Looking for evidence that cloud computing has achieved primacy over the “traditional” software model that long dominated the tech industry? Look no further than the stock market, where Google’s market capitalization briefly edged past that of Microsoft.
At one point on Oct. 1, Google’s stock had hit $761.78—good for a market capitalization of roughly $249.9 billion, slightly more than Microsoft’s $247.2 billion (Microsoft stock at that time was $29.49). That placed Google second among tech companies by capitalization, lagging behind Apple at $618.1 billion.
By late morning on Oct. 2, Google stock had dipped again to roughly $757.82, while Microsoft’s had edged slightly higher to $29.73. Both stocks are widely traded and subject to market fluctuations, meaning the two could trade positions for some time—but for some analysts, there’s nonetheless an ongoing trend that favors Google’s cloud-centric mindset.
“The PC hardware business is obviously struggling,” Martin Pyykkonen, an analyst with Wedge Partners Corp, told Bloomberg Oct. 1. “The transition here is pretty straightforward in terms of where things have moved to and certainly that’s cloud, that’s Web.”
While Microsoft’s Windows franchise maintains a dominating share of the traditional operating system market, and its Office software remains a mainstay of offices and schools, Google leads its rival in online search and mobile operating systems. Moreover, if Google’s Chrome OS and Google Apps increase in popularity, they could give the company a toehold in Microsoft’s areas of strength.
Microsoft’s aggressive “cloud first” strategy of recent years, and resulting products such as Office 365, is widely seen as a way for it to embrace the cloud trend while blunting the competitive forays of Google and its ilk.
Of all the cloud-related competition between the two companies, productivity software has arguably become the fiercest arena. Microsoft has been pushing Office 365 to a number of different audience segments, including schools and government, while cutting the pricing of most enterprise plans. For its part, Google recently acquired QuickOffice, a productivity suite for mobile offerings, which it will almost certainly integrate into its growing product portfolio.
Microsoft’s upcoming version of “regular” Office is likewise cloud-centric: users have the ability to save documents to the SkyDrive cloud-storage hub, for example, and transfer personalized settings across devices.
The cloud rivalry between Google and Microsoft has intensified to the point where both companies will crow loudly over customer wins—and fire off lawsuits when they feel the other side has an unfair advantage. In late 2010, Google filed a suit alleging that the U.S. Department of the Interior denied its bid to implement a cloud email and messaging system, a contract that had gone to Microsoft’s BPOS-Federal suite (the forerunner of Office 365 for Government). In response, the DOI eventually agreed to consider Google Apps.
Microsoft’s other cloud and mobile initiatives—including Windows Phone, which currently lags far behind Google Android in mobile-device market share—are also flashpoints for the two giants’ continuing acrimony. Google may have won a small, symbolic victory of sorts with its market cap, but Microsoft is far from ceding the cloud.