Both Apple and Microsoft have diversified business models.
Though each of these companies has a core business.
For Microsoft, it’s the Windows set of products. While for Apple, it’s the iPhone, around which the company has developed a trillion-dollar mobile ecosystem.
Apple and Microsoft, while they might have some overlap, they are fundamentally different companies.
Microsoft is a software-first company, and while, over the years, it also started to develop its own line of PCs and tablets, it’s still primarily a software company.
Apple, on the other side, combines hardware, software, and marketplace to enhance a business ecosystem through its App store and iPhone.
Microsoft has been diversifying in various areas, also investing massively in new areas like AI, with the partnership with OpenAI.
Apple, on its side, has consolidated its business model through the mobile platform while it has been looking to expand into other platforms like AR and mixed reality.
Major shareholders comprise co-founder Bill Gates, who stepped down from the company’s board in 2020, which is why these shares are no longer publicly reported. In 2019, Gates still owned a stake of 103 million stocks, which accounted for 1.34% of the company’s ownership (worth over $23 billion in January 2023). Other individual shareholders comprise Satya Nadella, the company’s CEO, Brad Smith (former president), Jean-Philippe Courtois (EVP), and Amy Hood (former CFO).
In 2022, on over $198 billion in revenue, Microsoft generated over $72.7 billion. The company had over $104 billion in liquid assets (which can be easily converted into cash).
Microsoft is among the largest companies on earth, with a diversified portfolio. Owned by billionaire Bill Gates, Microsoft acquired other companies like LinkedIn, GitHub, Skype, and more over the years. Today, Microsoft is a tech empire that spans software, social media, gaming, and more.
Microsoft’s first acquisition in 1987, Forethought, was the developer of a presentation program that would later become PowerPoint. Since then, the company has made an average of six purchases every year, with fourteen of those exceeding the $1 billion mark. Today’s Microsoft business model spans various segments thanks to an acquisition strategy, which saw Microsoft involved in multiple acquisitions.
Microsoft’s mission is to empower every person and every organization on the planet to achieve more. With over $110 billion in revenues in 2018, Office Products and Windows are still the main products. Yet the company also operates in Gaming (Xbox), Search Advertising (Bing), Hardware, LinkedIn, Cloud, and more.
Microsoft has a diversified businessmodel, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $168 billion in revenues, of which over $52 billion came from Server products and cloud services, and $39.8 billion came from Office products and cloud services. Windows generated over $23 billion, Gaming generated over $15 billion, LinkedIn over $10 billion, and search advertising (through Bing) over $8.5 billion.
Founded in 1975 by Bill Gates and Paul Allen, Microsoft is a revolutionary company in the world of personal computing. The company designs and manufactures software, hardware, operating systems, apps, and devices. Indeed, Windows and Microsoft Office are staples in billions of homes worldwide.
Microsoft has a product-type divisional organizational structure based on functions and engineering groups. As the company scaled over time, it also became more hierarchical while maintaining its hybrid approach between functions, engineering groups, and management.
OpenAI is an artificial intelligence research laboratory that transitioned into a for-profit organization in 2019. The corporate structure is organized around two entities: OpenAI, Inc., which is a single-member Delaware LLC controlled by OpenAI non-profit, And OpenAI LP, which is a capped, for-profit organization. The OpenAI LP is governed by the board of OpenAI, Inc (the foundation), which acts as a General Partner. At the same time, Limited Partners comprise employees of the LP, some of the board members, and other investors like Reid Hoffman’s charitable foundation, Khosla Ventures, and Microsoft, the leading investor in the LP.
OpenAI has built the foundational layer of the AI industry. With large generative models like GPT-3 and DALL-E, OpenAI offers API access to businesses that want to develop applications on top of its foundational models while being able to plug these models into their products and customize these models with proprietary data and additional AI features. On the other hand, OpenAI also released ChatGPT, developing around a freemium model. Microsoft also commercializes opener products through its commercial partnership.
OpenAI and Microsoft partnered up from a commercial standpoint. The history of the partnership started in 2016 and consolidated in 2019, with Microsoft investing a billion dollars into the partnership. It’s now taking a leap forward, with Microsoft in talks to put $10 billion into this partnership. Microsoft, through OpenAI, is developing its Azure AI Supercomputer while enhancing its Azure Enterprise Platform and integrating OpenAI’s models into its business and consumer products (GitHub, Office, Bing).
Stability AI is the entity behind Stable Diffusion. Stability makes money from our AI products and from providing AI consulting services to businesses. Stability AI monetizes Stable Diffusion via DreamStudio’s APIs. While it also releases it open-source for anyone to download and use. Stability AI also makes money via enterprise services, where its core development team offers the chance to enterprise customers to service, scale, and customize Stable Diffusion or other large generative models to their needs.
As of 2023, major Apple shareholders comprised Warren Buffet’s Berkshire Hathaway with 5.73% of the company’s stock (valued at over $130 billion). Followed by other individual shareholders like Tim Cook, CEO of Apple, with about 3.3 million shares, Artur Levinson, chairman of Apple, with over 4.5 million shares, and others.
Apple has a business model that is divided into products and services. Apple generated over $394 billion in revenues in 2022, of which $205.5 came from iPhone sales, $40 billion came from Mac sales, over $41 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $29.3 billion came from iPad sales, and $78.13 billion came from services.
iPhone and Services sales represented the main revenue drivers in 2022. Within the service revenues, the fastest growing sub-segment was the advertising business Apple built on top of the App Store, followed by the Mac, Accessories & Wearables, and the iPad.
In 2022, most of Apple’s sales (62%) came from indirect channels (comprising third-party cellular networks, wholesalers/retailers, and resellers). These channels are critical for sales amplification, scale, and subsidies (to enable the iPhone to be purchased by many people). In comparison, the direct channel represented 38% of the total revenues. Stores are critical for customer experience, enabling the service business, and branding at scale.
In 2022, Apple generated 62% from indirect channels vs. 38% from its direct channel. In 2021, 64% of Apple’s sales came by indirect channels vs. 36% from its direct channels in 2021.
Apple is a tech giant, and as such, it encompasses a set of value propositions that make Apple’s brand recognized, among consumers. The three fundamental value propositions of Apple’s brand leverage the “Think Different” motto; reliable tech devices for mass markets; and starting in 2019, Apple also started to emphasize more and more privacy to differentiate itself from other tech giants.
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
In 2022, Apple is worth two and a half trillion dollars. Apple generated over $205 billion from iPhone sales in 2022, which accounted for over 52% of its net sales—followed by services revenues at over $78 billion, wearables and accessories at over $41 billion, Mac sales at $40 billion, and iPad sales at over $29 billion.
Apple’s mission is “to bring the best user experience to its customers through its innovative hardware, software, and services.” And in a manifesto dated 2019 Tim Cook set the vision specified as “We believe that we are on the face of the earth to make great products and that’s not changing.”
It costs Apple $501 to make an iPhone 14 Pro Max, and the company sells it at a base price of $1099. This makes Apple’s base markup on the latest iPhone model at 119% Apple is the only tech company able to sell its tech products at a such a premium, thanks to a combination of hardware, software and marketplace.
While Apple Tim Cook’s salary has been $3 million since 2016, most of Tim Cook’s compensation is performance-based. For instance, in 2022, while the salary of Tim Cook was $3 million, he had total compensation of over $99 million, which comprised stock awards and other incentives and bonuses.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
