Of course not, never, absolutely not. But I’ve heard those words before. When I first moved to Silicon Valley, I went to work at ROLM, where there had been a lot of concern that IBM would buy and kill that company. So much so that IBM signed a contract saying it would never buy the firm. This was presented during my recruitment interview so that I would feel comfortable accepting a job at ROLM. Well, six months later, right before my profit sharing was due to cut in, IBM bought the firm and killed profit sharing (and a lot of other things).
In this case, Apple actually has more resources to do a deal like this than IBM, which should assure that Apple’s way of doing business survives in a merger. And IBM has been around for 100 years, so it should be far better at defending its culture and process than a much younger firm. In addition, we have creative options showcased by EMC that could allow a structure with the benefits of a combined company while avoiding most risks.
I’m not saying that IBM and Apple will merge. I’m saying I see a path for both companies that, in theory, could result in the benefits of the merger being realized while avoiding most of the risks.
The Disadvantages of a Merger
We saw the problems in trying to cover the consumer and enterprise markets in IBM in the 1990s, and then Microsoft, Palm, BlackBerry and Apple last decade. IBM consistently crippled its consumer efforts with the PC Jr., its biggest mistake, to preserve its enterprise business. Apple’s drive to consumers made its servers unsuccessful. Palm and BlackBerry embraced business; one went under and the other is in a critical turnaround. The more Microsoft focused on enterprise business, the more it put its consumer business at risk. Microsoft’s once overwhelming dominance in operating systems, PCs and leadership in game consoles has been sacrificed to its successful enterprise efforts.
A traditional slam-together merger between IBM and Apple would likely kill one, if not both companies. There is simply too much difference between the customer sets, cultures and financial structures for an executive team, any executive team, to pull this off.
The Advantages of a Merger
If the new entity could combine Apple-like products that met enterprise needs for security and compliance with IBM services, and these products were attractive to employees, the result could be very powerful. This is the partnership’s goal, and banks are already getting excited. However, to sustain a lead over the rest of the vendors that are increasingly tying their devices into their management and security frameworks, a higher level of common control will likely be required than a partnership would provide.
EMC/VCE May Have the Answer
EMC has been exploring a series of unique organizational structures, from its publicly traded controlling interest in VMware, to its customer partnership with GE for Pivotal representing its strategic software effort. VCE is perhaps the most pertinent. Cisco, VMware, EMC and Intel all own part of this entity, which focuses on large-scale Apple-like products (in terms of being appliance-like), and best of class offerings for the very large enterprise. Better than a partnership but not fully subservient, VCE has shown growth that has stunned the market largely by being able to cherry pick the best technology from its investors, who remain focused on the firm’s success.
Wrapping Up: Joint Ownership
Forming a third entity for this effort like VCE might be interesting, but I can think of an easier path. What if IBM took a very large position in Apple and Apple took a very large position at IBM, both populating much of each other’s boards with common board members. The CEOs would remain mostly independent but they would get firm guidance from the common board members, who would be focused on synergy between the companies. Given the lack of overlap between the firms, there shouldn’t be any unfair trade issues. The end result, if managed properly, would have the advantages of a merger but not the disadvantages, and have the added benefit of an incredibly strong defense against corporate raiders like Carl Icahn. Both CEOs would also become far closer to each other and could better coordinate against mutual threats like Amazon, Google and Microsoft.
Stranger things have happened.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+