Apple's deal with IBM is a strategic strike in a larger war

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Yoni Heisler
July 17th, 2014
In this article: apple ibm partnership, IBM, opinion
Apple's deal with IBM is a strategic strike in a larger war

Earlier this week, Apple and IBM struck a landmark deal wherein the two tech giants will, amongst other things, cooperate on creating apps and pushing iOS even further into the enterprise.

As one would expect, the deal generated a tremendous amount of ink from folks who think the announcement is huge and from those who think it'll have a negligible impact on both companies. To that end, here's what some analysts and pundits have been saying about the deal.

First up, we have Gene Munster who, as it turns out, can actually write a research report that doesn't mention an Apple HDTV. In the wake of the deal, the Piper Jaffray analyst penned an investor note articulating why he doesn't think the deal will help propel iOS sales in a significant way.

We do not expect the IBM partnership to have a meaningful impact on Apple's financials overall primarily based on our belief that large corporations are already utilizing iPhones. We believe that IBM will add incremental functionality for corporate customers, but is unlikely to be the make or break factor for a large corporation in utilizing iOS.

On the surface, it's a fair point. After all, Apple announced at WWDC that 98% of Fortune 500 companies use iOS. One then has to wonder where's the room for growth? To this end, it's important to remember that the bar used in tabulating that 98% figure may be very low.

Tim Cook said as much during a CNBC interview earlier this week where he explained that while many companies use iOS, actual penetration within the employee ranks could be a lot higher.

But the reality is, that the penetration of these businesses and in commercial in general for mobility is still low. So where we have very good market share the penetration suggests there's a huge opportunity here. And I think if we can bring the kind of transformation we've arguably brought to consumers to enterprise, I think there's a huge opportunity here.

And we knew that we couldn't do that alone. We knew that we needed to have a partner that deeply understood all the different industry verticals that had scale, that had a lot of dirt under their fingernails, so to speak, from really understanding each of these verticals. And we found a kindred spirit in IBM. And I am so happy we did.

Any time Apple makes a major announcement, everyone can't help but jump in and quickly gauge its importance. And because Apple has a track record of releasing revolutionary products from time to time, sometimes pundits expect Apple announcements to be just as exciting.

But who are we kidding? Enterprise sales aren't terribly exciting to most. So while there are folks out there underwhelmed by the deal, that's not to say the deal itself lacks significance. Apple has historically lacked an enterprise focus, though this has changed considerably in recent years. The deal with IBM therefore represents just the latest step Apple is making towards getting iOS devices out and into as many hands as possible.

John Moltz concisely writes:

An Apple and IBM partnership makes sense in the same way Apple selling its products through Walmart makes sense. Apple defended selling through Walmart by saying "Their stores are where ours aren't." The kinds of large enterprises where IBM has a presence are the places where Apple has the least penetration. iPads and iPhones are probably present in the executive offices and the sales force, but less so in other departments where central IT rules with impunity.

Apple products in Walmart likely don't "move the needle" so to speak, but no one would dispute that getting iPhones and iPads into Walmart was a significant move. Similarly, iPads in schools don't "move the needle", but every time Apple convinces a school district to buy a few thousand iPads, it's heralded as a giant success. Why? Because these tiny successes build on each other and, taken together, they can ultimately have a discernible impact on sales.

In the ongoing battle for smartphone supremacy, there's no "killshot". The dynamics of the smartphone industry are always changing and battles are being fought on many fronts. The recent IBM deal is simply Apple's way of shoring up its attack on the enterprise front. So while the deal in and of itself won't win the smartphone war, it's certainly a smart play on Apple's part as it can leverage IBM's enterprise expertise to push iOS adoption to even greater heights.

Tim Bajarin expands on this point in a smart piece on Techpinions:

This is not good news for the Android crowd. Google, and especially Samsung, had been on a course to try and get more Android devices into IT. However, this Apple/IBM deal will make that very, very difficult now and, if the deal works as designed, it could pretty much upstage any opportunity Android devices have in any future enterprise programs. This will also have an impact on Microsoft's quest to make Win 8 tablets and smartphones the de facto standard in IT. That would have been a tough thing to do even if Apple and IBM had not gotten together, but it will be even more difficult for them to gain a lot of ground with Windows 8 mobile devices in IT now.

This doesn't mean Win 8 or even Android devices will be locked out of IT. Indeed Google, Samsung, Microsoft and other tablet and smartphone makers will still try and gain ground in the enterprise with what they offer today and in the future. However, this IBM/Apple partnership, with its hardware, software, IT tools and services will make it tougher for them to compete directly in accounts Apple and IBM will attack together.

Of course, not everyone agrees with that sentiment, with some going so far as to claim that the deal serves to show that Apple has lost its ability to innovate.

But by and large, analysts appear to be exceedingly optimistic about the announcement that Tim Cook proudly called "historic."

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