Microsoft's Growth Leaves IBM in Its Shadow

International Business Machines (IBM) once dominated the tech industry like Microsoft does today.

The company was, at one time, worth more than many of its closest competitors combined and was the go-to choice for enterprise or office computers.

In 1980, IBM acquired MS-DOS from a little-known startup called Microsoft as part of a licensing deal that allowed other companies to use the operating system.

This deal led to the creation of personal computer clones that offered cheaper alternatives to IBM's products, ultimately undermining its dominance in the market.

Today, Microsoft is a diversified technology giant with a presence in cloud computing, business software, operating systems, gaming, cybersecurity, and artificial intelligence.

In contrast, IBM has shifted its focus towards hybrid cloud, AI, infrastructure, and consulting services.

When it comes to market cap, Microsoft sits at $3.6 trillion, 16 times bigger than IBM's $222 billion.

However, the valuation of the two companies differs significantly, with Microsoft trading at a 24 P/E ratio compared to IBM's 19.

Despite its lower valuation, IBM has a higher potential upside of 58% if its target price is hit, compared to Microsoft's 44%.

Additionally, IBM offers a nearly 3% dividend yield, making it an attractive option for income investors.