Google more valuable than Apple – if you exclude cash

By , Jun 26, 2013

apple money

For years, the media has been keen to compare companies based on their market capitalization. The metric itself is pretty fluke, but it makes for nice headlines – especially if the topic of reporting is Apple. Earlier this year, for example, much noise was made about Apple passing the oil giant ExxonMobil to become the world’s most valuable corporation by market capitalization.

Having said that, it really shouldn’t be surprising big media is now reporting that the Internet giant Google recently “passed” Apple to become the world’s most valuable technology corporation. The bold claim comes with a caveat: you have to stretch your definition of market cap and strip out some key metrics…

Market cap as the total value of the issued shares of a publicly traded company equals to the share price times the number of shares outstanding. Investors typically bake a company’s future performance expectations into its share price.

As a result, billions of dollars in market cap get wiped out literally overnight because investors are becoming increasingly fickle these days, their preferences changing faster and faster.

A good example is Samsung, whose market cap dropped by $12 billion after investors figured their Galaxy sales projections were overly optimistic.

Another factor investors calculate into the share price: cash reserves.

But what if you took that important asset away? Removing money in the bank from a company’s market cap leaves you with so-called underlying value.

The Wall Street Journal provides a nice analogy:

Another way to think about it: If you bought a house for $378,000, but there was $145,000 of cash lying on the living room floor, all you really paid was a net $233,000.

So, deducting Apple’s $145 billion of net cash (as of March) and Google’s $45 billion from its market cap leaves us with an enterprise value of $233 billion for Apple and $241 billion for Google.

Apple vs Google (underlying value, WSJ chart 001)

The number reflects the “underlying value of the companies’ actual operations”, per the Journal. I’m not sure how disregarding Apple’s or Google’s pile of cash makes sense: the money in the bank came from sales and is therefore treated as a valuable asset.

If we are to exclude bank accounts, we could just as easily strip out the value of a company’s intellectual property, or unsold inventory or licensing revenue.

It doesn’t make sense.

Be that as it may, it certainly did serve the Journal’s headline “Big Apple, Bigger Google”, followed by the lead paragraph saying “Google has passed Apple as the most valuable technology company in the world—on one measure”.

Big media, right?

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  • Jean-Claude

    Apple could have kept the top spot… But in a world where people praise Open Source, they kept their iOS and their minds closed.
    - A former iOS user.

    • http://klikkit.co.uk/ Jake – Klikkit

      Judging by that graph it’s paid off

      • Jean-Claude

        If Apple kept acting like this, I am excited to see the 2013 -> 2015 graph… Apple will hit below 0 Billion

      • http://klikkit.co.uk/ Jake – Klikkit

        Sigh.. no they wont, what these ‘scare graphs’ fail to show for the uneducated people, is that it drops during a period when Apple have no aesthetically new products on the market.

        When a new-look product is released, the graph spikes/peaks again.

      • Jean-Claude

        I remember like a year ago when the latest product was the 4S how these graphs were still on Apple’s side.

        Apple released iOS 6 beta 1… and BAAAM, those graphs began to fall. So your argument is invalid because if their new products were really as much as innovative as the older ones. We won’t be even reading this post and discussing why Apple is falling.

      • http://klikkit.co.uk/ Jake – Klikkit

        I’m referring to product launches, not free operating system launces.. just because you cannot grasp the simple concept behind my argument due to inferior intellect, does not mean it’s invalid..

        Here, this graph may help you: puu(.)sh/3oNbg.png

        Note how Apple’s worst moment is Google’s best moment.

      • Jean-Claude

        The month when Apple announced the iPhone 5 was their best month, so it’s basically because the product was much anticipated and many people were excited to know about the iPhone 5 (Only like 1% of the people saw the leaks of the iPhone 5) and look at their worth only 1 month after the release. Does it look to you like Apple is making any progress.

        I wish I could grab a similar graph but the one of 2007 details to show you how apple’s growth kept rising marginally after the release date of the iPhone 2G.

      • http://klikkit.co.uk/ Jake – Klikkit

        Regardless of how people reacted to it, this is the process, and will be exactly the same this year for the 5S/Retina Mini.

        Year in, year out, overall on average, Apple always do better, it’s really not a difficult concept to grasp.

      • Jean-Claude

        You’re just missing my point, Google is slowly, yet constantly growing. Apple keeps varying between high and low you won’t notice they’re falling, but compare that to previous years where the graph was also rising and falling.

        To make it clear, Apple’s highest moment this year is lower than last year’s highest moment

        And their worst moment this year is worse than last year’s worst moment as well. And it will continue to be like that for upcoming years.

      • http://klikkit.co.uk/ Jake – Klikkit

        hmm puu(.)sh/3oO5A.png

      • JeanMarc

        Apple has become a fashion. When a new device releases every body gets in line for it. When a new android device comes out you only have 2 people in line. Open source, we have a jailbreak for that. We have way more tweaks than any other phone out there.

      • Steve Jones

        Yes, Apple is a fashion. Keeping everything else aside, if you truly believe open source or even rooting is equivalent to an ios jailbreak, I would be speechless. Even a non rooted android has better control and depth than a jailbroken ios device let alone rooted ones. And yes, I’m a proud owner of an iPad 4 but I can accept the fact that I can’t have control I need on an ios device, hence I only use it as a gaming device, while the android gets used for anything productive or remotely complicated.

      • http://klikkit.co.uk/ Jake – Klikkit

        what can a regular android do that a Jailbroken iPhone can’t? besides running Droid apps?

        I can’t even see anything that my S3 could do that my jailbroken i5 couldn’t

      • Steve Jones

        REAL fully functional interchangeable keyboards instead of barely working jailbreak tweaks, real deep ui customization, without needing to feel like you are inside an app(dreamboard), accessibility of all data across all apps instead of each app being locked to its own data or having to browse through a file system like I file, true multitasking which doesn’t randomly pause background downloads or connections are some things which come to mind without much thinking. Ahh! And if you root? You can install a completely different operating system if you please. Of course I respect the jailbreak community and am so dependent on them that my iPad would be unusable for me without jb tweaks. And I don’t want to argue about this any more as, if you didn’t realize this even after using an android, then maybe you don’t actually own one(which I don’t want to say) or you don’t use it enough, I in which case you are better off with an iPhone.

      • http://klikkit.co.uk/ Jake – Klikkit

        tbh Winterboard lets me customise every aspect of iOS visually, and I’ve never felt like it hogs my device’s resources. The stock keyboard is fine for me, but I agree with your point that keyboards like octopus keyboard or whatever are complete and utter Sh*t.

      • Jean-Claude

        That makes no sense, it is because they have way more products than Google it’s why their revenue keeps increasing…

      • http://klikkit.co.uk/ Jake – Klikkit

        Google actually have more products and their fingers in many more pies, you’re not looking at the bigger picture, you’re seeing products as physical computers (iMacs/iPods/iPhones/iPads etc), even then, Google have more hardware out on the market today than Apple do

      • Maxim∑

        You think Google makes money only on Nexus products, common Google makes money on advertising the more products that use there services the more money they make. Google is extremely dependent on Samsung, if Samsung continues to be serious about Tizen OS then dont be surprised if Android market share drops in Asia.

      • Steve Jones

        Lol, Samsung is infinitely more dependent on Google.

      • felixtaf

        I would say they depend eachother… Google wasnt promoting Nexus 4 as much and willing to release Nexus version of popular flagships.

      • Maxim∑

        In America they are. Not in Asia, in Asia you would be surprised not that many people use google services.

      • Steve Jones

        Actually a LOT of people in Asia use Google services. In fact more than people in US. For example the largest user base of Gmail is from India, and so are the stats for other Google services.

      • Maxim∑

        From Q2 2012 (official) statistics Google usage in China,Korea and Japan was 8% compared to 73% for Baidu. If 73% of people are doing searches on Baidu its safe to assume they are also using Baidu’s services.

      • Maxim∑

        People praise open source to an extent I am a user of Linux and Android. There is a fine line between the to, this is simply happening because Apple has more competition then previous years. Your 2nd comment makes no sense. If you honestly believe Apple’s value will drop below 1 billion in 2 years you need a reality check.

        Only 1.67% of the whole iOS population is jailbroken everyone else is content with what they have. If Apple brings the purchase of Authentec to good use, as well as introduce a bigger iPhone/ cheaper model and a Retina iPad Mini they will do very well. iOS 7 was a major step in the new direction Apple appears to be taking. As Tim Cook said at the D conference, “lots of exciting new hardware and product categories coming fall 2013-2014″

      • Jean-Claude

        You actually took my “Will drop below 1 billion” expression literally? I was going to say it will cost them a LOT in the feature. Retina iPad mini while new 7-8 inch tablets are rocking the house with speed and gorgeous display is a bit late.

        Remind me why would I need an iPhone mini when we have the already amazing 4S.

        And the 98.33% are happy because they use their iPhones to show off or to just text or browse safari. No heavy user will be content with his iPhone when he knows about Android customizations or even Cydia’s tweaks.

        iOS 7 will only be loved by Apple users who never jailbroke their devices because it’s something new and offers stuff from jailbreak they didn’t know about.

        Let’s talk reality here, iOS 7 is a mix of a closed minded company and its depression. They love Open Source but can’t deliver it because they think that’s what Steve Jobs would have done if he stayed alive.

      • Sean Cua

        Because the Aspect Ratio os the 4S is way off than the 5 and iPod Touch 5g and they want to continue using that ratio if they’re going to make a mini.

        Well this is what I’m going to say about the OS being open source. Linux has been an open source OS for years and still the OS that most people use is Windows or Mac. Not everyone like to customize their products, but sure being able to customize your iphone without having to jailbreak is good, but in the end aesthetics isn’t as important as functionality.

      • Jean-Claude

        Windows and Mac despite not being Open Source are FULLY customizable, they don’t need to be open source. I used that expression to show how that people love to customize their phones, well not everybody, but the majority of people does.

  • Gorgonphone

    lol @ “if you exclude cash”