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Palmisano Sees No Innovation Slowdown at Apple (Update 1)

Stocks in this article: IBM AAPL MSFT

This story has been updated with additional comments from Palmisano and HDS.

NEW YORK ( TheStreet) - Former IBM (IBM) CEO Sam Palmisano says Apple (AAPL) can continue to push the technology envelope despite recent concerns its innovation engine may be slowing.

"I don't think that Apple is less innovative," he said, during a lunch presentation in New York hosted by Hitachi as part of the World Business Forum event. "It's just the cycle, that's where they are at. You have got to go to the future - where's the next wave?"

Palmisano, who was responding to a question from TheStreet following his presentation, acknowledged the challenges faced by Apple CEO Tim Cook and his team.

"It's a little bit of a dilemma, but I have lived it - I ran the PC business at IBM before we sold it," he said. "Apple's dilemma happens to be the phones - the challenge is that when you're running that kind of innovation model you have got to constantly have hits."

"Apple has a wonderful business model around smartphones," he added. "But you have got to move really, really fast - you went from iPods, then you went to the iPhone and then you went to the iPad."

An Apple investor who bought the tech giant's stock when it went below $400, Palmisano noted that the company's shareholders are increasingly sensitive to the iPhone maker's margins.

The one-time IBM supremo cited, in particular, Apple's launch of cheaper iPhones in emerging markets as a surefire way to pressure margins. "It's impossible, it's mathematically impossible (not to have margin compression)," he said. "I have lived it - it's impossible."

Palmisano also speculated about Apple's future technology moves. "The next hit has got to be, I think, TV," he said. "I don't know what it is, you would have to ask Apple what it would be."

The 62-year old took IBM's reins in 2002 and successfully shifted the company's focus away from hardware to high-margin software and services. He stepped down at the start of 2012, to be replaced by current CEO Ginni Rometty.

Speaking on Wednesday, Palmisano cited data analytics as a key area of enterprise technology innovation.

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