Microsoft rose to prominence in the early 1980s, largely based on a deal to brings its operating system to IBM computers. Microsoft later became the largest software maker in the world. And IBM? It missed one of biggest shifts in tech. But things change. And now, in an amazing twist, IBM has surpassed Microsoft in market value.

As of close of trading last Friday, IBM showed a market value of $207 billion. Microsoft, meanwhile, came in at $206 billion.

Barron’s noted:

At one point during the PC era, Microsoft’s value climbed three times higher than IBM’s. Apparently, this has been a long two decades in Armonk, N.Y., but Microsoft also is no longer the beast it once was. The guard is changing.

As the graphic below shows, Microsoft’s stock has slumped in the past 10 years as the software giant failed to keep up in new shifts in computing, primarily Internet technologies and mobile. IBM, on the other hand, has risen 45 percent during that same period.

With IBM’s market value at $207 billion, it is now considered the second largest technology company in the world behind Apple. (Market value of $308 billion).

Interestingly, Apple is now approaching the combined value of Microsoft and Intel which stands at $329 billion.

It is worth noting that Microsoft is still far more profitable than IBM. For its 2010 fiscal year, Microsoft posted profits of $18.7 billion on revenue of $62 billion. That compared to IBM’s profits of $14.8 billion on revenue of $99 billion.

Comments

  • http://www.joshuamaher.com Joshua Maher

    Considering we all thought IBM was dead twenty years ago, it will be interesting to see how Microsoft evolves… Btw, NOK & MSFT combined are around 239b 

  • http://www.joshuamaher.com Joshua Maher

    Considering we all thought IBM was dead twenty years ago, it will be interesting to see how Microsoft evolves… Btw, NOK & MSFT combined are around 239b 

    • Guest

      “Btw, NOK & MSFT combined are around 239b”
       
      Why is that relevant?

  • Guest

    Congratulations to IBM on becoming the biggest and therefore best company in tech!

  • Bob

    It’s not really an amazing twist. MS’s stock has been in decline for a decade. Neither Steve, nor the board, have shown much interest in changing that. And of course endless failures, including most recently in mobile and tablets, have been condoned.

    It was inevitable that others would pass MS under that scenario. Apple and IBM are just the first two. Oracle and Google will probably follow.

  • Brent

    “It is worth noting that Microsoft is still far more profitable than IBM. For its 2010 fiscal year, Microsoft posted profits of $18.7 billion on revenue of $62 billion. That compared to IBM’s profits of $14.8 billion on revenue of $99 billion.”

    Which tells you that the market has a lot more confidence in IBM’s leadership, overall business model, and ability to continue generating those profits than it does MS’s.

    The market isn’t always right. But after a decade of seeing MS’s stock and relevance decline along with its growth rate, some tougher questions need to be asked about whether the right leadership and stratregy are in place. If not by the board, then at least by shareholders.

  • Randy

    MS is now trading at a *30%* discount to the S&P average. So this result isn’t too surprising.
    And Apple should actually be closer to $400B based on fundamentals. It’s currently at the same forward PE as IBM!

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