Three Reasons Apple Should Acquire IBM.


If the acquirer is Apple AAPL -1.91% and the target is IBM IBM -0.74%, the answer is maybe. And there are three reasons that such an improbable merger might make sense.

Before getting into these reasons, it is worth pointing out that such a deal would make Warren Buffett smile. According to AP, he “believes that IBM will be making more money ten years from now than it does today, and IBM is repurchasing its stock aggressively so Berkshire’s share of the company’s profits  — [it owns 9% of IBM stock now] will grow over time — [due to revenues from IBM's cloud computing and corporate services].”
Whether that happens or not, Apple is becoming increasingly dependent on demand in China for its eight year old iPhone line — China is Apple’s biggest region and its sales soared 70% there to $16.8 billion in the first three months of 2015 – while IBM keeps getting smaller while promoting the hope that the cloud — it invested $4 billion there, according to the Wall Street Journal – will be its salvation.
During the same period, IBM’s revenue dropped 12% to $19.59 billion “as a surging U.S. dollar compounded the impact of shrinking hardware sales. It was the company’s 12th straight quarter of year-on-year declines,” according to the Journal.
Tim Cook knows IBM
Cook worked at IBM from 1982 to 1994. Cook rose up the ranks at IBM and in his last job there he was “North American Fulfillment director, managing manufacturing and distribution functions for IBM’s Personal Computer Company in both North and Latin America,” according to Biography.com.
In July 2014, IBM and Apple partnered “to deliver Apple technology to big business,” according to the Wall Street Journal. IBM has since developed software for Apple’s iOS operating system, but it has been unclear how important the relationship is to either company’s bottom line.
Last month, IBM and Apple announced a deal to get iPads into the hands of elderly Japanese through Japan Post. But so far, the IBM partnership has not boosted iPad sales which tumbled 23% to 12.6 million in the first three months of 2015, according to the Journal.
On April 30, Cook expressed optimism for the partnership, noting  “We want to change the way people work. There are too many enterprises that are stuck in a different era.” 

Apple can afford to make the buy
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.
For now, Apple’s market capitalization is $743 billion — and it could borrow more money if it decided to use debt to help finance that $205 billion purchase. But it would take 28% of Apple stock to buy IBM at that price.
IBM needs help with execution
Whether it makes economic sense for Apple to buy IBM depends on whether the merger could generate enough additional cash flow in current dollars to more than offset the acquisition price.
I think such a deal could generate some significant cost savings by consolidating overlapping overhead departments like finance, human resources, and procurement. Perhaps the two companies could find ways to save on office space as well.
Moreover, Apple might be able to spin off some of IBM’s business lines that would not fit the combined companies. For example, it probably would not make sense for Apple to keep IBM’s mainframe business.
On the other hand, IBM has a well-developed sales and consulting arm focusing on business and government that Apple lacks.
Apple could apply its long-proven ability to build products that individuals want to own — it might be able to find gems within IBM’s vast library of patents and intellectual property that it could turn into products that enterprises would want to buy.
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.

FORBES.

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Sandhurst's sheikhs: Why do so many Gulf royals receive military training in the UK? A parade outside the building at Sandhurst Continue reading the main story In today's Magazine The death list that names 5,000 victims Is this woman an apostate? Voices from a WW1 prison camp The Swiss selfie scandal Generations of foreign royals - particularly from the Middle East - have learned to be military leaders at the UK's Sandhurst officer training academy. But is that still a good idea, asks Matthew Teller. Since 1812, the Royal Military Academy Sandhurst, on the Surrey/Berkshire border, has been where the British Army trains its officers. It has a gruelling 44-week course testing the physical and intellectual skills of officer cadets and imbuing them with the values of the British Army. Alongside would-be British officers, Sandhurst has a tradition of drawing cadets from overseas. Many of the elite families of the Middle East have sent their sons and daughters. Perhaps the most notable was King Hussein of Jordan. Continue reading the main story Find out more Matthew Teller presents Sandhurst and the Sheikhs, a Whistledown production for BBC Radio 4, on Wednesday 27 August 2014 at 11:00 BST It will be available on iPlayer shortly after broadcast Four reigning Arab monarchs are graduates of Sandhurst and its affiliated colleges - King Abdullah of Jordan, King Hamad of Bahrain, Sheikh Tamim, Emir of Qatar, and Sultan Qaboos of Oman. Past monarchs include Sheikh Saad, Emir of Kuwait, and Sheikh Hamad, Emir of Qatar. Sandhurst's links have continued from the time when Britain was the major colonial power in the Gulf. "One thing the British were excellent at was consolidating their rule through spectacle," says Habiba Hamid, former foreign policy strategist to the rulers of Dubai and Abu Dhabi. "Pomp, ceremony, displays of military might, shock and awe - they all originate from the British military relationship." Sheikh Hamad Bin Isa Al Khalifa, King Abdullah, Sultan Qaboos Sandhurst alumni: King Hamad of Bahrain, King Abdullah of Jordan and Sultan Qaboos of Oman It's a place where future leaders get to know each other, says Michael Stephens, deputy director of the Royal United Services Institute, Qatar. And Sandhurst gives the UK influence in the Gulf. "The [UK] gets the kind of attention from Gulf policy elites that countries of our size, like France and others, don't get. It gives us the ability to punch above our weight. "You have people who've spent time in Britain, they have… connections to their mates, their teachers. Familiarity in politics is very beneficial in the Gulf context." "For British people who are drifting around the world, as I did as a soldier," says Brigadier Peter Sincock, former defence attache to Saudi Arabia, "you find people who were at Sandhurst and you have an immediate rapport. I think that's very helpful, for example, in the field of military sales." The Emir of Dubai Mohammad bin Rashid Al Maktoum with his son after his Passing Out Parade at Sandhurst in 2006 Sheikh Mohammad bin Rashid Al Maktoum, Emir of Dubai, with his son in uniform at Sandhurst in 2006 Her Majesty The Queen's Representative His Highness Sheikh Hamad bin Khalifa Al-Thani, The Emir of Qatar inspects soldiers during the 144th Sovereign's Parade held at The Royal Military Academy Sandhurst on April 8, 2004 in Camberley, England. Some 470 Officer cadets took part of which 219 were commissioned into the British Army Hamad bin Khalifa Al-Thani, the Emir of Qatar until 2013, inspects soldiers at Sandhurst in 2004 Emotion doesn't always deliver. In 2013, despite the personal intervention of David Cameron, the UAE decided against buying the UK's Typhoon fighter jets. But elsewhere fellow feeling is paying dividends. 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Over the years donations like this have saved the UK taxpayer a considerable amount of money." But what happens when Sandhurst's friends become enemies? In 2001, then-prime minister Tony Blair visited Damascus, marking a warming of relations between the UK and Syria. Shortly after, in 2003, Sandhurst was training officers from the Syrian armed forces. Now, of course, Syria is an international pariah. Journalist Michael Cockerell has written about Libyan dictator Colonel Gaddafi's time at the Army School of Education in Beaconsfield in 1966: "Three years [later], Gaddafi followed a tradition of foreign officers trained by the British Army. He made use of his newfound knowledge to seize political power in his own country." Ahmed Ali Sandhurst-trained Ahmed Ali was a key player in the Egyptian military's removal of Islamist President Mohammed Morsi That tradition persists. In the 1990s Egyptian colonel Ahmed Ali attended Sandhurst. 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