The latest news from IBM (NYSE: IBM):

Look at who is No. 2 behind Apple (Nasdaq: AAPL) as the world’s largest technology company?

It’s not Microsoft. (Nasdaq: MSFT).

Rather, on Thursday, IBM rallied past the software giant in market value to $214, Bloomberg news reports. Microsoft slipped to $213.2 billion.

This is the first time IBM has topped Microsoft since 1996, Bloomberg says. And an analyst told Bloomberg that one reason for IBM’s growth was its decision to move beyond reliance on hardware – like PCs. In 2005, IBM sold off its Raleigh-based PC division to Lenovo.

The move has paid off for both firms. Lenovo used the IBM PC base to grow to become the world’s No. 3 PC maker in a business in which Big Blue had struggled. Meanwhile, IBM focused more on software and services.

IBM as No. 2 is “a reflection of industry changes including the shift away from the personal computer,” Bloomberg wrote.

So how has IBM, which employs some 10,000 people in North Carolina, managed to surpass Microsoft?

“Chief Executive Officer Sam Palmisano sold IBM’s PC business six years ago to focus on corporate software and services,” Bloomberg says. “Though Microsoft has expanded into online advertising and games, it gets most of its revenue and earnings from the Windows and Office software used primarily on PCs.”

Ted Schadler, an analyst with Forrester Research, said Big Blue anticipated big changes.

“IBM went beyond technology,” he explained. “They were early to recognize that computing was moving way beyond these boxes on our desks.”

Read more details here.

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