Apple is chasing down Exxon

Apple just became the most valuable tech company in the the world, surpassing Microsoft. It is now chasing ExxonMobil, the most valuable company in the world and the only one ahead of it. Apple is valued at $291B and with nearly $26B in cash they can do pretty much anything they can dream of.

The last century was largely defined by energy and, especially, oil (OK, up until about 1990). Oil exploration, the creation and growth of the automobile industry, the creation and growth of an electricity generation and distribution industry. ExxonMobil is, of course, the current name of (several parts of) Rockfeller’s Standard Oil Company.

The previous century had been defined by agriculture and, to a lesser extent, by railroads. Indeed, the railroads of the 1800s were the Internet boom of the time: a few large profitable companies and hundreds of completely nonviable railroads in places where it turned out there wasn’t enough business to support a company. By the way, did you know that the Lefty O’Doul bridge by AT&T park in San Francisco used to be a rail bridge since the baseball parking lots were railyards. That’s why it is so massive.

For the most of the last 50 years Exxon has been the most valuable company on earth as it continues to be today. I believe GE were more valuable than them for a short period (the Welch years) and Microsoft pushed ahead at one point in the 1990s, but both fell back. However, I think they are on borrowed time and, if Apple continues to execute as well as it has been doing, then they will eventually surpass them.

But in the 21st century consumer electronics looks like it is going to be the defining technology: Internet, computers, cell-phones and who knows what else. Although in first quarter PetroChina was actually more valuable event than Exxon, ChinaMobile is also in the top 10 with its 570 million subscribers. That’s another trend we can expect to see more of, Asian companies rising to the top. When consumer electronics is the technology, Asia has a lot of consumers. Remember, the population of China (never mind India) is bigger than the US, all of Europe, Japan, Brazil combined.

Apple apparently has 50,000 employees. Not the over 80,000 that ExxonMobil has but in the same league, but nothing compared to Walmart’s two million employees.

With revenues of $65B Apple makes over $1M per employee. Revenue per employee isn’t actually a very interesting measure, it often merely indicates how much a company outsources, but when you consider that many of those employees are in retail and so not highly leveraged, the revenue per person in the core company must be huge.

In other parts of the business, in particular semiconductor design, Apple is outsourcing less than it used to. The original iPhone was all parts purchased externally, the heart of the iPad is the A4 chip designed internally at Apple (with lots of IP from elsewhere, of course). This is a trend that I think is going to be important and that I’ll come back to soon.

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