Apple and IBM's Enterprise Partnership Bears Fruit

By Markets Fool.com

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Source: Apple

Earlier this year, Apple and IBM announced to much fanfare that they would partnerto "transform enterprise mobility through a new class of business apps, bringing IBM's big data and analytics capabilities to iPhone and iPad." Apple's press release centered on four capabilities: industry-specific enterprise solutions and apps, cloud services optimized for iOS, AppleCare service and support for enterprise, and new offerings for device activation and management.

The partnership makes sense as IBM transitions to becoming a data analytics/cloud company and could use hardware partners to encourage enterprise end users -- businesses and government -- to adopt its technologies. Apple could use help in the enterprise as well. Although the companyboasted of 69% of enterprise device activations in the third quarter, according to the latest Good Technology Mobility Index Report, Apple still wants to steal enterprise market share from laptops and PCs.

IBM's MobileFirst for iOS
On Wednesday December 10, 2014, the two companies delivered the first iOS-exclusive apps under the partnership, which havewide-ranging implications and could be used across a broad spectrum of industries. The applications include: Plan Flight, designed to help airlinesbetter manage fuel; Trusted Advice, which will assist financial advisors in managing client portfolios; and Case Advice, which helps government workers manage the workload of caseworkers based on real-time analytics.

More interesting was the breakdown of apps: Of the 10 announced apps, six were related to the travel and transportation, FIRE (finance, insurance, and real estate), and telecommunication industries. Apple and IBM identified four clients that haveannounced support for MobileFirst for iOS solutions: Citigroup, Air Canada, Sprint, and Mexican financial services firm Banorte.

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Key to this Apple/IBM partnership is to deliver a new class of industry and company-specific apps and enterprise solutions designed from the ground up.If Citigroup is of any indication, this is a robust and underserved market. Heather Cox, chief client experience, digital and marketing officer for global consumer banking at Citigroup, stated in the Apple press release:

Mobile innovations are driving profound impact on how Citi delivers superior client experiences, particularly those that extend our enterprise expertise all the way to the point of customer contact... There's terrific energy in our collaboration with IBM and Apple around the goal of equipping our professionals with mobile capability that will create new competitive advantage and enable us to reimagine how we share our knowledge to improve the quality of life for our clients.

Could this reverse IBM's recent underperformance?
When it comes to financial performance, IBM needs a win more than Apple. With year-over-year revenue dropping every quarter for the last two years, the company has turned to returning cash to shareholders and moving to higher-margin businesses to enrich investors. Since fiscal 2013 (seven full quarters), the company has returned $27 billion to investors via stock repurchasesto lower its outstanding share count in an attempt to reach its goal of $20 in adjusted earnings per share by FY 2015.The company recently abandoned that lofty goal.

Earlier this year, hedge fund manager Stanley Druckenmiller called out IBM as the "poster child" of problems with corporate America in which businesses were "more interested with buying back stock and financial engineering than investing in their business." He pointed out that IBM tripled its debt load to buy back stock even while sales remained stuckwhere they were six years ago.And although it has divested some businesses, making the revenue comparison an unfair one going forward, Mr. Druckenmiller has a point that IBM could really use a growth driver.

That said, IBM has reinvented itself numerous times over its 100-year history. Many famously remember CEO Lou Gerstner saving IBM by refocusing the company on information technology services. Although the company's current situation isn't as dire, CEO Ginni Rometty certainly could use her own "Gerstner moment." If Apple's recent success is any indication, IBM picked the right partner.

The article Apple and IBM's Enterprise Partnership Bears Fruit originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.