Alphabet Inc is now officially Apple’s Big Daddy. The new Google parent is the richest company in the world, surpassing the iPhone maker in after-hours trading on Monday, knocking it off a four-year perch at the top.
If the two companies were countries, they’d be the 23rd and 24th richest in the world, when their valuations are compared to countries’ gross domestic product. That puts them ahead of Poland, the UAE and Qatar, but after South Korea, India and Saudi Arabia. However, such comparisons do not take into account elements such as total asset holdings and payments to suppliers.
It’s the first time Google has reported earnings.
The change is thought to signal a paradigm shift in the way we use technology. When Apple overtook Microsoft in 2010, the world was moving away from desktops to handheld mobile devices. Microsoft, for its part, powered past International Business Machines (IBM) about 20 years ago, signalling the era of personal computing. Before that, computers were giant mainframe monsters that took up entire rooms – or buildings – and were only affordable to companies.
The new pecking order could signal that Alphabet’s non-core businesses are becoming more important and that technology is increasingly being used to better the human experience rather than simply to assemble expensive toys. The company’s oddball or moonshot projects include making WiFi available to everyone using hot-air balloons (Project Loon), monitoring in-home air quality (Nest Labs), and finding the secret of eternal youth (Calico).
Sales from these projects, which Alphabet calls Other Bets, increased 37 per cent in 2015 to $448 million – although losses nearly doubled to a stratospheric $3.07 billion, CFO Ruth Porat said on Monday.
On the other side of the internet, Apple shares dropped last week after reporting the slowest-ever increase in iPhone shipments and forecasting its first revenue drop in 13 years. Its stock has struggled due to signs of softening demand for its signature phone, especially in China, and the lack of another blockbuster product in its pipeline, while Alphabet stock has surged in the last year, helped by increasing sales of advertising on mobile devices, Reuters reports. “The primary driver was the increased use of mobile search by consumers,” Porat said, adding that Google-owned YouTube and automated, or programmatic, advertising also fuelled advertising revenue.
“This makes Alphabet an even stronger bellwether for investors to watch,” Scott Fullman, chief strategist at Revere Securities Corp, after the earnings on Monday. “The company has been tracking very well given the volatility in the market, dominated by falling energy prices and weakness from China,” he told Reuters.
Alphabet shares are also much more expensive, relatively speaking, than Apple’s, trading around 38 times earnings for the last 12 months, compared to about 11 times for Apple. Alphabet pays no dividend, whereas Apple’s dividend currently yields about 2 percent of the stock’s value annually.
(If you’re interested in the country comparison, this cool Financial Times blog breaks it down further.)