Apple Puts IBM Rivalry to Rest With Corporate Sales Deal

July 16 (Bloomberg) -- Bloomberg Contributing Editor David Kirkpatrick discusses the partnership of Apple and IBM on business software for iPhone and iPad users. He speaks on “Bloomberg Surveillance.”

Apple Inc. (AAPL) and International Business Machines Corp. (IBM) are putting aside a rivalry started at the dawn of the personal-computing era to get more businesses to embrace iPhones and iPads.

The deal unveiled yesterday gives Apple access to an IBM sales force that will recommend Apple’s devices to customers in industries such as health care and banking, which have never been priorities for the consumer-focused iPhone maker. IBM gets a boost in a long-running effort to sell software and services to companies seeking to manage workers’ smartphones and tablets.

“We really recognized almost simultaneously that we could be uniquely helpful to one another’s strategy and that there was literally no overlap,” Bridget Van Kralingen, IBM’s senior vice president of global business services, said in an interview.

The partnership helps Apple pursue a bigger slice of the market for corporate users of wireless devices. While many businesses allow the use of iPhones and iPads for checking e-mail and other tasks, some longtime users of PCs running Microsoft Corp. (MSFT)’s Windows software have remained reluctant to adopt its gadgets.

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For Armonk, New York-based IBM, the alliance may aid the company’s efforts to catch up after watching other technology companies -- including Apple -- seize upon the growing popularity of mobile devices.

Source: IBM via Bloomberg

Apple Inc. Chief Executive Officer Tim Cook and International Business Machines Corp. Chief Executive Officer Ginni Rometty at Apple headquarters in Cupertino, California, on July 15, 2014. Close

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Source: IBM via Bloomberg

Apple Inc. Chief Executive Officer Tim Cook and International Business Machines Corp. Chief Executive Officer Ginni Rometty at Apple headquarters in Cupertino, California, on July 15, 2014.

“They’re now strongly associated with the premium mobile platform and mobile devices,” Frank Gillett, an analyst at Forrester Research Inc., said of Apple. “If you want to do anything interesting in the enterprise, you now have to check with IBM on what they’re doing with Apple.”

Enterprise Clout

Apple, which has seen sales growth slow in recent quarters, has already recognized the potential of the corporate market, touting that its devices are used by employees at 98 percent of Fortune 500 companies. Deutsche Bank AG has almost 20,000 iPhones, while Siemens AG has 30,000, Apple said in April.

“This is a shot in the arm for IBM and a great validation of Apple in the enterprise space, where they already are a huge success,” Aaron Levie, chief executive officer of cloud-storage company Box Inc., said in an interview.

IBM Tries to Adapt. Again.

IBM shares rose 1.6 percent to $191.46 at 10:29 a.m. in New York. The company is scheduled to report earnings tomorrow. Apple, which reports quarterly results on July 22, climbed 0.9 percent to $96.17 after reaching $97.10, the highest intraday price since September 2012.

Apple and rival Samsung Electronics Co. (005930) are seeking to further displace BlackBerry Ltd. (BBRY), which once held a strong grip on the corporate market. Shares of BlackBerry fell 5.1 percent to $10.72.

Surprising Alliance?

The partnership -- announced with a press release that included a picture of Apple Chief Executive Officer Tim Cook and IBM CEO Ginni Rometty walking together at Apple’s headquarters in Cupertino, California -- would be surprising to those following the companies three decades ago.

IBM and Apple were bitter rivals during the early days of the PC. Apple’s famous “1984” Super Bowl television commercial to introduce the Macintosh computer compared IBM to George Orwell’s totalitarian Big Brother. The competition eased as IBM abandoned the PC business and instead focused on software and services geared for corporate clients.

Cook also worked at IBM for more than a decade before joining Apple.

While the companies’ agreement targets business customers, it puts IBM back in the position of selling consumer products -- something the company left behind in 2005 with the sale of its PC unit to Lenovo Group Ltd.

Mobile Expansion

A key element of the Apple-IBM deal is developing mobile-centric software tools for businesses. While smartphones have become ubiquitous, in business they are primarily used for checking e-mail or calendars. That’s expanding to include more sales functions and day-to-day work flow, like getting approvals needed from a manager, said Jeffrey Hammond, another analyst at Forrester.

Apple and IBM said they will build more than 100 industry-specific applications for the iPhone and iPad, as well as tools for managing functions on the devices such as activations, security and analytics.

Reshaping IBM

IBM, meanwhile, has identified mobile as one of the company’s biggest opportunities since before Rometty stepped into the role of CEO two years ago. She is seeking to reshape IBM with services such as data analytics to boost revenue growth after eight straight quarters of declines.

The company is contending with technology customers that are increasingly seeking to store data and software on cloud-computing networks, rather than on-site, limiting clients’ need for IBM’s servers and mainframes.

The potential financial impact for IBM will hinge on whether the applications are sold and if customers find value in them, said Daryl Plummer, an analyst at Gartner Inc.

“Revenue-wise, it’s going to be hit or miss,” he said. “It depends on what they commercialize -- I can’t say it’s a jump-start yet.”

To contact the reporters on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net; Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net Jillian Ward, Stephen West

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