What Does the Apple-IBM Partnership Mean for Investors?

Enterprise deal could boost sales of iPhones and iPads and help IBM overcome its revenue problem. Where is Google in all this?

Jul 23, 2014 at 5:30PM

What a difference 30 years makes. Back in 1984, Apple (NASDAQ:AAPL) and International Business Machines (NYSE:IBM) were bitter adversaries in the PC business. Today, the two tech giants are partners in a venture where Big Blue will help sell iPhones and iPads to its corporate clients and develop apps that will allow big businesses to access IBM analytics from Apple devices.

The collaboration, IBM MobileFirst for iOS, will focus on four areas:

  1. iPhone and iPad business apps
  2. iOS cloud services
  3. AppleCare services for the enterprise
  4. Mobile device management by in-house IBM staffers

Apple has a new sales division
In effect, IBM will help create a new market for the mobile devices specialist. The high-end consumer smartphone and tablet industry is showing some signs of slowing down as lower-priced, but just as capable, devices gain traction. Apple rival Samsung just reported less than stellar quarterly results as it starts to feel the effects of those sagging sales.

The opening of a brand new business opportunity would undoubtedly be positive for Apple and its investors, even as the company is set to continue its decade and a half long mobile revolution this fall by releasing a slew of products that are mostly meant for consumers, including updated versions of the iconic iPhone and iPad.

Big Blue needs a revenue boost

The partnership could be a boost for IBM investors too as it might help reverse the downward spiral in revenue which has plagued the company for the past few years.

IBM Chart

IBM data by YCharts

It appears IBM MobileFirst for iOS, in which the company is committing up to 100,000 employees, will be the next thing that IBM brings out of its toolkit to try to boost revenue. Big Blue has tried a number of things as it tries to climb out if its hole:

  1. Commercialization of the game show winning supercomputer Watson, which is has tremendous potential the medical, financial services, and retail industries. 
  2. A new $3B chip technology research program to be used to help improve its own products and create licensing agreements with other companies. 
  3. Shareholder activities such as dividend increases and share count reduction.

IBM Dividend Chart

IBM Dividend data by YCharts

Foolish conclusion
Apple and IBM plan to work together and develop MobileFirst for iOS. Shareholders of both companies will benefit if the partnership is successful in making inroads into the enterprise market. In the case of Apple this new business will help if a slowdown in the consumer market materializes. For IBM, the added revenue will be welcome. 


Leaked: Apple's next smart device (warning, it may shock you)
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Mark Morelli owns shares of Apple and International Business Machines. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

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This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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