsung trailed behind in second and LG remained at the bottom. In quarter 2 of 2018, as Apple went up, Samsung went down from the previous year. Reason for their decline was due in part by ZTE, a Chinese manufacturer nearly collapsing after the Trump administration enforced heavy restrictions on the tech giant. In the 3rd quarter of 2018, Apple still headed the popular market with 39% share. The capability for Apple to keep reign shows their ability to be consistent. In the 4th quarter of 2018, Apple’s shares spiked as the XR was issued. As for the beginning of the new year in 2019 the top three brands, Apple, Samsung and LG controlled a vast majority of the market. Still, Apple held their place at 39%. In the latest quarter, Apple maintains their standing once again after launching the iPhone 11 and Apple TV+. To summarize, yearly, Apple continues to dominate the market no matter what may come their way. (Guha & Burns, “US Smartphone Market Share: By Quarter”, 2019)

Although Apple has great success, they’ve also had tremendous failures over the years and even canceled projects. In 2017, Apple released information that they would be creating a wireless charging station available in 2018. The wireless charger that many were eager for was announced to be canceled. Apple never commented when questioned about the sudden cancelation. I would assume that the sudden removal and decline for response was because the product had a mishap and Apple did not want it to ruin their brand name, which is understandable. In 2017 a mass amount of iPhone batteries were becoming weaker and quality of the iPhone was lacking. Apple commented on the issue by claiming they in fact did slow down older iPhones to conserve battery life. This was obviously dishonest, and Apple wanted to continue to make large amounts of profit by forcing users into buying newer, higher priced iPhones. Although buyers are expected be angry at this response, at the same time a business will do what they can to thrive. In 2014 a larger iPhone than the previous was released. When users got their hands on the new product, Apple received bad clout from pictures and videos of their device bending. In 2012 Tim Cook, CEO after Steve Jobs death had a major issue when Apple Maps failed. Malfunctions and faulty directions created a fiasco among users and was Cook’s first epic fail. In 2008, Apple released MobileMe, which is now the modern-day iCloud. The creation of MobileMe was for online storage and would allow users to sync all their information together. MobileMe cost ninety-nine dollars a year to subscribe too. After many people bought the application, they were disappointed when they were unable to log into their account. In 1996 Apple attempted to bring their products into the heart of the home, the living room. The game console “Pippin” although, never took off as buyers and developers were uninterested. Among these listed failures are many more such as the Copland in 1994, an operating system designed to be competitive against Microsoft Windows, but was later canceled and the over-priced, glitching Newton digital assistant of 1993. (Colby, 2019)

As of 2019 Apple is ranked number one of the top ten global companies with brand value of $309.5 billion dollars. In my opinion, the reason for Apples great success is from factors such as brand loyalty and their strength in the marketplace when it comes to knowing what the consumers want. Apple also has a strong branding strategy that has shown to continuously lure customers who buy one Apple product to buy another. The company focuses on the emotions of the buyer and how they will feel when using their product. The brand encourages a unique lifestyle through imagination, innovation and dreams. Their product and name are well advertised to catch the eye of the people through television commercials and ads on nearly every social media platform from Twitter, Facebook, YouTube and several others. A great advantage to having multiple Apple products is that they all share the same software, applications and operate in a like way. An example I can personally relate to, if subscribed to Apple Music it can be accessed through computer and phone or whatever other Apple products an individual owns. The billion-dollar company has a well-established reputation when it comes to the development of new devices. Each year Apple never fails to disappoint in their releases of their most popular product, the iPhone. A key element for Apple when developing and delivering new products is that the operating system stays the same. To keep up to date with a new version of a product, they offer software updates available on past models that are current with the new model. By not changing the operating system but offering updates, Apple is able to save time and money as well as stay ahead of competitors while still giving the consumer what they want. A strong integrated supply chain is one of Apple’s most valuable advantages. To name a few, Apple partners with suppliers, developers, music and entertainment companies, and software developers which keeps their community and connections large. On its own, they operate their own stores, are up to date with software standards and have full control over their product development, manufacturing and marketing; not all companies can claim this. Lastly, I believe that individuals, including myself, who purchase Apple products over and over again despite the high prices do so because the product and exclusive features offered never disappoint (Linton, 2019).

As for the future of the company, I believe that Apple will continue to grow as they as they keep innovating new technologies and groundbreaking products. As far as retail goes, they have expanded to 506 stores in over 24 countries and will only continue to grow as their company does so. Each year Apple never fails to captivate their customers into buying their new products. Changes I would make within in the company is expanding product space and covering more markets. By doing this they can generate more money and become more of a competition with Samsung. Such products could include appliances and home theatre. Apple is known mainly for their iPhones but sometimes I feel that when they release new iPhone’s they focus more on the look rather than how the device functions. I would change this so that the buyer has more to look forward to technologically rather than aesthetic wise. Lastly, I chose this company because I respect the hard work they continue to put in ever since being founded. Many would avoid writing an essay on this company because of how huge they are as a business. By writing this I have learned several things I never knew about the company which I enjoyed since I am a user and continuous supporter and buyer of their brand.   

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