Apple climbs atop tech world (News Feature)

By Andy Goldberg May 27, 2010, 1:26 GMT

San Francisco - It took more than 30 years, but Apple, after losing out to Microsoft at the dawn of the personal computer age, has finally scored the sweetest revenge on the obstreperous software giant from Seattle.

Powered by investor and customer enthusiasm for its range of iPods, iPhones, iPads and Macintoshes, Apple on Wednesday overtook Microsoft as the world's most valuable technology company, thanks to the persistent run-up in Apple shares and the dwindling value of Microsoft stock.

Apple's total market capitalization was 227.1 billion dollars in Nasdaq trading early Wednesday afternoon, after its shares rose 1.53 per cent on the day. Microsoft's shares, meanwhile, fell 1.69 per cent to give the company a market capitalization of 225.58 billion dollars.

The divergence in the companies' fortunes is even more remarkable when compared to where the companies were just a decade ago. In 2000, Steve Ballmer had just taken over Microsoft from founder Bill Gates, while Apple founder Steve Jobs had just returned two years earlier to rescue the floundering company he had founded.

At the time, Microsoft was valued at a staggering 556 billion dollars, while Apple was worth just 16 billion dollars.

Since then, Apple has gained some 211 billion dollars in value, while Microsoft has lost about 325 billion dollars in market valuation.

Even the most rabid of Apple fanboys could not have predicted such an outcome when, in one of his first public strategy speeches, Jobs identified the development of digital lifestyle products as the company's key activity. He announced that Apple was taking a 150- million-dollar investment from its old enemy Microsoft in what was widely seen as a sign of the desperate measures needed to keep the company afloat, if not total capitulation.

Microsoft, meanwhile, appeared to have an unassailable position at the top of the tech world. Not only did its Windows operating system run more than 90 per cent of the world's computers, the Internet Explorer browser held similar sway over people's access to the internet, and its Office productivity software was the standard tool of the business world.

Starting with the all-in-one iMac computer of 1998, Apple began its long march back to the top. However, the company's real salvation came not from computers but - as Jobs foretold - from a revolutionary new device that was introduced in 2001.

The iPod took advantage of consumers' ability to download music from the web, offering an easy and intuitive way to manage song libraries on a portable machine. It was followed by the launch of the iTunes online store, which soon became the top music seller in the world.

The combination was the perfect execution of Jobs' vision of tight Apple control over both software and hardware. The iPod sold more than 100 million units within six years, making it one of the most successful products in history, while it took only five years for iTunes to sell 5 billion songs.

Jobs was just getting started. In 2007, he introduced the iPhone, which shattered the established order of the cellphone industry and has now sold more than 50 million units worldwide.

The iPhone reflected Jobs' belief that the internet would gradually morph from being a desktop function to a mobile convenience - a trend that has sapped the power of Microsoft, which remains tightly committed to the desktop computers on which its fortune was founded.

The success of the recently introduced iPad bodes well for Apple's attempts to encroach on Microsoft's traditional strongholds. Microsoft faces further challenges to its desktop dominance from Google, whose Android operating system is proving popular among computer makers for the iPad rivals that will surely cut into sales of laptops and desktops powered by Windows.

The switch in fortunes was widely hailed by Silicon Valley's tech pundits, who viewed it as proof of the region's relentless culture of innovation.

'It is the single most important turnaround that I have seen in Silicon Valley,' veteran venture capitalist Jim Breyer told The New York Times.

On the tech site Cnet, one reader observed: 'Microsoft is now the IBM of the '80s and '90s: still needed in the corporate world, but viewed as the aging dinosaur with no 'cool' factor.'