Is IBM Serious?

By Tim Beyers
November 11, 2008 | Comments (8)

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Does Apple (Nasdaq: AAPL) compete with IBM (NYSE: IBM)? Big Blue thinks so.

"Electronic devices large and small are powered by the same type of intelligence, the microprocessor," IBM argued last week in a lawsuit designed to prevent former employee Mark Papermaster from joining the iEmpire as its new lead engineer for the iPod and iPhone product lines.

Papermaster had been on IBM's payroll for 25 years. His departure was conditioned upon not joining a competitor for at least one year. Apple qualifies, according to Big Blue's lawyers. And, apparently, to the judge who ordered Papermaster to cease work till further notice. But are these two really rivals?

Not unless you buy IBM's argument that it competes with, well, everyone in the business of producing electronic devices. I think we'd be better served by dealing in specifics. Apple battles Research In Motion (Nasdaq: RIMM) in mobile, Microsoft (Nasdaq: MSFT) in operating systems, and Amazon.com (Nasdaq: AMZN) in digital entertainment. IBM, by contrast, is fighting a three-front war versus Dell (Nasdaq: DELL) in servers, Oracle (Nasdaq: ORCL) in infrastructure software, and Infosys in professional services. So in my opinion, either:

  1. IBM plans to introduce an alternative to the iPod or iPhone, or
  2. Big Blue doesn't want to set a bad precedent.

By "bad precedent" I'm referring to Papermaster's agreement. Non-compete arrangements are essential in industries such as the high-tech field, where innovation rules the day. So while Papermaster's lawyers said that Apple offered him an "once-in-a-lifetime 'dream job,’" IBM has every right to defend its intellectual property -- even if it has to make a silly claim to do so.

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Fool contributor Tim Beyers had stock and options positions in Apple and stock positions in IBM and Oracle at the time of publication. The Motley Fool's disclosure policy just is.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 11, 2008, at 4:27 PM, jlwegma wrote:

    Don't concentrate on the product - concentrate on the components. Who supplies the chips for the top 3 gaming systems - Wii, PS3 and XBox - IBM. http://www-03.ibm.com/technology/?cm_re=masthead-_-products-...

  • Report this Comment On November 11, 2008, at 5:38 PM, jmullina wrote:

    wow- not a very good article. @jlwegma's comment is on the mark. But beyond that, even the list of key competitors is incomplete (e.g, IBM competes with Microsoft, and now Google competes with Apple given the G1/Android). And of course, the competition goes way back to the 1970's between Apple and IBM. It has evolved dramatically along the way, but IBM and Apple still have competing philosophies about computing -- IBM being very pro-open source (except on the mainframe, where it has it's own monopoly of sorts, of course) and Apple being the most closed source computing company out there (remember, they didn't even want to release an iPhone sdk).

  • Report this Comment On November 11, 2008, at 6:30 PM, justputt2 wrote:

    The author has a bad case of myopia, in regards to the breadth of both Apples's and IBM's vision of their marketplaces and product applications. This market has not been specific short lived products since the introduction of the PC in the early '80s. BUT certain keystone architectures such as Intel's i86 and IBM's Power lines have become mother lodes of long term revenue. That is what Apple was after when it went after Papermaster's talents. Jobs is no fool, he needs to bring inhouse a Premier Architecture to maintain long term high profitability.

  • Report this Comment On November 11, 2008, at 7:10 PM, PrimeTimeKlein wrote:

    I doubt this suit gets to trial. Non-compete agreements are usually not looked on favorably by courts. If the non-compete is reasonable in terms of scope (geographic limitation and time period), it may be upheld. One year is a pretty long time frame to keep someone out of the workplace, especially in tech. Seems to me if IBM could prevent Papermaster from going to work for Apple by using such a broad non-compete, they may be able to block him from working for almost any tech company, essentially cutting off his livelihood for a year. Our society places great value on personal liberty, I think Papermaster wins this.

  • Report this Comment On November 11, 2008, at 8:21 PM, ErryHe wrote:

    Embarrassing article for the Fool - your stuff is usually much better than this.

    Did you take a shot on a freelancer without editor review before posting this incomplete, and self-righteous (read self embarrasing) silliness?

    Great - now I'm feeling stupid for even reading that article!

  • Report this Comment On November 11, 2008, at 9:09 PM, krr711 wrote:

    I have said this before. Instead of getting young writers eager to make a name by using generic scenarios and comparisons, Motley, please, please get back to information about which stocks will pop, when and why! What else really matters in the business world? You wasted your money paying this word processor junky, Tim Beyers, to draft this article with info that was available on other news sites.

  • Report this Comment On November 12, 2008, at 1:43 AM, CatFoodMoney wrote:

    what was wrong with the article ? maybe i'm some kind of idiot, but i enjoyed reading it. what's up with all the hate ? if you didn't like the article, maybe you should cry quietly to yourself instead of being ugly and condescending in public.

    as far as this papermaster guy goes, if he had an agreement not to compete then he shouldn't work for one of ibm's competitors. if i was in charge of ibm, i would take him to court too. ibm and apple both do computer related technology stuff, right ? let papermaster deliver pizza for a year, it won't kill him.

  • Report this Comment On November 12, 2008, at 5:18 AM, BOTCHAGALUPE wrote:

    "Not unless you buy IBM's argument that it competes with, well, everyone in the business of producing electronic devices."

    I'm guessing you have never signed an IBM contract.

    John

    johnmwillis.com/papermaster

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