San Francisco: Wall Street has called the end of an era and the beginning of the next one: The most important technology product no longer sits on your desk, but rather fits in your hand.

The moment came on Wednesday when Apple Inc., the maker of iPods, iPhones and iPads, shot past Microsoft Corp., the computer software giant, to become the world’s most valuable technology firm.

This changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and its co-founder and visionary chief executive, Steven P. Jobs. The rapidly rising value attached to Apple by investors also heralds an important cultural shift: Consumer tastes have overtaken the needs of business as the leading force shaping technology.

Microsoft, with its Windows and Office software franchises, has dominated the relationship most people had with their computers for almost two decades, and that was reflected in its stock market capitalization. But the click-clack of the keyboard has ceded ground to the swipe of a finger across a smartphone’s touch screen.

And Apple is in the right place at the right time. Although it still sells computers, twice as much revenue is coming from hand-held devices and music. Overall, the technology industry sold around 172 million smartphones last year, compared with 306 million personal computers, but smartphone sales grew at a pace five times faster.

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Stunning turnaround: Apple CEO Steve Jobs at the launch of the iPad. Daniel Acker/Bloomberg

As of Wednesday, Wall Street valued Apple at $222.12 billion (Rs10.6 trillion) and Microsoft at $219.18 billion. The only American firm valued higher is Exxon Mobil Corp., with a market cap of $278.64 billion. On Thursday, at 8pm India time, Wall Street valued Apple at $228,380.90 million and Microsoft $228,911.50 million.

The revenue of the two firms are comparable, with Microsoft at $58.4 billion and Apple at $42.9 billion. Microsoft is sitting on more cash and short-term investments, $39.7 billion, to Apple’s $23.1 billion, which makes the value assigned by the market to Apple—essentially a bet on its future prospects—all the more remarkable.

Microsoft and Apple declined to comment.

Apple’s climb to the top of the heap cements the reputation of Jobs, who once operated in the shadow of Microsoft’s co-founder, Bill Gates.

“It is the single most important turnaround that I have seen in Silicon Valley," said Jim Breyer, a venture capitalist who has invested in some of the most successful tech firms.

While Apple is at the top of its game, it faces a new and powerful rival in Google Inc., which is battling the company in mobile devices with its Android operating system, and mobile advertising.

Google, with a market cap of $151.43 billion, also appeared to leap ahead of Apple in a new potentially important area, Internet-connected televisions. And Google is steering consumers towards a yet new model of computing in which Internet applications, rather than iPhone or desktop applications, rule.

“The battle has shifted from Microsoft against Apple to Apple against Google," said Tim Bajarin, a technology analyst who has been following Apple since 1981. “Apple has a significant lead. But Google is going to be a powerful competitor."

Apple and Microsoft initiated the personal computing revolution in the late 1970s, but Microsoft quickly outflanked Apple and grew to be one of the most profitable businesses ever created.

A little more than a decade ago, Apple, which had pushed out Jobs in 1985, was widely believed to be on the path to extinction.

Michael S. Dell, founder and CEO of Dell Inc., went so far as to suggest that Apple should shut down and return any money to shareholders. (The computer maker is now worth around one-10th of Apple.) Around the same time, Microsoft’s chief technology officer called Apple “already dead".

But with the return of Jobs to Apple in 1996—and an investment by Microsoft of $150 million—the firm began a slow path to recovery. Apple’s rebirth began in earnest with the introduction of the iPod music players, and Jobs began to gain a reputation for anticipating what consumers want. It elbowed aside Sony Corp. and came to dominate the music distribution business with the iTunes online music store.

Apple later upstaged Nokia Corp., the dominant brand in mobile phones, by introducing the iPhone in 2007. And this year, Jobs shook things up again with the introduction of the iPad, a tablet computer that has the potential to create a new category of computers and once again reshape the way people interact with their devices.

Jobs helped create “the best desktop computer, the best portable music device, the best smartphone and also now the best tablet", said Steve Perlman, a serial entrepreneur who was an executive at both Apple and Microsoft and is now CEO of OnLive Inc., an online gaming company.

As Apple grew increasingly nimble and innovative, Microsoft has struggled to build desirable updates to its main products and to create large new businesses in areas such as game consoles, music players, phones and Internet search.

Microsoft, which is a component stock of the Dow Jones Industrial Average, has lost half its value since 2000.

Still, Microsoft is a hugely powerful and profitable company in the tech world. Its Windows software runs nine out of every 10 computers, while at least 500 million people use its Office software to perform their daily tasks, such as writing letters or sending email messages. These two franchises account for the bulk of Microsoft’s annual revenue.

But it is Apple that has the momentum. “Steve saw way early on, and way before Microsoft, that hardware and software needed to be married into something that did not require effort from the user," said Scott G. McNealy, co-founder and long-time CEO of Sun Microsystems Inc., which almost merged with Apple. “Apple’s products are shrink-wrapped and ready to go."