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12/12/2010
12:48 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: Apple, IBM, Or Microsoft: Who Has #1 Most-Valuable Software Product?

The top software-product franchise gets a value of $110 billion, and both Oracle and Microsoft have two entries in the Top 6. But who's #1?

THE TOP SIX SOFTWARE FRANCHISES, RANKED BY TREFIS.COM

1) Microsoft Windows OS. Dec. 2010 estimated value: $110 billion. Dec. 2009 est. value: $101 billion.

2) IBM Middleware. Dec. 2010 est. value: $107 billion. Dec. 2009 est. value: $103 billion.

3) Microsoft Office. Dec. 2010 est. value: $86 billion. Dec. 2009 est. value: $83 billion.

4) Oracle Database. Dec. 2010 est. value: $69 billion. Dec. 2009 est. value: $67 billion.

5) Oracle Middleware. Dec. 2010 est. value: $44 billion. Dec. 2009 est. value: $41 billion.

6) EMC Storage Software. Dec. 2010 est. value: $23 billion. Dec. 2009 est. value: $21 billion.

As Trefis wrote in the blog post, "While most of the businesses continued to retain their position, Microsoft’s Windows Operating System emerged as the single most valuable software business segment in 2010. Microsoft Windows Operating System (at $110 billion) surpassed IBM’s Middleware, which at $107 billion now stands at a comfortable second. Microsoft Office managed to retain the third position at $86 billion.

"Trefis estimates a price of $177 for IBM’s stock, which is 22% above its market price, with Middleware Software constituting 46% of it. For Microsoft, we have a price estimate of $31.60 which is 16% above the market price. Windows Operating System is the largest segment for Microsoft, making up about 41% of Microsoft’s stock, followed by Microsoft Office which contributes 32% to the company value."

Now, here's where the sorcery bit comes in: Trefis says its expertise lies in its ability to help investors "understand how a company's products, that you touch, read, or hear about everyday, impact its stock price." Fair enough.

But let's take a look at one example of a Trefis analysis to get a picture of how those breakdowns work: in this case, highlighted on the Trefis website, it's Apple.

Trefis' Apple breakdown lists the current market price for Apple stock at $321, and also shows that Trefis projects the share's underlying value at $418. Here's how Trefis breaks out the contributions to Apple's stock price made by its various product lines (and when you see the product line called "iOS," shout out "Let's Go Steelers!"):

iPhone: 53.5%

Macintosh: 18.3%

iPad: 6.7%

iPod: 2.8%

iTunes: 2.8%

Apps for iPhone, iPad, iPod: 2.4%

Apple TV: 0.4%

Cash (minus debt): 13.1%

Total: 100%

So, I don't think I heard anybody rooting for the Steelers—could that be because the iOS, Apple's mobile operating system, wasn't listed? And Trefis would therefore have us believe that the Windows OS is worth $110 billion, but Apple's iOS—powering the most disruptive and influential mobile tech devices in the world—is worth squadoosh?

I'm just not buying that—no way, no how. That dog don't hunt and that pig don't fly, and no less an authority than Steve Jobs himself recently explained that Apple is a software platform company, as analyzed in our recent column called Global CIO: Inside Steve Jobs' Head: The Supremacy Of Software:

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