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We have just witnessed the so-called boxing match of the century: Floyd Mayweather versus Manny Pacquiao in Las Vegas. Reputedly grossing over half a billion US dollars, this is a financial windfall of the likes never seen before in professional sport.
But the Mayweather v Pacquiao bout has its long-running mirror in the technology arena, with American technology giants Apple and Microsoft slugging it out for the crown of the most valuable company in the world since the dawn of the new millennium.
Apple slugs it out with Microsoft
Back in 2000, Microsoft held sway with its dominance over the PC software market thanks to the prevalence of the Windows operating system and its Office software suite, wearing the "Technology Most Valuable" belt with pride.
Figure 1. Global iPhone Volume Sales Remain Very Strong
Source: Apple
But in 2015, it is Cupertino-based Apple that is the Floyd Mayweather of the tech world –wearing the crown for being the most valuable company in the world as it is worth over $750bn (£495.7bn, €674.2bn) and nearly twice the market size of Microsoft.
Recent Apple results have underlined the pre-dominance of the iPhone 6 and 6+ models, even taking reportedly a 25% market share of the Chinese smartphone market in the face of incredibly fierce domestic competition from handset makers Huawei, HTC and Xiaomi.
In fact, Apple sold more iPhone 6 handsets in China than in the US over the past three months. The 61.2 million iPhones sold globally over the second quarter (Figure 1) served to dish up outstanding financial results at Apple, beating the expectations of financial analysts by a wide margin.
Unlike during the technology bubble in 2000, "old" technology names such as Apple (US code: AAPL) and Microsoft (US code: MSFT) are today substantially cheaper than the overall US stock market. Adjusted for the cash on the balance sheets of tech titans Apple, Microsoft and Google, you pay an average of under 12 times earnings for these globally dominant tech names; in contrast, you pay a much more expensive 18 times earnings for the overall US stock market (Figure 2).
Figure 2. Apple, Microsoft & Google: Much Cheaper than the US Stock Market
Source: Yahoo Finance. Note: Lower P/E ratio is…
