At this point Sony is a classic value play. The company is in the middle of a turnaround, which if successful could provide significant upside to its stock price. In fact, Sony’s common stock is up nearly 60% year-to-date as the company is showing progress in the turnaround. Despite this run-up in price, the stock still trades at 0.9 times its tangible book value and 0.3 times its price to sales. For comparison, Apple Inc. (NASDAQ:AAPL)’s price-to-book value and price-to-sales ratios are 3.2 and 2.5, respectively. The opportunities for buying companies like Sony below book value are rare and this could be one of them.
Microsoft Corporation (NASDAQ:MSFT) has partnered with leading mobile-phone manufacturer Nokia Corporation (ADR) (NYSE:NOK), and also launched its own mobile operating system, Windows 8, that is used in tablets and phones. Windows 8 for phones and tablets is still a distant third after Apple’s iOS and Google’s Android, but Windows still commands the largest share in desktop and laptop software. Also, Windows is used much more widely by businesses due to its lower price.
Microsoft has been criticized for making software that is unreliable and prone to viruses. More recently, Apple is starting to have its own problem with viruses, according to this article in Forbes. Importantly, Apple Inc. (NASDAQ:AAPL)’s hardware is much more expensive than Windows hardware, and often it costs as much to repair an Apple laptop as it is to buy an average Windows-based laptop. Many businesses and consumers stay loyal to Microsoft and are reluctant to switch to Apple. The reasons are higher initial prices, higher maintenance prices, and higher prices for most peripheral devices. On the other hand, the Windows application store only has about 150,000 applications available for download, compared to over 800,000 for Apple’s iOS and Google’s Android.
Similar to Sony, Microsoft Corporation (NASDAQ:MSFT) common stock trades in value territory. It offers a 2.8% dividend yield per year and the best EBITDA margin (among the four companies discussed here and despite the advanced age of its products) of 40.3%. The stock trades at a 2013 price-to-earnings ratio of 11.9, which is at the low end of its historical PE ratio in the past 10 years of between 9 to 40.
It is growing more difficult for Apple Inc. (NASDAQ:AAPL) to maintain its lead in smartphones and tablets. Steve Jobs is the person who revived Apple and brought enormous success to the company in the 2000s. It seems that, following Steve’s passing, Apple is rapidly losing ground, as evidenced in its operational performance. Google, Sony, and Microsoft, on the other hand, are continuing to innovate, form partnerships, and improve on their services and technologies. While financial engineering can keep Apple ahead of its competitors for a few more years, Steve Jobs’ successful leadership seems difficult to replicate, leaving plenty of room for competitors.
The article Three Companies Threatening Apple’s Dominance originally appeared on Fool.com and is written by Delian Naydenov.
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