LinkedIn’s explosive IPO has been the talk of the tech world this week, but another stock market milestone quietly occurred: As of the end of trading today, IBM surpassed Microsoft in market capitalization — the total equity value of a company, as calculated by multiplying the price of an individual stock by the number of shares outstanding — for the first time in about 15 years.* This puts IBM and MSFT at #2 and #3, respectively, behind Apple, the market cap of which is a whopping one-and-a-half times either of the two.
Stock market prices fluctuate, of course, and Microsoft could well retake the #2 slot. But temporary or not, this reversal of fortunes is significant in that in the ’90s, when Microsoft experienced its meteoric rise, many observers said that it had bested IBM for good. Meanwhile, while someone who invested in Microsoft at the beginning of the ’90s would likely be happy with their 4000% return (versus a 625% return for IBM), if one got in on Microsoft at the beginning of the 2000s, they would be disappointed: Microsoft stock has fallen 58% since then, whereas IBM has increased in value 57%.
Steve Ballmer took over as CEO of Microsoft on January 13, 2000, and his detractors see the company’s less-than-stellar stock market performance since as reflective of his less-than-stellar performance as CEO, though the heavy federal oversight of Microsoft following its antitrust lawsuit with the DoJ no doubt played a role as well.
(SAI via Daring Fireball)
(*: The stock market value of a company is not the same thing as the company’s total value, since it represents only its equity; Enterprise value, which takes into account debt, cash, and other factors, is often seen as a more comprehensive metric. By this measure, IBM still trounces Microsoft, with an enterprise value of $224 billion versus MSFT’s $173 billion.)
