Both shares took a significant tumble late in the afternoon as the market gave up its gains and then some in the final hour of trading. Even so, Apple still finished in front at $222.1 billion, far ahead of Redmond at $219.2 billion.

How important is this? On the entire New York Stock Exchange there is only one American company that is more value, and that is oil giant Exxon Mobil. It also completes what could really be called a stunning comeback for Apple, which as recently as teh years ago had been in bad financial shape.

One ironic point: Microsoft itself could be credited with helping bring back Apple from the dead: in 1997, the company made a $150 million investment in the company shortly after Steve Jobs returned for his second and current stint as CEO.

Investors in Microsoft cannot be happy with what they’re seeing here. Since 2005, Microsoft’s stock has been essentially flat, posting a meager four percent increase. Compare this with Apple, whose stock has risen a staggering 550 percent in that same time period.

That to me is just crazy.

(Disclosure: Ed Oswald has small holdings of stock in both Microsoft and Apple, Inc.)

The stock is now down to about $53, a stunning 65 percent fall from its June high of $148. It’s precipitous drop has stirred talk on the Street of a possible buyout, with one analyst saying Microsoft could be that company.

“RIM is a massive strategic fit” for Microsoft, Canaccord Adams analyst Peter Misek told Reuters. “I’m fairly certain they have a standing offer to buy them at $50 (a share).”

If Microsoft were able to make this happen, it would be a huge win for them. Windows Mobile (while doing okay) really hasn’t made much of a real dent in the smart phone market. By snagging RIM, Redmond would gain a good deal of footing against Apple and Symbian, as well as new entrant Google.

There is some thing that still need to happen, namely at least another $10 or so drop in RIM’s stock price if this were to happen. RIM right now has a value of about $31 billion or so, a little to much for Microsoft to handle without tapping the credit markets.

With credit all but frozen right now, that’s not going to happen. However, if it is able to make a $50 per share offer, the value of the company would be placed at about $28 billion, much more affordable.

Reuters estimates that Microsoft has about $24 billion or so in cash and short-term investments that could be used to finance most of the deal. I guess the question then becomes, is it worth it depleting your cash reserves in an economic climate such as this?

I’d think you’d be able to find a lot of analysts who would argue that wouldn’t be such a smart idea.

In fact, some are seeing years of progress wiped out as investors head for the hills. Among the top five tech stocks (in terms of market capitalization), all are down significantly, with most trading quite close to 52-week lows and in some cases multi-year lows.

Microsoft, the largest technology company, has seen its stock fall nearly 21 percent year-over-year as of Tuesday. This is especially frustrating for the company’s shareholders considering the stock saw an impressive run towards the end of 2007 where the stock peaked at $37.50 a share in early November. Since then, the stock has taken a precipitous decline, losing a third of its value and falling back to the levels it has been stuck near for much of the decade.

#2 IBM is also down 18.5 percent, and so is #5 Hewlett Packard, which has fallen nearly 23 percent during the pas year. The biggest drops among the tech heavyweights are Cisco and Google, both falling by more than a third.

Cisco, third in market cap, has seen its stock fall more than 40 percent. The stock is now at its lowest point since August 2006, and the stock hit its 52-week low on Tuesday. Fourth place Google has not fared much better, down 42 percent and hitting a also hitting 52-week lows.

As we move onto notable companies outside the top five, the news isn’t any better. Apple has gotten mauled as investors worry about slowing consumer spending, it’s down about 45 percent and at a 18-month low. Yahoo has taken a beating as uncertainty over its future is just not something that is a good thing in this market — down 47 percent there, and at a five-year low.

Other poor performers include SAP, down 33 percent; Research in Motion and Dell, both down about 47%; and eBay, down 54 percent. All in all, this market’s brutal to say the least.

There is some solace. Tech stocks for the most part should not see as steep declines as their traditional market brethren due to less exposure to the credit crisis than most. While yes, it would affect those companies with less-than-sanguine financials, most should make it through with modest losses.

However, in a recessionary environment, there is downward pressure on just about all stocks. With so much of the industry having exposure to the consumer, as they spend less and less revenues will decrease, and thus will cause the stock prices to decline.

Like with any bear market, the best thing to do is have a long-term strategy. If you’re looking for a quick buck, this isn’t the market for you, and probably won’t be for months if not years. Even so, in what many analysts see as an “oversold” market, there are some bargains out there.