As was widely expected, Apple Inc. (NASDAQ:AAPL) sailed past Oracle Corporation (NYSE:ORCL) in the first round of this year’s Stock Market Madness. In fact, the Apple/Oracle matchup was the biggest blowout among the tournament’s opening round games.
Round 2 isn’t going to be as easy for Microsoft, however, as it faces tourney favorite Apple.
A victory for MSFT isn’t out of the question, but AAPL is going to need to have an off day and Microsoft is going to have come across as outright flawless to voters if it’s going to knock off the maker of the iPhone, the iPad, and most recently, a crowd-pleasing smartwatch.
Here are the keys to a victory, or a loss, for each team.
In round 1, Apple simply used its prowess and size to push Oracle out of contention. While Oracle is a worthy company in its own right and arguably setting the bar when it comes to putting big data in the cloud, it just wasn’t enough to up-end the name behind the world’s most recognizable smartphone and the world’s best-performing tablet. Both simply drive more and more revenue.
Perhaps just as important is that AAPL is peaking at the right time of year, still feeding on the effects of another solid quarter, and adding another layer of euphoria stemming from the upcoming debut of the much-ballyhooed smartwatch. Any sooner or any later, and investors may have developed Apple-fatigue, opening the door to another team.
It’s an important idea for Apple too, as when the crowd turns on AAPL, it really turns.
Investors who have grown accustomed to faultless results and execution are quick to cry foul at the first mere hint of trouble. Indeed, Apple couldn’t be any further away from that situation right now than it is, particularly now that it has a new player on the bench.
That new addition to the team is news that Apple will be launching an online television service this fall. Such services already exist, but Apple is going to take the premise to the next proverbial level by making broadcasts from ABC, CBS and Fox available to subscribers. Up until now, the mainstream broadcast networks had preferred to keep their primary programming delivered only through a coaxial cable.
Putting it all together, there’s not a lot to not like about AAPL.
Although Apple may be “the” name to beat in this tournament, Microsoft could prove to be a bracket-buster in any other bracket except the one it’s in.
On that note, never say never.
From round 1 of the tournament, we know the Microsoft being led by Satya Nadella isn’t the same one that was led by Steve Ballmer. Under Ballmer, anyone and everyone was competition, without even considering the possibility another company could be a partner instead. Nadella isn’t thinking so closed-mindedly, already forging a partnership with Oracle that would have never materialized under Ballmer’s tutelage.
That willingness to think bigger-picture is already paying dividends (literally and figuratively). Sales are growing, and net income is projected to start growing again next year.
And, though not as riveting as the upcoming launch of the Apple smartwatch, Microsoft announced late Tuesday that Windows 10 would be launching on a near-global basis this summer.
Windows 8.1 received mixed reviews, so the company needs Windows 10 to be noticeably better than its predecessor. That said, it appears it will be. Not only will Windows 10 leave a smaller footprint on hard drives, it also will be easier to remove the included-by-default programs that most computer owners never use. Rumors also suggest Windows 10 is going to be considerably more secure, relying on a user’s biology — like retina scans and finger prints — rather than passwords to grant access to users.
It may be enough to convince frustrated Windows users to appreciate the overdue changes.
Our Second-Round Pick: AAPL
Microsoft is a much better company than it was a year ago, and it’s going to be an even much better company than it is now at this point in 2016. But it’s just not enough.
Apple isn’t starting over. It’s extending its commanding lead on its … well, the word “competition” seems a little too generous.
Nobody’s a threat to Apple yet in any of its arenas, and the advent of streaming network-television broadcasts could make AAPL the name to beat in that category too.
Head back to the Stock Market Madness bracket to vote for your favorite stocks and check out other previews!
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.