Commentary on the new Apple-IBM partnership was all over the lot, but most analysts saw it as a "win-win."
Below: Excerpts from the notes we've seen so far.
VIDEO UPDATE: Scroll to the bottom for the remarks of Elevation Partner's Roger McNamee on CNBC.
Steve Milunovich, UBS: Leveraging IBM's systems of record and sales strength. "Apple has a good share of mobile devices in the enterprise, now the issue is enabling greater use. IBM will write the industry apps with Apple assuring a suitable interface—it is not clear if there will be opportunity for user customization. IBM can provide backend connection to systems of record, eventually leveraging its Watson analytics. A big win for Apple is having IBM's sales force hawking iPhones and iPads and IBM service supporting the devices, essentially providing Apple Care for the enterprise." Apple rating: Buy. Price target: $100.
Kulbinder Garcha, Credit Suisse: Apple and IBM: a partnership is formed. "We view this partnership as positive for Apple in gaining further traction and solidifying its position with Enterprise by leveraging IBM's large installed base. [It] will offer: i) more than 100 enterprise apps created for iPhone/iPad; ii) IBM cloud services for iOS devices, including device management, security, analytics and integration; iii) AppleCare enterprise grade support; and iv) packaged offerings around enterprise device activation, supply and management." Overweight. $96.
Amit Daryanani, RBC: IBM & AAPL Partnership; Potential Galore. "For AAPL, this opens up a huge enterprise market that could see material uptick in iPhone deployments and eases two of the largest concerns (security and service). From AAPL's perspective this should help accelerate revenue and unit growth in the enterprise markets and assuming new AppleCare is a premium offering it will also bolster their recurring revenue stream. For IBM, this enables further entrenchment into the existing enterprise customers and gives them a solution (MobileFirst) that they can sell to enterprises along with the 100+ enterprise apps that are/have been developed that will all leverage IBM's extensive cloud infrastructure." Outperform. $100.
Brian White, Cantor Fitzgerald: An iPhone and iPad Potentially in Every Cubicle. "With great mobile device experiences for consumers now available, we often ask ourselves why so many people remain handcuffed to inferior mobile devices in the workplace that not only reduces efficiency but also increases frustration. We believe tonight's announcement could represent the beginning of an initiative to free workers from inferior mobile experiences and open up new opportunities for enterprise productivity." Buy. $111.
William Power, Baird: Derivatives. "This deal could be a meaningful negative for BlackBerry as it attempts to leverage its remaining enterprise clout to turn around the business. If successful, IBM could help AAPL cement iOS as the preferred platform for enterprise. Additionally, IBM mentions device management as a cloud service it intends to build, which could be competitive with BlackBerry's platform." Outperform. $102.
T. Michael Walkley, Canaccord Genuity: "While Apple’s iPhone and iPad devices have grown share of the enterprise mobility market the past several years, particularly in developed markets, we believe this partnership could further accelerate iOS penetration in and share of the global enterprise market... In fact, we believe this partnership could add some potential upside to our above consensus FY14/FY15 Apple estimates and expectations for a record iPhone 6 upgrade cycle." Buy. $112.
Gene Munster, Piper Jaffray: It's Still All About The Consumer. "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. We believe overall 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. We note that if half of the Fortune 500 were to each purchase an incremental 2,000 iPhones and 1,000 iPads above what they were planning to purchase as a result of the IBM deal, it would mean about a half a percent to CY15 revenue. Additionally, we expect IBM to eventually offer similar solutions on Android over time, thus we believe Apple's innovation on the OS and hardware remain the most critical factors in device sales." Overweight. $105.
Brian Marshall, ISI: Quick Thoughts. "In our view, AAPL has already penetrated large business (e.g., ~98% adoption among Fortune 500 and ~92% among Global 500) with iOS. However, much of this adoption came from the "ground-up" as rank-and-file employees brought their own devices to the workplace. We believe there is significant potential for broader/deeper penetration with a top-down approach together with IBM. For IBM, we see this as a small step towards restoring relevance among its customer base by specifically focusing on the highest-value applications and use cases in the workplace. We do not expect IBM to make any meaningful margin on AAPL hardware sales, but see this as another way to monetize software and industry expertise inside the company... While the partnership is a win-win, we do not expect a material contribution to AAPL. For example, if AAPL was to sell an incremental 5% of annual corporate PC sales through the partnership (e.g., 5% of estimated ~150mil corporate PC sales) in an optimistic scenario, this would boost iPad sales by just under ~10% and add ~2% to EPS annually. Buy.
Trip Chowdhry, Global Equities: Quick Take. "We are skeptical about the timing of the deal, which makes us wonder if IBM, and may be even AAPL are going to miss their revenue expectations:
- It is something out of ordinary for both APPL as well as IBM to make such an announcement, while both companies are in their quite (sic) period
- IBM is only 2 days away from their earnings announcement, while AAPL is only 1.5 weeks away from their earnings announcement. The timing of this announcement makes us feel that IBM will very likely miss their revenue expectations and probably Apple may also miss their revenue expectations"
VIDEO UPDATE: Roger McNamee on CNBC.