Tech stocks are hot property. Of all the major industries, high tech is one of those industries that have been consistently turning great profits for decades. One such stock has been Microsoft. If you bought MSFT shares when it listed in 1986, you paid $25.50 per share on the IPO price. Over the intervening 27 years, the stock has undergone 9 share splits of which seven were 2 for 1 and two were 3 for 2. If you bought one share in 1986 for $25.50, today, your investment would be worth slightly more than $8,000; providing astonishing return on investment for early investors.
However, some investment analysts are predicting Google will be bigger and more valuable than Microsoft, why is this? The answer lies in what can only be called the startup culture of Google, or as has been coined, the dynamic corporation. First, let’s take a quick look at the journey of the Google stock before looking at three reasons why Google could very well be more valuable in the near future. Google is a much younger company and listed in 2004 at $100 per share. Today, with the share trading at $800 and assuming we exclude the recent share split, your one share investment will have netted you $700 more in just 9 years. Financial analysts however predict Google could go as high as $1600 in the next few years; why is this?
If Microsoft was the king of the software-as-a-product age then Google is the prince of the software-as-a-service age. One of the biggest challenges MSFT faces today is the shift from software products to software services, while Google is the offspring of this shift. One example is Google Docs. While MS was busy selling software on disks, Google was investing is shared software services in the cloud and whereas Google have not quite monetized their cloud services like MS has their software, they have a huge head start on MS as far as cloud goes. So what does being first in cloud mean? It means as everything moves to the cloud, you will be there to reap the benefits, much in the same way MS reaped the benefits when everything moved to the desktop. Going forward, MS have a huge task to pivot to cloud. Google are already well entrenched in the cloud and ready to reap handsomely from it.
Advertising, email, document processing, Google glass, self-driving cars, infrastructure, robotics, medicine, Motorola Mobility, Chrome OS, Chrome books, Google Nexus, Android; the list of pies that Google has a finger in is tremendous. Some of them are in-house projects while others are investments through Google’s investment arm but the bottom line is, the more items you have in your portfolio, the larger the possibility of success. For MS, their stable of products is pretty homogeneous and only of late have they deviated into other fields through their mobile devices. Investors are showing Google love because they don’t want a one horse carriage any more. Apple is perhaps the best modern day example of a one hit wonder. Having mastered the device market, Apple now have nowhere else to go because that is all they invested in. With a diversified portfolio, Google can piggyback on any new and emerging industry trends and take off.
Google is innovative and aggressively entrepreneurial while MS is a traditionalist corporate behemoth. While MS is huge in every sense of the word, this makes it hard for them to really go for new markets aggressively because they still have to protect their legacy markets. When Google launched Android, MS Windows Phone was already in place but neglected by its parent company. It was only when mobile became hot that MS threw in its lot with mobile, which was way too late. Google takes risks only startups and entrepreneurs are willing to take, and this is a big deal when it comes to investors. Investors want companies that are brave enough to venture into new markets and take on new revenue streams. This is at the heart of the Google corporate philosophy.
We may never see the phenomenal success of Microsoft repeated in the near future but one thing is sure, Google is poised to grow at such a tremendous rate, many will wonder why they didn’t buy sooner. The linchpin that Google has become makes it hard to replace or supplant while for Microsoft, their best bet would probably be to remain in their traditional niche and keep a tight grip on it.
The Author of this article, Scott Ryan is a technology and business writer interested in exploring the convergence of business and technology. He currently writes for Morris Brothers Music Store, a store that specializes in high-quality musical instruments.
Jan 27, 2015 0