Apple 2.0

Covering the business that Steve Jobs built

Graphic: How Apple is gaining on Microsoft

October 26, 2008: 9:37 AM ET

Here's a chart that should keep Steve Ballmer up at night.

It compares Microsoft's (MSFT) market share, revenue, net profit and growth rate to Apple's (AAPL), using the numbers from each company's most recent quarterly report.

Although Apple has a bit more cash on hand ($24.5 billion v. $20.7 billion), Microsoft's operating system still dominates. And if you use generally accepted accounting principles (GAAP), Redmond's revenue and net income still dwarf Cupertino's.

But it turns out that Apple has been hiding most of its iPhone revenue behind subscription-based accounting (see here). As Apple Insider's Prince McLean points out, if you use the non-GAAP deferred revenue numbers that Apple released last week (and are shown in this chart), the company now earns more than half of Microsoft's profits on more than three fourths of its revenue (seeĀ Apple earnings, profits, and cash embarrass Microsoft).

Steve Jobs' company is also growing much more quickly than Ballmer's. Microsoft's revenue grew 9% year over year last quarter. Apple's grew 75%.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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