Apple IBM Partnership: A Match Made in Heaven or in Hell?

apple-ibmMany analysts are trying to figure out what to make of the news that Apple (NASDAQ:AAPL) is partnering with International Business Machines Corp. (NYSE:IBM) to provide business solutions, applications and technology.
IBM is a leader in cloud services, data solutions and business management products. Apple is a leader in consumer technology products. Working together, IBM gets to shed its older, boring products image, while Apple gets to leverage IBM’s business solutions knowhow.
IBM’s CEO Ginni Rometty emphatically stated that both IBM and Apple are on the same page with their goals to “transform the way people work, industries operate and companies perform.” It’s not just marketing copy either, both firms have challenged the status quo, and won, for years.
This partnership looks to provide Apple’s devices, with pre-loaded and jointly created software and apps, to IBM sales representatives. Both of these companies would be able to tap into new markets and expand their current footprints – without impacting their core businesses.
The companies are targeting the healthcare, banking, insurance, retail, travel and transportation industries.
In a joint interview with Apple CEO Tim Cook and Ginni Rometty yesterday, they gave an oft-used example of the iPad application with airline pilots, and expanded upon it.
Airline pilots in the transportation industry were one of the first groups to employ iPads to replace stacks of flight manuals. It simplified pilots information access, it provided ease of updating by the airlines, and it was cost effective because it shaved hundreds of pounds off their flights.
Now imagine that that same airline pilot, with enhanced IBM business intelligence solutions, can make a judgment call on whether the fuel tanks need to be topped off based on current reserves and flight plans.
If a pilot could decide that the fuel reserve was more than adequate, they could prevent tens of thousands of pounds of additional fuel from being loaded, and save money by flying lighter.
It’s information technology in the hands of people that can use it.
Tim Cook said, “For the first time ever we’re putting IBM’s renowned big data analytics at iOS users’ fingertips, which opens up a large market opportunity for Apple.” He added that this partnership was “a radical step.”
It’s just the kind of big picture, long-term thinking that investors like to hear. This partnership has the real potential to upend a number of industries in drastic ways.
Imagine the technology behind Apple’s Siri and IBM’s Watson used to help medical professionals pre-diagnose symptoms and drug reactions before they’ve even seen a doctor or nurse.
If you haven’t already experienced it, Apple’s Siri is a personal assistant application, answering simple queries and searching the Web for others. It can take dictation, schedule meetings, make calls and even find out the time of that night’s big game.  All by voice.
IBM Watson took on some of the best contenders that Jeopardy had to offer and beat them handily. Watson is the future of seemingly artificial intelligence joined with big data and human interaction.
Doctors pay massive malpractice premiums to insurance companies every year. Do you think insurance companies might reduce your premium if they knew a Watson – with the world’s medical knowledge – could verify and concur with your doctor’s diagnoses based off your symptoms?
Watson was able to beat its human opponents with massive mainframes and paralleled microprocessors. But what if we dumb it down a bit, say small enough to run on smaller computer.
Now take that intelligence application and replace the vast majority of all customer service phone interactions.
Dozens of industries that outsource thousands of service and call-center jobs overseas could bring them home to the good old U.S.A. by using a Siri/Watson to answer the vast majority of their calls.
And judging by some of the latest customer service mishaps at firms like Comcast, it’s an easy bet that they’d be politer.
Some of the potential losers from this partnership would be competitors such as BlackBerry Ltd (NASDAQ:BBRY), whose primary merits were that it was the only secure choice for business; and Microsoft (NASDAQ:MSFT), whose operating system has been carried by businesses primarily because there have been few good business alternatives.
Both of these companies could be under severe pressure if Apple and IBM expand and enhance their partnership in the business software, services and devices markets. And that may take some time.
Ultimately, the real outcome of this new Apple IBM partnership will remain to be seen, as it’ll take time to see this impact earnings in a meaningful way for either of these industry behemoths.
Regardless, when two companies like Apple and IBM get together in a meaningful way, short-term or long-term the outcome should be profitable for investors.

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