Apple has a chance to surpass rival Microsoft in revenue this week, if the company continues its tradition of handily beating revenue projections for the quarter.
Apple, which reports results on Tuesday, is expected to report $14.62 billion in revenue, according to a survey of analysts Thomson Reuters conducted. Microsoft, according to the same poll, is expected to report revenue of $15.25 billion. High and low estimates from each overlap one another, however, proving that at least some analysts believe that Apple could top Microsoft in revenue.
Historically, PC market share numbers have long favored Microsoft; at the present, Apple only commands slightly under 10 percent of the U.S. PC market, and even less on a global basis, according to second-quarter reports.
But as anyone following technology knows, Apple has expanded into consumer electronics with a vengeance, defining categories such as the MP3 music player and forcing companies like Creative Technology into mere shadows of former selves. comScore doesn’t rank Apple among the top five in terms of OEM mobile-phone sales for May 2010 (Samsung, LG, Motorola, RIM, and Nokia hold that honor) but Apple nevertheless owns 24.4 percent of the 49.1 million smartphones in the U.S.
Microsoft has tried a similar tack, and struggled. Microsoft’s Zune sells a fraction of the sales of the iPod and iPod touch, and although has shipped a technical preview of its next-generation Windows Phone 7, the final software and phones aren’t due until the holidays. Apple has already said that the iPhone 4 is its most successful launch, ever. And although Apple will be forced to take a charge at some point to supply free iPhone 4 bumper cases to consumers, it’s unclear how much that may be.
And then, of course, there is the iPad: seen as an extravagance by some, Apple said on June 22 that it has sold over 3 million units. Microsoft, meanwhile, has struggled to launch Windows tablets, even as it essentially invented the category.
In April, Apple reported its best non-holiday quarter ever, reporting profits that neary doubled from the quarter a year earlier, to $3.07 billion, on revenue of $13.50 billion. Highlights included the iPhone, whose 8.75 million units sold grew 131 percent from a year ago. Apple also sold 2.94 million Macintosh PCs, a 33 percent increase, and 10.89 million iPods, a 1 percent dip. Meanwhile, Apple sold $1.69 billion worth of desktops, a respectable increase over the $1.056 billion it sold a year ago. Notebook sales grew from $1.904 billion to $2.276 billion.
Both companies also have businesses that certainly contribute to the bottom line – but how much is the question. Bloomberg recently suggested that the Xbox Live Marketplace contributes $1 billion to Microsoft’s bottom line for its latest fiscal year, and Piper Jaffray analyst Gene Munster calculated that Apple derives an estimated $189 million in profit from the Apple iTunes App Store. Both services, however, complement and support existing businesses: Microsoft’s Xbox game console, and Apple’s iOS hardware devices.
The question is whether or not Apple will continue to defy but exceed expectations, generating revenue that is above and beyond Wall Street predictions.
“Just last quarter, Apple not only beat revenue estimates by over $1 billion, but it annihilated EPS estimates by reporting $0.88 above the $2.45 consensus – a 36% beat,” Fortune noted, in its earlier analysis of the two upcoming earnings reports. “In fact, Apple has regularly beaten consensus estimates by well over 35% each quarter over the past year.”
Fortune also noted that Apple will be hard pressed to surpass Microsoft in net income, due to Microsoft’s high operating margin.