If you’ve been trapped in an ice cave for the last 13 years, you might want to hold on to something when I say this: Ace of Base is no longer the hottest act in music. Oh, and that loveable niche computer maker, Apple (Nasdaq: AAPL) , the one that was getting bailed out by Microsoft (Nasdaq: MSFT) in 1997? Yeah, it’s now bigger than General Electric (NYSE: GE) .

Shocking, huh?

Even though Apple’s been climbing up the list of the largest American companies for years, it’s still a bit stunning to hear: As of last Friday’s close, Apple was the third most valuable company in the U.S. It’s since slipped back to the fourth position, but the list below shows the regal company Apple’s keeping as it skyrockets up the list of the most valuable American companies.

Top 10 U.S. Companies by Market Cap

Company Recent Market Capitalization (Billions) 1.) ExxonMobil (NYSE: XOM) $318.2 2.) Microsoft (Nasdaq: MSFT) $259.7 3.) Wal-Mart (NYSE: WMT) $213.1 4.) Apple $203.7 5.) Berkshire Hathaway $203.3 6.) General Electric $194.1 7.) Procter & Gamble $185.1 8.) Google (Nasdaq: GOOG) $180.1 9.) Johnson & Johnson $179.3 10.) JPMorgan Chase (NYSE: JPM) $173.4

Source: Capital IQ. Prices reflective of March 18 closing price.

Put another way, here’s a chart of Apple’s enormous growth over the past 10 years.

Source: Capital IQ, a division of Standard & Poor’s.

Apple’s success has been the result of reinventing itself. It’s moved away from just “the Mac maker” into a diversified consumer electronics company. Apple not only managed to produce one of the greatest products of the first half of the decade (the iPod), but it also followed that up by creating the greatest success story of the second half of the decade (the iPhone) just as the iPod was reaching its apex. A look at the chart below shows how Apple has shifted away from Mac and iPod sales over the past three years.





Source: Company filings. Uses revised quarterly data to adjust for change in new revenue accounting principles.

A little seasick at these levels

Still, as impressive as the Apple story has been, it rightfully leaves many investors a bit uneasy. Even if the company matches up more favorably on valuation metrics than many investors would expect (for example, its forward P/E is roughly equal to Procter & Gamble’s), there’s a certain sniff test that Apple still fails.

Most other companies on the market cap list feature decades of dominance in their respective industries, and a near assurance of their continued success. ExxonMobil has been around in one form or another since the beginning of the last century. Wal-Mart has ruled retail for decades. These are companies that have huge scale advantages; there’s no foreseeable way their dominance will be challenged in the near future.

The road to $300 billion

Meanwhile, Apple’s riding a wave of confidence from a string of blockbuster products. On a relative scale, it’s still a flash in the pan. Investors are concerned not only about whether it can protect its current line-up from competition, but also whether it can keep the hits coming. As Motley Fool co-founder Tom Gardner recently said during a discussion about Apple, “It’s a great company, but I’m not sure how they keep growing. How do they become a $300 billion company?”

With that in mind, what needs to go right for Apple to become the largest technology company in the world?

Simply put, it needs to become the Microsoft of mobile.

In many ways, the mobile race is similar to the PC battle of the ‘80s. In one corner we have Apple, packaging its hardware and software in a limited number of systems. In the other corner, there’s Google (replacing Microsoft), licensing out software to any number of hardware vendors.

Apple could actually learn from Microsoft. It needs to be more than just the best smartphone on the market right now. Microsoft never controlled the operating-system market because it was the best -- it won because it locked users in, and most people essentially had to use its products. Microsoft has released some real clunkers over the years, but it took few hits from them. Likewise, even though Apple’s unparalleled in its commitment to quality-unlike a certain competitor we just discussed -- with a price tag that implies sustainable long-run dominance, Apple needs a margin of safety to ensure that even with a hiccup or two, it will continue to rule the mobile world.

The $300 billion question

So it all boils down to one question: How well can Apple lock users into its ecosystem? As developers continue building apps at rates far in excess of competing platforms and more users synch their digital lives around iTunes, you can see Apple creating a platform that’s sustainable well beyond just the next upgrade. From there, no company possesses a virtuous circle like Apple. Higher iPhone market share begets high-margin sales of apps and media, as well as increased Mac sales. Given the size of the smartphone market, the margins Apple collects from each iPhone, and the boost to other Apple products, you can see a path to $300 billion forming.

But can Apple become the Microsoft of mobile? Already, there have been pushes to make programming for different app stores more interchangeable between platforms. While early attempts seem laughable at best, this is just the first round of a protracted battle. More importantly, how much will app stores really matter in three years? While they’re tremendously important in the current generation of smartphones, future smartphones might be more open, leaving the need for an app store diminished thanks to technology changes or adapting consumer tastes. Apple doesn’t need the market share of Microsoft’s Windows to justify an enormous market cap, but it’s clear that its competitive position will always be more tenuous.

And that’s the bottom line. The more Apple can look like the Microsoft of the mobile world, the more it will be worth. Commanding a market with even half the dominance Microsoft did with operating systems is a once-in-a-generation opportunity, but I’m not so sure the mobile world is built in a way that’ll allow that.

Care to agree or disagree? Have some other thoughts on how Apple can keep growing to $300 billion? Let me know in the comment box below!