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IBM May Have Won the Battles, But Apple Won the War

It was a battle that raged nearly as long as the cold war ... okay, maybe not that long, but is sure seems it: IBM (IBM) vs. Apple (AAPL). IBM had its legacy, installed base, name recognition and billions in R&D to fight off Apple in corporate America. And it worked for a long time.

Elliot Markowitz

October 24, 2014

3 Min Read
IBM May Have Won the Battles, But Apple Won the War

It was a battle that raged nearly as long as the cold war … okay, maybe not that long, but is sure seems it: IBM (IBM) vs. Apple (AAPL). IBM had its legacy, installed base, name recognition and billions in R&D to fight off Apple in corporate America. And it worked for a long time.

That battle now looks to be over, if the latest financial results from both companies are indicators. Apple didn’t permeate the high corporate walls via its desktop machines or operating system but through mobility and the consumerization of IT. Now as its latest quarterly results show, Apple is positioned directly where the industry is growing—and IBM less so.

It all started 13 years ago on Oct. 23, 2001, when Apple unveiled the first iPod. What was first deemed as a cool and sleek portable music player ended up changing the music distribution business, mobile communications and the gaming business. Then, six years later, the first iPhone hit the market and there was no turning back. Apple was leading the mobile device charge, pushing the boundaries of cloud computing and getting inside corporate America after years of failure.

For its part, IBM got out of the PC business to focus on higher-end servers, software and services. The company is trying to focus on more cloud-based services and software and less on actual hardware, but the transition isn’t an easy one.

Each company’s latest quarterly financial results tell the story. Chew on these numbers:

For its third fiscal quarter, IBM reported revenue from continued operations of $22.4 billion. This represents a 4 percent decrease from the third quarter of 2013. Figuring out its earnings shortfall is a bit more complicated. Its 3Q diluted earnings per share came it at $3.46 a share, an 8 percent drop from $3.77 a share a year earlier. Then there are non-GAAP earnings per share, which any way you compare them declined as well. Net income from continued operations decreased a whopping 17 percent to $3.5 billion for the quarter from $4.1 billion a year earlier.  Then there is consolidated net income and non-GAAP income.

Again, any way you slice it, IBM missed both its earnings and revenue target and is once again undergoing a transformation, according to its CEO.

“We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas—cloud, data and analytics, security, social and mobile—where we continue to shift our business. We will accelerate this transformation,” said Ginni Rometty, IBM chairman, president and chief executive officer, in a prepared statement.

Now turn your attention to Apple, which also reported its third-quarter fiscal results, which were the opposite of IBM. Driven mainly by strong iPhone, Mac and App Store sales, Apple reported 4Q profits of $8.5 billion, or $1.42 per share on revenue of $42.1 billion. This compares with net income of $7.5 billion, or $1.18 per share, on $37.5 billion for the corresponding period the year before.

Both top and bottom line results beat Wall Street expectations. As result, Apple’s board even approved a cash dividend of 47 cents per share.

“Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus,” said Tim Cook, Apple’s CEO, in a prepared statement. “With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015.” 

The rivalry is dead. IBM was keeping Apple at bay for years. Now the two aren’t even in the same markets.

Knock 'em alive!

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About the Author(s)

Elliot Markowitz

Elliot Markowitz is a veteran in channel publishing. He served as an editor at CRN for 11 years, was editorial director of webcasts and events at Ziff Davis, and also built the webcast group as editorial director at Nielsen Business Media. He's served in senior leadership roles across several channel brands.

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