Google, Microsoft, Apple and Amazon : competitive advantages for future lead

In less than one decade, the ITs business has spread on the worldwide mainstream demand. Handsets, multimedia gaming platforms, Internet take in average more than 2 hours per day per customer in western countries . In this new business consisting in providing both hardware and contents for customers communications, searchs and leisures, new names such as Facebook, Amazon, eBay, Skype, Yahoo or Google have occured. These new companies challenge already existing firms such as Microsoft, IBM, HP or Apple. The purpose of this document is to study the financial statements from key IT firms to estimate potential trends. Four companies are studied, respectively Microsoft, Google, Apple and Amazon.

Introduction

The IT market for consumers can be structured in two main segments respectively hardwares and contents. If hardwares still requires payments when contents can be obtained either for free or competitive prices, standards supports connexions between the different brands. These recent easy interactions between all the IT tools accelerate the technological and behavior current convergence.

Google has based its financial success on one specific step of the value chain : its ability to provide accurate data for free. It represent more than 60% of the Internet connection worldwide . Google has acheived in 2009 a turnover of 21,795 billion USD mostly based on its connected dominant position in online advertising. The company faces now a growth challenge and focuses on vertical integration with handsets and OS. This integration pushed Google in frontal competition with historic and new business actors : Apple, Microsoft and Amazon.

The 5-years long success of Apple comes from its capability in selling high-end solutions. It has achieved a turnover of 36,537 billion USD in 2009 with a progressive domination in online music. Its market-building reputation has been confirmed both in hardwares (new macs, ipods, iphones) and attached contents (itunes, istores,…). Apple is now in frontal competition with Google, Microsoft and more recently Amazon with it new iSlate and the attached book store.

With 19,1 billion of annual turnover and more than 50% of marketshare worldwide in the book services , Amazon is the biggest book store. If its profit margin of 4,7% is far below its above listed competitors’ average , Amazon tries to position itseft as the online access to knowledge. However, it faces technical challenges as the company has based its success only on transaction. The success of its tablet must be confirmed.

Finally, all these recent evolutions mustn’t let forget the global dominant position of Microsoft. In less than four years, the company has doubled its operating turnover at 58,437 billion USD . In 2009, the financial size of this company was mostly equal to the sum of Google and Apple together . On the hardwares and contents for consumers business, Microsoft is present in all high value segments such as office services (MS Office,…), games (XBOX,…) or OS (Windows,…).

However, since the late 1990s and more than 9 billions USD annual spendings in R&D , Microsoft is facing new challenges :

• The development of Google. Bing, the search engine represents less than 11% of marketshare worldwide both in USD and connexions . The success of the partnership with Yahoo & Facebook in technology and advertising must be confirmed. • The come-back of Apple and its high-end positioning in all the payable segments of the ITs, in general, and handsets in particular. • The development of e-stores and online applications and OS both for handsets and PCs.

All these US competitors have their own vision of hardwares and contents for consumers business and each of them has based its success in developing new specific markets. However, the recent convergence drive them to competition. In this area, on one hand, if Microsoft is clearly the company with the biggest assets and the most structured organization . It hasn’t succeed in maintaining the momentum effect, creating both innovations and value with the web. On the other hand, if Google and Apple have succeed in catching value from new businesses, the success of Google is mostly based on the performance of its algorithms when Apple uses its strengths in marketing.

For more details, please read the attached document.