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NEW YORK, May 23 (Reuters) – International Business Machines (NYSE:IBM) surged past old rival Microsoft Corp (NASDAQ:MSFT) in market value for the first time since April 1996, marking the latest twist in the fluctuating fortunes of two of the world’s most storied technology companies.

IBM ruled the computer industry for decades until it hired the tiny, unknown Microsoft to provide an operating system for its new range of personal computers in the early 1980s.

Bill Gates parlayed that breakthrough into industry dominance, proving his theory that software would be more valuable than hardware, so that by the end of 1999 Microsoft’s market value was three times that of IBM’s.

Throughout Seattle-based Microsoft’s rise, IBM was pilloried as an old-fashioned, immobile Goliath that could not keep up with the computing revolution.

Since the Internet technology bubble burst in 2000, the tables have been reversed, and Microsoft’s stock has been stagnant, as investors doubt its ability to move beyond its Windows operating system and Office suite of software, while younger rivals such as Google Inc (NASDAQ:GOOG) and Facebook steal the limelight.

In the meantime, "Big Blue" has refashioned itself as a specialist in business software, servers and consulting, jettisoning its PC business along the way.

An investor putting $100,000 into both stocks 10 years ago would now have about $143,000 in IBM stock and about $69,000 in Microsoft stock.

Resurgent Apple Inc (NASDAQ:AAPL) moved past Microsoft in terms of market value last year, and is now by far the world’s biggest tech company.

According to Reuters data, Apple’s market value stood at $308.3 billion on Monday, IBM at $203.5 billion and Microsoft at $201.1 billion.

IBM shares were down 1.2 percent at $168.07 while Microsoft fell 1.3 percent at $24.18.

(Reporting by Rodrigo Campos, David Gaffen and Bill Rigby; Editing by Phil Berlowitz)