With most major companies already using iOS, Piper Jaffray doesn't see IBM deal surging Apple sales

Posted:
in iPad edited July 2014
Apple's new enterprise partnership with IBM will likely strengthen the position of the iPhone and iPad in the corporate world, but it probably won't move the needle much in terms of overall device sales, investment firm Piper Jaffray believes.




Analyst Gene Munster's take on the new Apple-IBM partnership was declared in a note to investors on Wednesday, a copy of which was provided to AppleInsider. He noted that iOS devices are already being tested or deployed at 98 percent of Fortune 500 companies, and 92 percent of Global 500 corporations.

"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," Munster wrote. "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."

In his view, Apple's new deal with IBM will strengthen existing relationships with top companies deploying iOS devices. However, he doesn't expect a surge in enterprise sales for Apple, leaving the consumer market as the company's main target.

For example, Munster said that if the new IBM deal were to prompt half of the Fortune 500 to each purchase an additional 2,000 iPhones and 1,000 iPads beyond what they were previously planning, it would amount to just a half a percent of projected calendar year 2015 revenue.

But while most companies are utilizing iOS, Apple Chief Executive Tim Cook noted to CNBC that penetration of those devices in major corporations is still low. This deal, he said, aims to drive further adoption.

"The penetration suggests there's a huge opportunity here," Cook said. "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."




The new program, dubbed "IBM MobileFirst for iOS," was announced by both companies on Tuesday. IBM revealed that it has developed more than 100 native iOS apps and services tailored to the needs of multiple industries.

Through the deal, IBM will sell and even lease iPhone and iPad units to businesses. Its MobileFirst Supply and Management program will provide businesses with device packages, as well as activation and management services

Alongside the program, Apple will also introduce a new AppleCare warranty tier tailored specifically for enterprise customers. It will include 24/7 telephone and email support, while IBM will be responsible for onsite repairs.
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Comments

  • Reply 1 of 97
    eideardeideard Posts: 428member
    Way too conservative, Gino. Think IBM's doings only approach the Fortune 500?
  • Reply 2 of 97
    blastdoorblastdoor Posts: 3,209member
    This is in line with what I was thinking when I heard about this.

    I think it's a good deal for Apple, but probably a better deal for IBM, and perhaps best of all for business customers. And that's all great -- nothing wrong with it. It's just not likely to move AAPL higher in any significant way.
  • Reply 3 of 97
    Wrong...This will be huge for Apple. There are a ton of small and medium (my company) that is really waiting for something like this to integrate business software into the iOS platform. It is just too difficult today unless you have one of the handful of supported business solutions that is actually usable. Plus the fact that this will extend these devices even further to replace other task specific handheld will be crazy...I don't know everything but I am pretty sure about this.
  • Reply 4 of 97
    addicted44addicted44 Posts: 830member
    Quote:

    Originally Posted by sog35 View Post

     

    Get this clown out of here.

     

    Just because 90% of Fortune500 companies use iOS products does not mean its an intergal part of their information system.  I bet half of those companies are just company iPhones.

     

    Muenster just has to STFU already.




    You are right. That being said, Muenster is also correct. Any additional sales caused by the IBM partnership will hardly move the needle for Apple. They simply cannot compare to the large number of iOS sales Apple already has.

     

    Where this may help is further entrenching iOS in enterprise, and making it extremely difficult to switch from. In addition, if there are Macs involved, this may massively help with mac sales.

  • Reply 5 of 97
    This from a guy who ups amzn eStimates to $420.

    Just shows you which way he wants the stock to trade the next two weeks. Come blowout earnings let us see what he does. If successful in getting cover for the price machinist ions,he may go the other way.

    Probably smarting from not being privy to the deal. Meanwhile amazon will earn in the next 50 years nothing close to what apple will earn in a year.
  • Reply 6 of 97
    ecatsecats Posts: 272member
    If he's just thinking about email, contacts and calendars, then he's right. Unfortunately for him, that's not what Apple/IBM are thinking about.

    Business IT is filled with absurdly expensive software/hardware combinations that could be trivially replaced by an iPad if large IT providers stopped milking the status quo.

    As Business IT infrastructure doesn't end at correspondence apps. The point of IBM writing 100 industry-specific applications is going to allow apple devices to be rolled out easily for a large range of business uses where they would have previously required costly in-house development, or a massive scale to justify switching costs.

    It's actually quite a big opportunity for large business, who can now replace expensive to maintain equipment and code with a user-preferred solution on relatively inexpensive hardware. (With the bonus of AppleCare like support.)
  • Reply 7 of 97
    I'm sure Piper Jaffray knows more about this than Apple or IBM. The fact of the matter, is many of those companies are using iPads in a very small way. Making these devices a viable alternative could lead to a big change in corporate thinking, not just in the Fortune 500, but across the world. And no one was saying this would increase apple sales by x% anyway. This is just another awesome ripple of the Apple effect. Awesome news for Apple and IBM. One OS to rule them all. And corporate seems like a good fit for Apple, because they can afford the high end devices. This gives Microsoft a taste of what it was like when IBM was on the other side of the fence. I think the biggest take away here is that Apple isn't just a fad in the business world. It's here to stay. Better options bring more customers who bring better options. Microsoft missed the train here, Android has a good name in the malware industry, and Apple is making all the right moves.
  • Reply 8 of 97
    robin huberrobin huber Posts: 3,924member
    Gene "Turd in the Punchbowl" Munster.
  • Reply 9 of 97
    melgrossmelgross Posts: 33,508member
    While I don't expect any sudden surge, I do expect that over time, this will add significantly to Apple's sales, and presence in enterprise (which means business, government and education).

    It will take some time for this to happen. As both companies have said, it will begin to rollout during the fall, as Apple updates iOS to 8, and comes out with new, more powerful hardware. But it will mainly be impacted through 2015 as most of this is actually available.

    What I expect, is that this will speed Apple's adoption, and make that adoption more bullet proof regarding Google and Microsoft. Of course, this kills any chance that Blackberry may have had. I've already read a couple of dozen articles about this deal, and all have been positive, some exceedingly so.

    We should also remember something very interesting. When Cook said that he was going to double down on secrecy, we all thought he meant hardware. But this deal has not been negotiated over the past two years, it's been IN PLACE over the past two years. The deal was done two years ago! What's even more remarkable about that is that both Apple and IBM have had hardware and software teams working in each other's plants on this for a substantial portion of the past two years—and not a word of this came out. Not even a whisper! Remarkable!

    It makes me think of something that could be happening which I think, if true could be just as significant as the deal itself, and I'm mentioning it here first, and not on all the business sites I regularly am a part of.

    Apple has significantly bolstered iOS, in particular, and OS X regarding security, bug reporting and fixing, etc. over the past two years. It makes me think that something has been going on there that has been different, but I couldn't put my finger on it, even with the people I know at Apple, and IBM. Now I think that this deal is a good part of the reason.

    IBM knows what is needed, and with those teams working together I can see the impact they may have been having. Remember that the deal is exclusive. That word, exclusive, is an important one. But I think it goes further than that. The exclusivity of the deal allows Apple and IBM to do things that otherwise they might not. I'm wondering if this extends to Apple allowing something they've never allowed. That is, low level access to iOS and the hardware, and possible something there for OS X as well. With Handoff, OS X must be involved somewhere, though they both just talked about mobile. Handoff adds to that mobility argument though, and I suspect we will see something there as well.

    But, as IBM will be enabling their additional security on iOS, they would need low level access to the software and hardware to make it more effective. As we should all know, security can't be added to the top of an OS and be expected to work as well as it should. Now, I know there will be some who will be thinking old thoughts, and complaining that Apple won't do that. I disagree. We aren't talking about some small, untrustworthy third party here, we're talking IBM. IBM is likely the only company Apple would trust with this, as as has been pointed out in a number of articles, both companies have no rivalries, no competing products. This is all complementary to each, additive.

    So, yes, I can see this as being part of what is happening. Remember, they've been working together on this for the greater part of two years already.

    There's really so much more that can be said about this.
  • Reply 10 of 97
    markbyrnmarkbyrn Posts: 661member
    As for getting advice on Apple, you'd be better of asking the magic eight ball than relying on Gene Munster.
  • Reply 11 of 97
    thedbathedba Posts: 757member

    While this deal is about "business", I also see another benefit from the consumer point of view.

    Cloud services, a place where Apple has been weak. With IBM's expertise, Apple's services may get the needed boost to bring their offerings up to par or maybe even surpass Google's and Microsoft's.

     

    I'm thinking here calendars, e-mail, iTunes match (painfully slow) and others.

  • Reply 12 of 97
    clemynxclemynx Posts: 1,552member
    Quote:

    Originally Posted by Blastdoor View Post



    This is in line with what I was thinking when I heard about this.



    I think it's a good deal for Apple, but probably a better deal for IBM, and perhaps best of all for business customers. And that's all great -- nothing wrong with it. It's just not likely to move AAPL higher in any significant way.

     

    Most companies use iOS. That doesn't mean that they exclusively use iOS.

    Apple has a huge growth opportunity here.

  • Reply 13 of 97
    tundraboytundraboy Posts: 1,882member
    melgross wrote: »
    While I don't expect any sudden surge, I do expect that over time, this will add significantly to Apple's sales, and presence in enterprise (which means business, government and education).

    With Handoff, OS X must be involved somewhere, though they both just talked about mobile. Handoff adds to that mobility argument though, and I suspect we will see something there as well.

    Ding, ding, ding! Yes, didn't think of this. I thought or wished that something OS-Xy comes out of this iOS push into enterprises. If your direct reports have been equipped with iOS devices from this partnership, what better and more convenient way to communicate and transfer data with their iDevices?
  • Reply 14 of 97
    mactmact Posts: 26member
    While iOS sales may not go up, the integration of iOS and OSX may lead to a significant increase in iMac, MacBook and Mac Pro sales to corporate customers.
  • Reply 15 of 97
    jkichlinejkichline Posts: 1,369member

    OK, so let's do some quick math Mr. Analyst. How many corporations are there in the world. Answer... BIG NUMBER that is greater than 500. OK.  Next, Apple says they are used in 98% of Fortune 500 and 92% in Global 500 right? Yes. But, they don't say that there is anywhere near 100% penetration of mobile devices used by employees in those corporations, just that they are being used there.  Now, let's look at IBM who may or may not be used in those large corporations, but IS used in that other large number.  I think what you have here is a powerful reason for these corporations to ditch any other products and go straight Apple.

     

    So using fuzzy math (or just plain logic), there's a huge upswing for Apple to be had here. They've just partnered with the company that IS enterprise and coupled that with a user experience that IS consumer level, making the best of both worlds.

     

    Good luck trying to justify this in six months.

  • Reply 16 of 97

    This further solidifies AAPLs position in the marketplace,  feeds into the ecosystem and increases the size of the moat competitors need to cross.  AAPL products used in the home, workplace and mobile.  Creates more recurring replacement of AAPL products.  To the extent Wall Street has increased confidence in AAPL's recurring revenue, this should expand AAPL's PE multiple.

  • Reply 17 of 97
    rogifanrogifan Posts: 10,669member
    Wall Street obviously doesn't think this deal impacts Microsoft. As of this morning Microsoft stock is up more than Apple and almost as much as IBM. A good quarter from Intel trumps Apple's announcement.
  • Reply 18 of 97
    island hermitisland hermit Posts: 6,217member

    If anything, it might help legitimize Apple in the enterprise world.

  • Reply 19 of 97
    tundraboytundraboy Posts: 1,882member
    blastdoor wrote: »
    This is in line with what I was thinking when I heard about this.

    I think it's a good deal for Apple, but probably a better deal for IBM, and perhaps best of all for business customers. And that's all great -- nothing wrong with it. It's just not likely to move AAPL higher in any significant way.

    When Apple announces 250 new features in the new iOS or OSX, we all know most of these are trivial. I always assumed that the same goes for "98% of Fortune 500 have iPads".

    If you think a significant opening to the heretofore trivially addressed enterprise market is not a big thing for Apple, I don't know what is. Tim Cook is putting his stamp on this company and he is doing so by looking into opportunities that Steve Jobs probably never gave more than 5 minutes thought. And that was probably the right thing for Steve to do at the time because the iOS devices were gargantuan rollouts.

    But today, there probably aren't any new revolutionary devices ripe for introduction in the next few years. After all, before the smart phone, it was the PC and that was 30 plus years ago. So smart mobile has many years of build out ahead of it until enough new technologies are developed and another Steve Jobs comes around to see possibilities no one else could see as clearly and builds the next revolutionary device from disparate new tech.

    Think about it, Steve began his career rolling out one revolutionary device and ended it rolling out the next one.
  • Reply 20 of 97
    blazarblazar Posts: 270member
    Very exciting news, hopefully new opportunities open up for apple in this area besides the obvious corporate use of apple products.

    Watson back end to siri would be sweet... Of course then skynet will take over the world and computerized spiders will take over the area at the bottom of the oceans as a staging groud for a land war...
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