It's not been a good year for Microsoft when it comes to their overall standing in the technology business space. A couple of months ago Apple overtook the company as the number 1 international technology company in terms of value because of the frankly amazing work done by Steve Jobs and his team over the last decade in capturing technology markets and calling them their own. Now the less surprising has happened in that IBM has overtaken Microsoft in value to force the Redmond giant down to the number 3 slot.
Bloomberg have reported that IBM's value yesterday reached $214 billion while Microsoft's fell slightly to $213.2 billion. IBM has been steadily gaining on Microsoft in the last year by adding 22% to its overall value, while Microsoft's value has seen a drop of 8.8% in the same period.
This isn't at all surprising given the drive towards the cloud now for all technology companies and the servers required to get their presences there being supplied predominantly by only a few major firms, of which IBM has always been a leader. We could probably see Fujitsu, HP and others significantly climb in value too in the next couple of years, again off the back of the move to the cloud.
Microsoft's business focuses predominantly on Windows, Windows Server and Office with other aspects of the company's products, namely their Bing search engine and their Xbox gaming division being propped up by revenue from the company's traditionally strong products. With very few exceptions Microsoft have never made hardware and certainly haven't got into the server market.
This is the first time that IBM has topped Microsoft in value since 1996 and is now the fourth-largest company in the world by market value. IBM sold their own PC division to a Chinese company in 2005 and HP also now look set to sell their own PC division to concentrate on the prospering server market. IBM could clearly see which way the wind was blowing. While the rest of the world believed that processing was coming down from servers onto the desktop, they stuck to their ground and were soon proved correct that processing would continue to be done on servers and, indeed this market would grow significantly. In an interview with Bloomberg, Ted Schadler, an analyst with Forrester Research siad “They were early to recognize that computing was moving way beyond these boxes on our desks.”
Microsoft are still the world's largest software company but in 2000 were worth three times the value of IBM. This shows just how much IBM's business has grown in that time, and the company has announced plans to grow their business even further by 2015. Back in the summer of 2000, Microsoft was valued at $430 billion but dropped to $135 billion in 2009 at the height of the economic downturn.
Microsoft will continue to be a dominant player in the market but the rise of alternative operating systems from Google and Apple have proven that it's no longer all about the operating system you run, as I point out in an article today on our sister site Windows8News. This move then does not mean that Microsoft won't still be a technology giant ten years from now. They may still see this dominant place slip however and could be number five by the end of next year.
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