IBM Surges Ahead of Microsoft in Market ValueMicrosoft used to be the most valuable tech company in the U.S. based on market capitalization. Apple (AAPL) took that crown away last year. Now, IBM (IBM) has moved ahead of Microsoft (MSFT), dropping the Redmond, Wash., giant into third place. As of Monday, Microsoft's market value was $203.7 billion and IBM's was $203.8 billion.

Exxon Mobil (XOM) still holds the No. 1 spot among all companies traded on U.S. exchanges, with a market cap of $397 billion. Apple holds the No.2 spot at $309 billion.

Over the last two years, IBM's shares have risen 60%, while Microsoft's have gained just 20%. The five-year trend makes Microsoft look even worse: IBM is up 110% over the period, while Microsoft is essentially flat.

What gave IBM the edge? First, enterprise computing got hot. Oracle (ORCL), one of the leaders in the industry, has posted a 140% gain in share price over the last five years. Most experts think this is because large business-to-business hardware and software companies sell products with ongoing licenses and service fees. From a revenue and earnings standpoint, these contracts are a gift that keeps on giving. The software, hardware and license model also diversifies revenue away from a single business.

IBM's revenue rose nearly 8% in the last quarter to $24.6 billion, and net income was up 10% to $2.9 billion. IBM's global technology service business revenue was up 6%. Business services operation sales rose almost 7%. But the real driver of revenue growth was its systems business -- mostly hardware sales -- which were up 18%. Tight cost control kept margins across all of its businesses high.

Microsoft's business model has become less attractive to many investors. Some, for example, can't figure out why Microsoft is in the online content portal business -- which includes its MSN property. The operation appears to have little relationship to its core operating system business, and it losses money. The same holds true for its device division, which gets most of its sales from the Xbox, another product that seems to disconnected from Microsoft's core Windows business. And, there is Bing, Microsoft's search engine, which runs well behind Google in terms of market share.

Meanwhile, Windows in under siege. Most Windows products are either PC- or server-based: They use the processing power of local hardware to make the software function. But much of the computing world has moved to cloud computing, where the processing is done by remote servers. Microsoft's core businesses are also driven by PC sales, which have been hurt by the success of smartphones and tablets. Those portable devices are most often running Apple's iOS or Google's (GOOG) Android OS, while Microsoft's mobile efforts have been stalled.

When it comes down to it, Wall Street has rejected the Microsoft business model and embraced enterprise computing as more promising.


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rdins4

IBM is really a great company. Years ago everyone thought they were a goner. They have revamped the mainframe into that a server that is most secure in the world, they have built the largest outsourcing business in the world, and are now one of the great tech companies of our generation. I'm looking to buy their stock but probably not until mid summer.

June 05 2011 at 11:27 AM Report abuse rate up rate down Reply
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May 28 2011 at 4:00 AM Report abuse rate up rate down Reply
theradjad

Yeah... Go BIG BLUE!!! No matter how you look at it, IBM has always been BIG (and well earned and deserved); if and when they fall behind, it's only temporary... they'll be back, as always, and You Can Bank On That!

May 24 2011 at 9:22 PM Report abuse rate up rate down Reply
wstepp2250

Speaking of Technology and how Companies are on the Verge of (Loosing Lots of Money), it is the very Company that is distributing this report to their members while we're reading. The practice of Privacy Invasion by going into the Members E-Mail accounts and overlaying a veneer that states "BE YOURSELF AND USE YOUR NAME WHEN SENDING E- MAILS without realizing when invading the Account and they read the E-Mails they didn't understand the content, then the person formed an Opinion that each Internet address was used on one Computer because of the Account being under one name. When other Family members have a total of 5 Computers 3 Laptops and 2 Desk tops that are being used with the same Wireless unit that can control 8 devices at one time. Hello Companies and Private Parties be Careful AOL AOL AOL because they are the only one that controls the member knowledge and can input additions in the E-Mail Program setup. AOL is allowing or instructing their employees to place the Master Account holders Name in front of the E-Mails. Yhis is Illegal and an Invasion of the Privacy Laws. This happened when I discovered AOL was Forcing Members to use Facebook to respond to articles on their front Page. Revenge but stepping over the line. Be Careful people.

May 24 2011 at 6:31 PM Report abuse rate up rate down Reply
topmind

It would seem to me that IBM well deserves the crown: their software is affordable and does not crash, freeze, maim computers as some other companies' expertly do. Mickeysoft stuff fell off my computers and, trying to replace it, they insisted that I buy new one, being unable to give them their defective, crashed, disappered software's serial number. As I heard one day. "The wheels of the gods grind slowly, but they they do grind extremely fine". It seems to me that MSFT is on the way back down to oblivion for the next decade or so. One could make hay out of this by shorting MSFT.

May 24 2011 at 12:26 PM Report abuse +1 rate up rate down Reply
pemphantom

MSFT is toast!! The stock hasnt moved since it split @ $50 ten years ago. Ballmer is the architect of this meltdown and Gates doesnt have the spine to fire him! Bye bye Mr. Gates

May 24 2011 at 11:30 AM Report abuse +1 rate up rate down Reply
bill

IBM may be doing well today but I give it only 2 to 3 years before their lead shrinks and bounces them out of the running. Their innovation is faltering and will be left in the dust once their operations see end of life in the US. In 2 years the Asians will take the lead because IBM was shortsighted thinking services would be all they need to compete. The mainframe business and computers in general have a long way to go before the breakthrough in computing power runs out of steam. Its way to early to leave the game now and that's why Palmisano and his pals are not very bright. The best ideas and groundbreaking discoveries were made here in the US.......that's what made IBM. Now the hots shots at the top making millions have decided they can get the ideas cheaper elsewhere. That's one reason they won't give a US headcount anymore and why they will ultimately lose in the end.

May 24 2011 at 11:14 AM Report abuse rate up rate down Reply
1 reply to bill's comment
chris1011

"Its way to early to leave the game"
Why didn't you write it's way ~two~ early to leave the game. You would have been just as wrong.
How about using good spelling as in ~too early~? Too hard?

May 24 2011 at 4:07 PM Report abuse rate up rate down Reply
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