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Comment by sgolestane | Hacker News Reader

It seems Microsoft (http://finance.yahoo.com/q/ks?s=MSFT+Key+Statistics) is doing financially better than Google (http://finance.yahoo.com/q/ks?s=GOOG+Key+Statistics) in every aspect. Microsoft also has a more diversified business so I wonder why Google still has a larger market cap.

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For once and for all, markets value companies based on future growth prospects rather than current results. Markets are betting that Google has a better growth prospect vs. Microsoft - which I do not doubt. Similarly is the reason why Twitter is valued at $30B with less than a billion dollar in annual revenue - there is a reason for that and the reason is future growth. You can argue that Twitter or Google may not grow as fast/much as what market is predicting - but that valuation is based on future earnings and NOT present earnings. So you comparing the current balance sheets/income statement to determine market caps is a futile exercise.

The market works in mysterious ways. I feel the same when comparing Apple to MS. MS is more diversified. If Apple royally screws up the iPad, they can do a lot of harm to their business. If MS screws up Windows (and they have, a few times), they have so many other revenue streams that they can survive.

It's not as much other revenue streams than the steady business of corporate IT. When Microsoft released Vista, companies continued to deploy (and pay for) XP. When 8 didn't get the stellar reception Microsoft expected, enterprises kept on deploying Windows 7. The same goes for every version of Office, with the added "benefit" (for Microsoft) that documents created by version n are usually not compatible with version n-1, thus forcing full user base upgrades of Office (or holding Office upgrades back when it can't run on the official corporate Windows). The same also happens with servers: if your company has a dozen critical apps developed in ASP.Net, it's very likely that, when a server upgrade is due, it will be a Windows server.

Not necessarily. There's a free compatibility pack that lets you open new docx etc documents in much older versions of Office, and in some cases, edit them. http://www.microsoft.com/en-us/download/details.aspx?id=3

This support goes back to Windows 2000 SP4 and Office 2000, which is ancient in software terms.

There are also free viewers if you don't have a copy of Office.

In any case, Office supports dozens of file formats so you're not obliged to use the latest. You can create files in old Microsoft formats and some non-Microsoft formats.

> open new docx etc documents in much older versions of Office, and in some cases, edit them

Well... There is partial functionality. That makes it even more difficult to support the stack as you have to keep track of which versions of what can edit which documents.

> You can create files in old Microsoft formats

Try explaining that to the average Office user.

What's the average cost per year of employing an average Office worker? $50.000?

What's the cost per year of buying a copy of Office? (I'm still on Office 2007 and it's 2014...)

People whose time is worth so little that they can't afford to update Office can spend time on workarounds instead.

That only recently changed. Pretty sure Google had a lower market cap for many years, like 2008-2011, when the stock price was around $500. (If someone can figure out how to graph the market caps that would be nice)

The market is evaluating future potential. When Google's stock price was around $500, the P/E was pretty darn low, so people didn't think Google had much future potential.

Now due to some forays into new businesses like cell phones and hardware, and PR about stuff like Glass and self-driving cars, the market thinks Google has potential again.

Likewise Apple's P/E dropped below 10 last year, so the market obviously thought they had very little growth potential.

expectations for the future is the difference. the stock market weights future earnings and dividends.

The Beta on MSFT is 0.7

MSFT has been flat for so long that no one wants to buy it.

That seems silly, they pay dividends. I'm perfectly happy with flat, dividend-paying stocks.

What seems silly? 3% annually in dividents is below inflation level.

Fed's target rate is 2%, and either way it's close. Also, you can be quite confident you will get that 3% return if the stock is flat. Much more than you can say for a 0.07%-return savings account.

You wouldn't want to put all your money into a 3% dividend stock, but as part of a larger diversification? Solid choice IMO.

>MSFT has been flat for so long that no one wants to buy it.

What? You call this flat? [1] The dividend payout has gone up, the price has been rising. If you call that a flat and that there is no interest in it, then I am sorry for the following remark: You have no idea about stocks and stock markets!

[1]http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&c...

Let me rephrase. They aren't a growth stock anymore, so no one who wants growth stocks wants to buy it. Very recently, they have made some gains, but a lot of people remember the previous 10 years.

Microsoft has been doing fantastic over the past 5 years, especially when you take into account dividends. Just cause they were massively overvalued during the dot com bubble does not mean it has been a flat stock.

I really don't understand how you can dismiss market data that's right in front of you, it's bordering on denial.

He is right. For years market insiders considered MS a flat stock and no one wanted to recommend it. That has changed in the past 6 months and all of the sudden it has popped up on everyone's buy radar. I always thought the market was crazy especially when MS was at $18 in 2008.

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