Steve Jobs wins: Apple takes first steps toward IBM acquisition

Steve Jobs once flew a pirate flag over Apple headquarters to signify his defiance toward the computer establishment and, specifically, industry leader IBM. Now his successor Tim Cook has struck a wide reaching deal with what’s left of IBM, which has exited the personal computer business entirely and now focuses on selling solutions to corporate enterprise customers. The move gives IBM the legitimacy of being able to sell its products for use on the popular iPhone and iPad, while it gives Apple a free ride into the enterprise space where it’s long struggled. But more importantly, it means Steve Jobs wins, because it’s the first step toward Apple acquiring IBM itself.

The deal essentially makes IBM the world’s most powerful third party developer of iPad and iPhone apps, and ensures that IBM can hang onto its relevant position in enterprise as corporate computing increasingly shifts from desktop and laptop PCs to tablets and smartphones. If the partnership works out well, Apple’s next logical move will be to bring IBM entirely in house, both to ensure greater integration between hardware and software – something which Apple’s operating philosophy is based on – and in order to edge the Android based competition out of the IBM mix. That means an Apple-IBM merger at some point down the road, and based on relative market cap, it would be Apple doing the acquiring.

Steve Jobs might not love the idea of IBM’s nerd herd of employees setting up shop in Apple’s headquarters. But he’d have relished in the notion of the decidedly non-geek Apple having grown so powerful as to be able to buy IBM outright. Apple’s current market capitalization is currently about three times that of IBM’s. But Apple has nearly enough cash on hand to acquire the $197-billion-valued IBM entirely in cash alone. That wouldn’t happen, but the cash position would allow for a relatively easy buyout, and one which IBM’s shareholders would likely support, all things considered.

Such a move would dwarf Apple’s comparatively pea-sized three billion dollar buyout of Beats by Dre, and would represent by far the biggest gamble in Apple history. But adding IBM’s enterprise and corporate customer base would give Apple the kind of instant, massive, and firmly entrenched boost to its iPhone and iPad sales that the rise of Android has made difficult over the past two years. Then again, Steve Jobs did once comment that he couldn’t see a reason to buy a particular company if he could just keep hiring away its employees. In a similar vein, Apple may not need to spend the money to buy IBM when it can simply sit back as IBM promotes Apple’s hardware products in enterprise as it promotes its own software products.

What would Steve Jobs do? At this point it doesn’t matter. Apple-IBM is Tim Cook’s call now, and at the least, he’s shown that he’s willing to make moves that no one is sure whether Jobs would have made or not. But the mere fact that IBM now needs Apple would have been enough to make Jobs want to fly that pirate flag once again.

Will Stabley
Will Stabley is the Founder and Senior Editor of Stabley Times.
Will Stabley