One of the things I love about the market is that there are always surprises when you least expect them. Take Apple (NASDAQ:AAPL), which is one of the most followed and scrutinized public companies on earth. For months, speculation on the company has been focused on the time/specifications of the upcoming iPhone 6 launches, when the company will actually announce a much rumored foray into wearable technology and the usual blather about what technology firms the company should acquire with its huge cash hoard.
So what does the company do? It announces a huge partnership with IBM Corporation (NYSE:IBM) to build and deliver the equivalent of its hugely successful "AppStore" to the enterprise. Despite hundreds of analysts and pundits covering this tech titan, the news caught the market totally unprepared as I don't recall this possibility being on the radar of anyone.
Apple stock soared $2 a share before succumbing to profit taking and giving back all of those gains by the end of the day. IBM rose 2% on the day as it gives a potentially significant new revenue source; which it desperately needs. However, the greatest impact on any equity was that of BlackBerry (NASDAQ:BBRY), as this threw a major hiccup into its effort to transition to be a major enterprise software provider.
Apple's AppStore is one of the lesser appreciated parts of Apple's business and robust ecosystem. Downloads from the AppStore in the consumer space are producing over $1B in sales a month and growing exponentially. Apple gets a 30% cut of this fast growing and hugely profitable business. As a stand-alone entity, the AppStore should easily throw off over $3B in free cash flow this year. These apps have also changed the very way consumers use their mobile devices as well given the hundreds of thousands of apps and widgets that are readily available.
The new partnership could end up transforming the enterprise market. The companies will develop an enterprise-friendly range of systems on tablets and smartphones. This has the potential to upend how business gets done within the corporate structure and also furthers the BYOD (Bring Your Own Device) movement which already was accelerating. IBM will also now sell these Apple devices as part of its corporate offerings. Given the brand names within the partnership, the new venture should not have any trouble with getting an audience with any corporate CIO (Chief Information Officer) in the country.
This new partnership also shows Apple is moving on from the passing of Steve Jobs. To be blunt, this type of deal would have been unthinkable during his tenure as this visionary leader was known for his go it alone style. Maybe this is first of many such efforts.
It certainly is one more reason to own the shares of this tech giant from Cupertino. As I opined recently, the stock is not the screaming bargain it was one year ago, but still should outperform the overall market due to its valuation and upcoming catalysts. I see the stock hitting $105 a share by the end of 2014.
Finally, this announcement shines a positive light on Tim Cook who has taken his share of criticism since taking over for the legendary Mr. Jobs. However, investors have an approximate 60% gain including dividends over the last year as the company has made all the right moves. When Mr. Cook says Apple has "the deepest pipeline in 25 years", maybe investors might want to take him at his word and look forward to more positive announcements like this one. Just a thought. ACCUMULATE
Disclosure: The author is long AAPL, BBRY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.