Apple + IBM Partnership: Mac Opportunities

| About: Apple Inc. (AAPL)
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Summary

Apple + IBM partner in the IBM MobileFirst for iOS program.

The focus is on the iPad and iPhone apps portion of the agreement.

However, there are implications for Macs as well.

Developer teams have been working closely to develop the first wave of MobileFirst solutions and these solutions will be ready for customers beginning next month...

- Apple (NASDAQ:AAPL) CEO Tim Cook, October 2014 earnings conference call

Well, Mr. Cook did not deliver on that promise. We are well into December, and still have not heard any news on the topic. Earlier, I described what I expect from an announcement. I still believe in what I wrote, but now it seems that the news will wait until the new year.

Importance

  • It's very important for the investor to understand the deeper implications of the IBM (NYSE:IBM) partnership.

This project is of great importance to the Apple investor, as it is part of a long-term strategic move with major growth implications. In the initial article in this series, I described this partnership as part of Apple's longer-range, strategic objectives.

Here, I describe the implications for the Mac line.

Mac: Current Status

The Mac was very popular when introduced in January of 1984 and for several years thereafter. As time went on, however, businesses standardized on Microsoft (NASDAQ:MSFT) solutions - first DOS and later Windows. The Mac dropped drastically in market share, maintaining popularity mostly within the graphic artist community. On the consumer side, most people were introduced to computers at work. As such, they bought into the WinTel system because it was what they knew, plus it came with lower initial costs. The Mac became a little-known backwater.

Steve Jobs returned to Apple in 1996, and introduced the first iMac in 1998. The success of this computer began the long and slow return to popularity for Apple (and established the iconic "i" prefix). It was the success of the iPod, however, that began the "halo effect" - strengthened by each successive iDevice - and really launched the Mac resurgence.

Today, Macs still trail Windows PCs in sales, but market share is increasing. In calendar Q3, Mac reached over 14% market share, good for third place in the U.S. (trailing Hewlett-Packard (NYSE:HPQ) and Dell), and about 7% worldwide, just a tad behind fifth-placed Asus (OTC:ASUUY). The important point is that in the September quarter:

Mac sales increased 21% while PC sales overall slipped by 0.5%. [Gartner]

Another quarter like this, and Apple could bump Asus out of the fifth spot worldwide.

What's Happening?

For a long time, consumers drove Mac growth. People would buy an iPod or iPhone, decide they liked the Apple experience and move to Macs with their next computer purchase. For many years, Apple reported that at the Apple Stores, 25%-30% of Mac sales were to first-time Mac owners. But business users were not signing up in such large numbers.

Now, things have changed. With the introduction of BYOD (Bring Your Own Device) and the demand from users, including C-Suite users, Macs have slowly begun to show up. The fact that large tech companies, such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Cisco (NASDAQ:CSCO), have embraced the Mac wholeheartedly has helped.

One-quarter of Cisco's company-provided notebooks are Macs following that company's decision to allow employees to choose which platform they preferred. [Mac Rumors]

A VentureBeat report headlined:

Google's answer to internal security: Drop Windows, use Mac or Linux instead

9to5Mac writes:

During a talk at the LISA 13 conference in Washington D.C earlier this month, a couple members from Google's Macintosh Operations team explained how the company has been forced to develop its own set of tools to manage its fleet of roughly 43,000 Macs. The reason, according to Google engineers Clay Caviness and Edward Eigerman, is that Apple isn't doing a great job at supporting its enterprise management tools.

There are several of things to note here.

First is that Google is running over 43,000 Macs. This is a large number, and it shows that it can, indeed, be done. Now it is hard for IT managers to argue that the Mac has no place in the enterprise, since Google has shown how it can be done in a big way.

The second is the reason that it is being done. As the VentureBeat article states: Security.

Management

Finally, there is this key line from the 9to5Mac post:

Apple isn't doing a great job at supporting its enterprise management tools.

This is echoed by a comment in an earlier post by reader ramtekus:

As an IT architect responsible for everything from corporate security to software deployment to managing a virtual infrastructure to disaster recovery I can tell you that compatibility with a lot core software and lack of sophisticated tools to maintain/manage virtualize has more to do with it.

There are two replies to this critique. The first is that this is no longer 2005. Nowadays, there are high-quality solutions available for device management. JAMF Software, for example, offers the Casper Suite of tools for iOS and Mac OS integration into mixed environments.

JAMF and other companies are providing services that now allow the enterprise to incorporate Macs with a lot less pain than earlier.

Enter IBM Partnership

And here is where the new IBM partnership enters. While so much focus is put on the iOS, many analysts and writers have missed this simple point.

One of the main features of the partnership is that IBM will provide:

- Packaged service offerings: IBM is introducing IBM MobileFirst Supply and Management for device supply, activation and management services for iPhone and iPad, with leasing options. [Apple Press Release]

My question is, will it really create a device management system and leave out the Mac? To me, this seems very unlikely. (At first, perhaps, but surely the company will add it quickly.)

What this means is that the IBM solution will service all your management needs, and the Mac will have the backing and support of one of enterprise's most trusted players.

I can't help but think that this is going to foster a significant surge in adoption. With tens of millions of PCs sold into the enterprise each quarter, even a percentage point or two would add significantly to Apple's number.

Summary

In spite of the difficulties, Macs do appear to be gaining traction, with more and more enterprises either supporting them or providing them to workers. Still, InformationWeek wrote in July:

According to Forrester's most recent survey data, Macs account for only 2% of enterprise desktops and 6% of enterprise laptops. The firm found that 8% of employees want their next work device to be a Mac, however.

When IBM offers a complete product for Mac management that is comprehensive and secure, then a lot of the resistance to the Mac will fade.

If 8% of workers' upgrades become Macs, this would be a real shift, adding significant sales.

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In a follow-up article, I will project Mac sales for the current quarter.

Disclosure: The author is long AAPL.

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.

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