Palmisano Sees No Innovation Slowdown at Apple (Update 1)

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.

"It's all in the data," he said. "There's a huge opportunity to transform how you run a company - you can take all that kind of data analysis, forecasting trends, supply chain optimization."

"This is bigger than ERP," he added. "Because it touches all elements of society, not just payroll, inventory supply chain - this is a massive opportunity, and we're only in the beginning of it."

There has also been chatter recently that Palmisano would be a good successor to Microsoft's ( MSFT) retiring CEO Steve Ballmer. At one point, Brian Householder, the COO of Hitachi Data Systems, who hosted the presentation, asked whether Palmisano would take the Microsoft hot seat.

His guest quickly shot down this possibility, replying with a smile that he "would never work for a public company again."

Speaking to TheStreet following Palmisano's presentation, Householder agreed that analytics is a booming market. "Analytics could be of anything," he said. "This is the whole 'Internet of things'."

HDS, he said, is even providing content and data management solutions to satellite imaging companies that monetize information from retailers' parking lots by measuring customer density and predict the health of the businesses.

Householder also cited the example of retailers using video surveillance for "more than just security", with footage analysed to measure customer buying patterns. "The sky's the limit - everything will be enabled by driving value from your information," he said.

--Written by James Rogers in New York.

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