MANILA, Philippines – For the first time since it shifted gears in the 90s, technology giant IBM Corp. has surpassed software juggernaut Microsoft in terms of market value to become the second most valuable technology firm in the world, signifying a pay-off in the former’s gamble to focus on the services market.
According to a report by the Wall Street Journal over the weekend, Big Blue’s market capitalization soared to $214 billion last week, surpassing Microsoft’s, which slipped to $213.2 billion.
In the past year, IBM’s share prices jumped by 34 percent, while Microsoft’s slowed to a low 3.9 percent, the report noted.
“IBM Chief Executive Samuel J. Palmisano made tough decisions to dump cherished businesses like IBM’s PC division and bulk up in technology services, business software and premium hardware—complex lines of business that are hard for competitors to replicate and carry high profit margins,” it said.
Its strong focus on software (contributing as much as 44 percent to the company’s pre-tax operating profits in 2010) as well as services steered the company to growth, a reality which analysts believe is being copied by one of IBM’s chief competitors, Hewlett-Packard, as then CEO Leo Apotheker decided to spin-off its consumer PC business and focus on enterprise services instead.
Microsoft, on the other hand, had struggled to keep up with sectors where other industry players have succeeded, such as in online search, mobile and tablet computers. While IBM had not dabbled in these areas just yet, its strong focus on its core strengths had enabled it to soar higher, the report noted.
“The company has a long string of profitable quarters and has managed to get its revenue growing again. Since it is so large and complex, IBM has historically struggled to fire on all cylinders. But, recently the company’s older businesses and major growth areas such as emerging markets and business analytics have each done well,” the report added.
In fact, in the Southeast Asian and Asia Pacific regions, IBM had recently recorded great strides in the IT Services and Application Management Services sector, according to research firm IDC. IDC said that IBM continued to hold a significant lead in Consolidated AMS revenue, offering market-leading integrated or discrete service options to help clients address efficiency, cost, and portfolio modernization options.
“More clients in ASEAN including the Philippines are looking to services providers to leverage technology to stimulate growth and compete in a global market. Forward looking companies are acknowledging the paradigm shift–wherein the ‘cheapest’ is not necessarily the best when it comes to technology services, ” said Rodney Regalado, country executive for global technology services, IBM Philippines, in a press statement.
According to the IDC report, IBM’s 2010 ASEAN services revenue was 31 percent more than the next closest competitor. IBM was also the market share leader in outsourcing and application management.