Apple Teams Up With a Historic Enemy -- Here's Why

Apple announces a landmark partnership with IBM

Alex Dumortier
Alex Dumortier, CFA
Jul 15, 2014 at 7:00PM

U.S. stocks fell on Tuesday after a bi-annual monetary policy report from the Federal Reserve accompanying Chairwoman Janet Yellen's testimony before Congress indicated that "valuation metrics in some sectors do appear substantially stretched." The benchmark S&P 500 fell 0.2%, while the narrower Dow Jones Industrial Average (DJINDICES:^DJI) was flat. The technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) lost 0.5%. The report went on to say that "equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched."

Surely the market didn't need the Fed to point this out -- anyone who follows the stock market with a little bit of focus ought to have spotted it (this column has been highlighting the phenomenon for some time). Furthermore, not two weeks ago, Yellen said that she saw "pockets of increased risk-taking across the financial system" (though she did not mention equities, specifically) but emphasized that she did not "presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment, in order to address financial stability concerns." In that context, it's a bit odd that today's Fed report produced a negative stock market reaction, which suggests there still is still significant money out there that isn't aware of these excesses (or is simply behaving as such).

Apple and IBM team up to create a business computing platform
Today's announcement that Apple (NASDAQ:AAPL) is teaming up with IBM (NYSE:IBM) is symbolic of the extraordinary transformation of Silicon Valley -- the two companies were mortal enemies in another era. Don't believe me? Take a look at this iconic Apple ad from early 1984, which introduced the Macintosh. The Big Brother figure was clearly meant to represent Big Blue at the head of an army of PC clones:

Apple CEO Tim Cook didn't mince words in saying that "this is a really landmark deal," in a joint interview with this IBM counterpart Ginny Rommety. The agreement will see IBM develop over 100 industry-specific solutions, including native apps, for use on iPads and iPhones running the new iOS 8. The industries in question include retail, health care, banking, travel and transportation, telecommunications, and insurance. In addition, IBM's MobileFirst Platform for iOS will provide a full suite of tools to manage fleets of corporate devices, including -- crucially -- data security.

The deal makes sense for both parties: Apple, which is better known as a consumer-devices company, will have all the credentials it needs to make a deep push into corporations, while IBM gets to showcase its software and enterprise management capabilities with regard to devices that workers already use, trust, and love. The market is rewarding both companies' stocks in the after-hours sessions to the tune of 1.5% to 2%.

One company that will surely suffer from this alliance, however, is ailing devices maker BlackBerry (NYSE:BB). Having failed to entice consumers with its devices, the company doubled down on its corporate client base; today's announcement makes it that much easier for companies to drop them. BlackBerry shares were down more than 4% in the after-hours session.