Apple + IBM, Part 4

Apple + IBM, Part 1

Apple’s first significant partnership with IBM (that I know of) is formed with the AIM (Apple, IBM, Motorola) alliance in 1991 – several years after Steve Jobs’ unceremonious exit from Apple Computer.

Its goal – to challenge Intel/CISC with RISC processors based on “PowerPC” architecture.

Apple + IBM, Part 2

“Despite” his 12-year tenure as an IBMer, plus several months at Compaq to top it off, Steve Jobs hires Tim Cook to oversee worldwide operations in 1998 “anyway”. (I’ll be here all week.)

A tech rebel exec with a very keen (maybe even fairly recently acquired) business sense, hiring an operations expert with a self-evident rebellious streak. That original partnership still seems to be paying dividends to this day. (Pun intended.)

Apple + IBM, Part 3

IBM leads Apple into the 64-bit era with the PowerPC 970 chip in 2003 (a POWER4 derivative). And although G5 never finds its way into a PowerBook (the final G5-based products shipped until 2006), it undoubtedly helps Apple along for a time, as well as furthering IBM’s chip development efforts (though somewhat modestly – IBM was an $89B company in fiscal 2003, with $2.546B in OEM hardware revenues which included sales of semiconductors).

Also in 2003, a company by the name of Palo Alto Semiconductor was founded, for the purpose of developing “PWRficient” processors based on the Power Architecture.

Apple acquires P. A. Semi in 2008, according to Jobs, to work on SoCs for iPhones and iPods. And despite acqui-hired talent leaving over the years, it seems at least a few former P. A. Semi employees still work at Apple. In fairly important-sounding roles such as “CAD Engineer at Apple”, “Engineering Program Manager at Apple”, and “Vice President, CPU, GPU Design & Manufacturing”.

Apple + IBM, Part 4

Fast forward to today.

Apple’s still on the upswing – though profit growth has stalled since the iPhone 4S era (topping out at $41.7B in fiscal 2012, ttm net income currently $37.7B), and revenue growth is slowing as Apple tops $170B in sales per year. IBM’s still a force in tech, and earnings are comparatively steadier, but revenues ($99.7B in fiscal 2013) are still off from their about $107B peak in 2011 – which in turn wasn’t much growth from its previous revenue peak of $104B in 2008.

IBM seeks growth in its services and support business (etc.), and plans to deploy up to 100,000 employees in this new partnership (out of 431,000 as per its 2013 annual report). IBM will apparently become a (custom) iPhone and iPad reseller in the process – even an iOS enterprise developer working with Apple’s own teams.

Apple, though potentially being seen as “giving the cold shoulder” to other big data companies it could have partnered with, gains exclusive access to IBM’s enterprise sales channels around the world, including China and India. And since the initiative includes iPhone as well as iPad, that probably means an additional connection point to celcos such as China Mobile and Bharti Airtel.

As a “side benefit”, Apple’s launched a new “AppleCare for Enterprise” 24/7 support service (on-site service provided by IBM), which, in that context, translates to high-margin, recurring revenue service contracts. (Something tells me some – maybe all? – AppleCare offices are about to get some upgrades to handle the new business.)

Apple + IBM. A relationship that actually gets stronger as the years roll on. Who would’ve thought?

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