Apple vs. Exxon – Experts take sides

12th August 2011

On Seeking Alpha Geordie Wang is adamant that it matters very little.

"In the grand scheme of things, market cap means absolutely nothing. It can easily be driven up or smacked down by the market's mood swings. All that matters is a company's future cash flows. Investors would be well served to remember that Microsoft's market cap topped $600bn right before the bursting of the dotcom bubble in 2000. Cisco traded at $550bn at around the same time. Conglomerate General Electric was once a $575bn monstrosity. All these companies have track records that make Apple's claim to fame look like peanuts."

In fact looking at the market caps of these firms now, perhaps investors might even be a little more cautious when putting their money into the globe's top dog company.

Wang concludes that for companies, it doesn't matter where you where, it's where you are going that counts.

Other commentators have taken sides.

A lot of attention has been focused on Apple boss Steve Jobs. Irreverent tech website Gizmodo asks if Apple could be number one without him. In fact, it goes so far as to say put your money with the oil giant.

He writes: "As much as I hate the oil guys, I'd pick ExxonMobil for one single reason: They don't have the invaluable advantage and the problem that Apple has.ExxonMobil doesn't depend on the man with the vision, the Wizard of Oz, the snake oil salesman, the amazingly brilliant asshole that is Steve Jobs. I used to think that Apple could live without Jobs. Back in 2008 I wrote about why I thought that, if he left, the company would be just fine. I was wrong. Back then, investors disagreed with me. When we broke the news of the return of his cancer back in 2008, Apple lost billions in just a few minutes of trading. Back then, Apple and its friends at CNBC tried to deny the news that later was confirmed by Jobs himself. The investors were right, and now I'm convinced that Apple can't be Apple without Steve."

By contrast, on the International Business Times John Talty is a big Apple fan and down on Exxon. He expects the firms to trade places for some time, before Apple eventually consolidates its lead.

Here is his reasoning.

"Apple's been successful at getting consumers to buy into its whole ecosystem. Trends show that consumers aren't just buying an iPhone or an iPad, instead they are also buying Mac computers and other Apple products."

"Exxon, on the other hand, seems to be losing momentum. Prices for barrels of oil continue to drop, most recently below the $80 mark, limiting potential profits for the oil company. It also faces market resistance from automaker companies building more and more fuel efficient cars. Some of the world's biggest automakers have made a push to putting hybrid and electric cars in the market, as governments like the United States have mandated better gas mileage for cars."

Huffington Post finds that whatever the placings, specialist analysts are bullish about both.

Needham analyst Charlie Wolf of Needham Securities says: "Apple has outgrown the PC market for 21 straight quarters. That's the halo effect of the iPhone, the iPod, the iPad, which are picking up converts all over the place. Especially in the Far East."

Leave a Reply

Your email address will not be published. Required fields are marked *