Apple should acquire IBM

“Could a growing company that makes most of its money selling to individuals in China breath life into a shrinking giant that sells to enterprises?” Peter Cohan writes for Forbes. “If the acquirer is Apple and the target is IBM, the answer is maybe. And there are three reasons that such an improbable merger might make sense.”

“Tim Cook knows IBM. Cook worked at IBM from 1982 to 1994,” Cohan writes. “In July 2014, IBM and Apple partnered ‘to deliver Apple technology to big business in July 2014,’ according to the Wall Street Journal.”

“Apple can afford to make the buy,” Cohan writes. “IBM’s market capitalization is currently $171 billion. Let’s assume that Buffett would be willing to part with his shares for a 20% control premium — meaning that IBM might cost Apple $205 billion.”

“IBM needs help with execution,” Cohan writes. “Ultimately, such a deal would only make sense if Apple could figure out how to turn IBM into a company that grows fast by selling products that businesses want to own. On the other hand, perhaps this is an execution challenge that is beyond the ability of any human being to master.”

Read more in the full article here.

MacDailyNews Take: Apple buys the original Big Brother? While the neatness of the saga’s ending would be delicious, currently Apple can’t even master the challenges of shipping a watch, so integrating such a monster as IBM into the company might be troublesome, to say the least, or even deadly to one of both. Work with IBM and use them for what they can deliver, business customers, where “nobody ever got fired for buying IBM” even when what they’re selling today are iPads for Apple.

Huge M&A deals are a can of worms.

36 Comments

  1. “Apple can afford to make the buy” Just ’cause you can don’t mean you should. I agree with MDN- this would be an unmanageable bag of hurt regardless of the irony factor.

    1. The chances of Apple doing this are near zero, but it makes more sense than most of these “what ifs”.

      Keeping IBM as a subsidiary (to avoid loss of focus for both companies) that pushed Apple technology into the Enterprise and fabricated A-chips wouldn’t be the worst thing Apple could do. There would be a lot of synergy in being closer (but not merging).

    2. In fairness, the author titled his article “three reasons”. He didn’t call them “compelling”, “good” or even “remotely plausible.” When the first (and presumably best) is “Tim Cook worked there,” it can only slide downhill. Apple makes products; IBM sells services. Apple is currently very successful; IBM, not so much. The article explains why IBM and Warren Buffett would love such a deal; it just fails to explain ANY possible advantage to Apple, and I am certain Apple management is far too clever to enter such a stupid acquisition.

  2. Would Apple want to be saddled with IBM ? Such a monster deal would cut out a great deal of the flexibility in cash that Apple desires.

    Moreover, whats the return on investment.

    Apple would be better off with any number of companies. IBM doesn’t even rank on my list of target companies.

    1. Apple’s acquisitions to date have relied on almost singular cutting edge technology.

      And the IBM cutting edge with IBM’s technology is … ?

        1. Enterprise solutions with Apple tech is another, and a biggie.

          Apple wants to be in the Enterprise but doesn’t want to drop its focus on individual users, which is why their current arrangement with IBM already makes so much sense.

  3. Would Apple buying IBM be incredible poetic justice? Absolutely.

    Is it a good business more? Extremely unlikely. I agree with MDN- let partnership take its course. These are not the kinds of acquisitions Apple makes. They acquire small companies with valuable IP. And they then enter markets where they know they can make a big difference (can you say “cars”- yes, I knew you could!).

    This takeover will never happen. But it is fun to think about…

    1. If Warren Buffett into IBM then Carl Icahn into Apple, he should buy more AAPL, sell eBay, Nuance, Transocean, Hertz, Hologic, Herbalife to buy more AAPL. 🙂

  4. IBM is still selling large mainframe computers, derivative of the 360 line from the ’60s and support services for systems running COBOL. Why would Apple even want to think about grabbing on to that set of anchors? Absolute mismatch of cultures and skill sets. The fact that Tim Cook was motivated to get out in 1994 should be proof that his interests and skills lie elsewhere.

    Apples partnership with IBM makes a lot of sense. Getting low cost, robust devices into the hands of IBMs traditional customers as front ends to the massive systems those customers have in their data centers is a good idea. Apple trying to own and make money managing that process doesn’t seem quite so good.

  5. I’d be quite curious if Apple were to acquire IBM would Warren Buffett decide to dump his IBM shares. He gets IBM but doesn’t quite get Apple. Not sure why thinks IBM is a better investment than Apple. I’d think IBM would be harder to understand as a company unless Buffett just doesn’t like hardware companies. I don’t think Apple will bother to acquire IBM because Apple seems to be more interested in hardware companies, so far. However, maybe Apple might have interest in Watson technology which, to me, would make a lot of sense in acquiring.

    1. To be fair to Buffett, he never said that Apple wouldn’t be a successful investment, just that he had a hard time understanding most tech stocks. That’s pretty reasonable actually. He’s an expert in many fields, and doesn’t try to be an expert in every field. In the fields he knows, he’s got a really outstanding record of picking winners, and avoids the fields he doesn’t know. His investment in IBM in one of the most fringe investments he’s made, and even that has been more of an investment in business services rather than as a pure tech play.

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