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Apple, Inc.'s Deal With IBM Is a Game Changer

Oh, how things can change over the course of three decades. After co-founding Apple (NASDAQ: AAPL  ) , Steve Jobs made no attempts to hide his disdain for IBM (NYSE: IBM  )

Since then, Apple came back from the dead to become the most powerful -- and most valuable -- consumer electronics company on the planet, while Big Blue sold off its PC operations to Lenovo, and shifted its attention away from the consumer market toward enterprise and big data analytics. The two companies no longer directly compete as they did in Jobs' days, and have just announced a major partnership that leverages their complementary strengths.

Make no mistake... this deal is a game changer.

Tim Cook feels differently about IBM. Source: IBM.

A look at the partnership
The new partnership will encompass various aspects. IBM will help develop more than 100 industry-specific native apps for enterprise deployment, and optimize its cloud services for iOS devices. That includes industries such as retail, health care, banking, travel, and telecommunications, among others. Apple will also introduce a new service tier for AppleCare specifically for the enterprise.

Most notably, IBM will sell iPhones and iPads along with its industry-specific offerings to its wide range of enterprise clients all over the world. IBM has tens of thousands of enterprise clients that it will now be pitching iDevices to.

Source: IBM.

In an interview with CNBC, both Tim Cook and IBM CEO Ginni Rometty elaborated on the deal's potential. Rometty said that the partnership will drive growth for both companies, and that Apple and IBM have long discussed remaking businesses and reimagining the enterprise for a mobile world. Meanwhile, IBM can help address what she considers the No. 1 inhibitor to widespread adoption: security.

On the last conference call, Tim Cook noted that 91% of enterprise tablet activations are iPads. Cook was also optimistic about Microsoft's decision to bring Office for iPad, because that also strengthens the iPad's productivity capabilities. Still, Cook notes that overall mobile penetration within the enterprise remains relatively low, which indicates that Apple still has a huge opportunity here.

iOS 8 in the enterprise. Source: Apple.

Apple never used to target the enterprise directly, in part because the user (the employee) and the person making the purchasing decision (IT managers) were not the same. Apple has always preferred to directly target the user, which is why it typically goes after the mainstream consumer market.

The BYOD movement helped change that in a big way and, all of a sudden, the enterprise market has become an important opportunity for the Mac maker. Apple has been adding enterprise features to iOS since 2008, a trend that will continue with iOS 8. But Apple's strategy with software releases is major version updates each year with a handful of new features.

Partnering with an enterprise behemoth like IBM will dramatically jump-start Apple's enterprise feature roadmap, and accelerate enterprise adoption. Nice score, Apple.

Does the iWatch have enterprise potential?
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (3) | Recommend This Article (13)

Comments from our Foolish Readers

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  • Report this Comment On July 16, 2014, at 9:18 PM, Hobbes wrote:

    Hmm...remind us again what happened the last time Apple and IBM collaborated.

    Hint: you probably have no idea what Taligent and Kaleida were.

  • Report this Comment On July 16, 2014, at 9:54 PM, marv08 wrote:

    @Hobbes: True, but the Apple-IBM-Motorola work on the PowerPC did actually go quite well for many years (1991-2005), and for quite some time they really put some pressure on Intel. IBM and partnering on OS developments (OS/2, cough) is a hopeless story though... A company that can't even put captions an average human being can understand in a mail client maybe shouldn't...

    Anyhow, giving Apple an international enterprise-class support and consulting network (something they definitely don't have) and a mobile window to IBMs great applications (Maximo, Tivoli, Content Manager, Websphere etc.) is big, it is actually enormous.

    IBM's support is up for a big duh moment the first time to get any spare parts form Apple same year though. Apple understands SLAs with suppliers very well, supplying partners, resellers and integrators with anything... Not so much.

  • Report this Comment On July 17, 2014, at 2:11 PM, summersnowflake wrote:

    Different era, different market dynamics. This partnership is a win-win

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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