A Tale of Two Tech Giants: Apple, IBM Heading in Opposite Directions

A few months back after IBM (IBM) reported its third fiscal quarter result I wrote the battle being waged between IBM and Apple since the 1980s was over and that Apple won. This last week has proven not only did Apple (AAPL) make all the right moves at the right times to edge out its longtime rival, it left IBM in the dust.

If you had asked nearly anyone in the IT industry 15 or even 10 years ago whether they thought IBM was going to be in such dire straits while Apple—which was just unveiling the odd music-listening device called the iPod—would be reporting the largest profit in corporate history, I don’t think anyone would have imagined it. Not to this extent.

But through the constant consumerization of IT and Apple’s quick mobile innovation—and perhaps the best marketing on the planet—have boosted the company to unprecedented heights. All this while IBM was struggling to get out of the PC business, let go of its old server lines and refocus on cloud services. Apple was too fast and IBM was too slow.

When Apple founder and industry icon Steve Jobs died in 2011 and CEO Tim Cook had to stand on his own, many doubted he could continue the company’s momentum and innovation. Did he have Jobs’ vision? Did he have the respect among the industry and Apple’s workforce? Could he continue to drive research and development the way Jobs did and still run an efficient high-tech company in a wildly changing market?

Well, I was not one of them. While I wasn’t a huge Jobs fan and was unsure how Cook would perform without Jobs’ influence, I did believe he was a solid operator. But after this week’s earnings release, Cook got his vindication—not that he was even looking for it.

In anyone has been living under a rock the last few days or had no Internet access because of “Snowmageddon,” Apple reported the largest net income of any public company in history for its December quarter, with a 37 percent rise in profits to a staggering $18 billion vs. $13.1 billion for the year-ago period. This even topped ExxonMobile’s previous record of quarterly profits of $15.9 billion in 2012. Revenue came in at a whopping $74.6 billion for the most recent three-month period, compared with $57.6 billion for the corresponding period a year ago.

The driving force was record iPhone sales of 74.5 million units. That even beat the most bullish financial analysts’ estimates. Wow.

“We’d like to thank our customers for an incredible quarter, which saw demand for Apple products soar to an all-time high,” Cook said in a prepared statement. “Our revenue grew 30 percent over last year to $74.6 billion, and the execution by our teams to achieve these results was simply phenomenal.”

“Phenomenal” seems like an understatement. But what else could you say? Cook, in typical Cook fashion, put the emphasis on his team and away from himself.

On the East Coast, the news wasn’t quite as sunny. In addition to the mega snowstorm that rocked the area, IBM is being rocked by massive layoff rumors following a dismal fourth-quarter report.

IBM reported revenue of $24.1 billion, short of the $24.7 billion analysts were estimating, and net income dropped 11 percent to $6.2 billion—albeit the earnings drop was expected.

“We are making significant progress in our transformation, continuing to shift IBM’s business to higher value, and investing and positioning ourselves for the longer term,” said CEO Ginni Rometty said in a prepared statement.

What a different tale of two tech giants. To be fair, IBM is in the middle of a massive transformation and company executives have said that cloud services and business analytics are rising. But can they rise fast enough? I never count IBM out but now massive layoff rumors are flying around the industry.

One thing is certain: You can’t grow your way to the top through attrition. IBM needs to continue to develop its cloud services capabilities and find a way to reallocate even more resources.

Knock ’em alive!