BlackBerry (NASDAQ: BBRY ) and MobileIron (NASDAQ: MOBL ) shares are both falling lower after Apple (NASDAQ: AAPL ) and International Business Machines (NYSE: IBM ) announced a partnership to tackle the enterprise solutions market. This initiative includes a focus on mobile device management , or MDM, a key industry for BlackBerry and MobileIron. However, looking at the implications of this deal, one of the two companies will likely benefit.
What's this deal mean?
Essentially, Apple's deal with IBM means more iPads, iPhones, and Macs in the workplace. IBM already has an enormous enterprise customer base that uses the company for both infrastructure and software. However, hardware and on-premise IT has been a weak spot for IBM in recent quarters, with the stock declining by more than 20% in its last quarter as cheaper cloud solutions have become preferable.
However, by using Apple products and pre-installing enterprise-specific applications, IBM will not only have a higher likelihood of retaining current customers, but Apple will sell a lot more devices in this segment. Until now, Apple has largely been considered a consumer brand, but this deal puts it on the map with a company that's mainly enterprise. Hence, it's a great marriage for both parties.
How does this affect BlackBerry and MobileIron?
While BlackBerry's hardware is well known as being enterprise-friendly, the company's transition from hardware to software might leave many investors wondering why shares are being hit so hard following this news. Yet, in reality, the weakness in shares of BlackBerry and MobileIron has little to do with Apple's hardware penetrating the enterprise market, but rather the partnership's focus on MDM.
As part of the arrangement, IBM's cloud services will be optimized with Apple's iOS. The companies will target certain markets, one of which includes MDM, or the management and security of mobile devices and applications.
During BlackBerry's last quarter, it created nearly $600 million, or over 60%, of total revenue from software and services. In this segment, MDM is a big piece of the equation and is expected to become even more important in the years ahead. Therefore, it's easy to see why investors were so spooked at the thought of IBM and Apple focusing on MDM.
In regard to MobileIron, it focuses solely on MDM, growing revenue 158% last year to $105.6 million in this segment. The company, like BlackBerry, has benefited from the rise of enterprise demand on mobile devices, as the need for secure networks and applications has risen. However, investors now appear worried that IBM and Apple will steal much of its market share in this enterprise space.
Here's the catch
While this news may look bad for MobileIron and BlackBerry, it might actually be a blessing in disguise, at least for the latter.
MobileIron has no operational edge or other segments to protect it from the rise of larger competitors. Therefore, its stock losses and concerns could be very real. However, BlackBerry remains highly diversified with a large hardware business, a messaging platform with 100 million users that will be used with mobile payments, and a big data initiative called Project Ion that creates services from analytics. Plus, BlackBerry has $3.1 billion of cash and a patent portfolio worth billions, meaning the company has more than just MDM.
In other words, BlackBerry is diversified, and the news of Apple and IBM entering many of its core segments, like MDM, security, and enterprise big data, could make BlackBerry's buyout appeal significantly higher. Specifically, there are a handful of large technology companies that might not want to give up their enterprise presence to IBM or Apple, and could find BlackBerry appealing as a way to combat the partnership.
In retrospect, BlackBerry already has a presence in all of the industries IBM and Apple hope to enter, meaning a buyout could give an acquirer a first-to-market advantage. Not to mention, the fact that IBM and Apple are entering this space together is a good sign that BlackBerry is on the right operational path, creating yet another good reason to like the company long-term.
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