Google Inc (GOOG) Beats Apple Inc. (AAPL) In Enterprise Value

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Google Inc (NASDAQ:GOOG) has left Apple Inc. (NASDAQ:AAPL) behind in the race to become the most valuable technology company globally, at least on the basis of one of the parameters.

Courtesy: WSJ (Moneybeat)
Courtesy: WSJ (Moneybeat)

Apple Still Leads in Market Cap

In the previous week, Google Inc (NASDAQ:GOOG) outperformed Apple Inc. (NASDAQ:AAPL) to shine as one of the most valuable companies, but the parameter used here is rarely considered compared to the market capitalization. In terms of market capitalization, Apple is still ahead of the search engine giant with a market cap of $378 billion compared to Google Inc (NASDAQ:GOOG)’s $286 billion.

Google Ahead in Enterprise Value

However, the cash balances of both the companies add significantly to the market cap. On deducting $145 billion net cash as of March from Apple, the enterprise value comes to $233 billion for Apple Inc. (NASDAQ:AAPL). The enterprise value of Google Inc (NASDAQ:GOOG) stands at $241 billion after deducting a cash balance of $45 billion. Thus by this logic, Google Inc (NASDAQ:GOOG) is the more valuable company as this defines the value of the actual operation in a company.

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Oil major Exxon Mobil Corporation (NYSE:XOM) recently outperformed Apple and clinched the title of world’s biggest company from the iPhone maker. However, Apple Inc. (NASDAQ:AAPL) must be more worried about the Google rather than Exxon Mobil.

What Does it Mean?

The market cap after deducting the cash balance from both companies reflects that investors are skeptical about the future of Apple Inc. (NASDAQ:AAPL) hardware sales. They are more upbeat about the future prospects of Google Inc (NASDAQ:GOOG), which has huge profit margins from advertising.

Apple has a tough fight ahead in the smartphone and other segments with a number of rivals. Contrary to this, Google Inc (NASDAQ:GOOG) is the most dominant player in its segment.

The iPhone maker has put forth maximum efforts and has performed well in earning high profit margins on consumer electronics and computer hardware, but for the industry it is a low margin business.

Google Expanding in Hardware Business

Google Inc (NASDAQ:GOOG)’s efforts to create a large hardware business and follow Apple’s strategy is somewhat strange. The search engine giant acquired the Motorola Mobility Holdings Inc (NYSE:MMI) unit for $12.5 billion last year. The company is also seeking to develop notebooks, music systems and Google Glass.

The risk with this new business segment for Google will be that this segment will not be able to replicate the profitability of the media segment of Google Inc (NASDAQ:GOOG). The low profitability is expected to bring down the earnings per share of the company.

Google Inc (NASDAQ:GOOG) should be ready to face the risk of losing customers if it increasingly follows Apple Inc. (NASDAQ:AAPL)’s footsteps. Apple’s share price has declined from a high of $705 to $399. It is obvious that Google investors are not buying Google for its hardware business, because if this was the reason then they would have invested in any other company. Google will lose its shine if it excessively gets into the hardware business.


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