Microsoft, IBM tussle for tech value runner-up

IBM appears on the verge of passing Microsoft in market capitalization for the first time in 15 years, as the two duke it out for the number-two tech company slot, behind Apple.

IBM briefly surpassed Microsoft in stock value on Thursday, but as of noon Pacific time on Friday, Redmond was holding onto its number-two slot at $215.07bn, although IBM was close behind at $212.24bn. Apple, of course, rules the roost at $370.15bn, making it one of the most valuable companies in the world – depending on Exxon’s share price - although IBM and Microsoft have both shared Apple's top-tech status, as well.

If IBM can surpass its former bedmate, there will be some schadenfreude-filled celebrations in Armonk at close of business. Without IBM picking Microsoft to supply it with an operating system – or, rather, to buy an operating system from the Seattle Computer Company and slap a logo on it – then Bill Gates might have gone down in history as just another software CEO of modest success. For years it would visibly pain senior IBM management whenever this history was bought up.

That the two companies have become so close in market capitalization is down to a solid run of good performance in IBM’s share price and a more lackluster showing from Redmond. At this time last year, Microsoft’s value was about where it is today, but IBM was languishing at around $170 billion. IBM’s increasing focus on big data is now proving attractive to investors, while Redmond faces a shrinking PC market, reduced sales of its cash-cow applications suites, and a less-than-certain cloud and mobile future.

One could argue that market cap isn’t really that great an indicator of a company’s true value. After all, if a company’s share price falls 10 per cent, very little actually changes – its products and campuses certainly don’t become a tenth less valuable.

But for senior management and investors, stock prices matter a great deal. The former are concerned for their stock options, bonuses, and careers, and the latter fear for their retirement plans.

In the case of Microsoft CEO Steve Ballmer, the increasing rumblings from both staff and investors might make a further fall in his company's value a factor in his career – and possibly his (forced) retirement.