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Here’s Why Microsoft Could Beat Apple, Amazon, and Alphabet to $1 Trillion Mark

Barb Darrow
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Barb Darrow
Barb Darrow
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Barb Darrow
By
Barb Darrow
Barb Darrow
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December 27, 2016, 9:41 AM ET

Microsoft’s $26 billion purchase of LinkedIn gives it a shot to beat Apple, Google parent company Alphabet, Facebook, and Amazon to be the first digital company to hit a $1 trillion market capitalization, according to a research note by Equities.com analyst Michael Markowski.

As of Friday, Microsoft (MSFT) held the third largest market cap at $494.6 billion after Apple (AAPL) at $618 billion, and Alphabet (GOOGL) at $548 billion. Amazon (AMZN) and Facebook (FB) rounded out the top five with market caps of $366 billion and $343.1 billion, respectively.

Markowski thinks the LinkedIn purchase will boost Microsoft’s prospects over rivals for a few reasons, one of which relates to rulings earlier this year by the U.S. Securities & Exchange Commission that will allow more online crowdsourcing of startups. He expects that will lead to an uptick in social investing because companies will be able to advertise directly to prospective individual investors. LinkedIn, with its database of more that 467 million people will come in very handy there.

Microsoft, he continues, will be well positioned “to play a key role in the new social investing industry which is the key to drive crowdfunding to ubiquity.”

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Markowski expects the social investing community will become as large as the entire social media segment the next decade.

“Microsoft, with its ownership of LinkedIn, is extremely well positioned to be a major player,” Markowski writes. “It has a monopoly on the business social media niche or community.”

Microsoft has another advantage in that it has $27 billion in free cash flow for the trailing twelve months compared to $23.4 billion for Alphabet, $10 billion for Amazon, and $8.5 billion for Facebook. This is an important metric in that it represents the amount of money a company can pull together after capital expenditures to make acquisitions or otherwise invest to improve its business.

The LinkedIn deal has yet to play out, but Microsoft is entering year four under chief executive Satya Nadella, has been headed in a very stable direction of late. Its stock hit an all-time high in October, reflecting investor optimism.

Update: And just to prove that this is a race, RBC Capital Markets analyst Mark Mahaney recently predicted that Amazon, the retail and cloud computing giant, would be the first company to hit the $1 trillion mark.

Geekwire has more on the Equities.com report.

Editor’s note: This story was updated to add mention of the RBC Capital Markets prediction that Amazon would be first to the $1 trillion mark.

About the Author
Barb Darrow
By Barb Darrow
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