Posted on 06/06/2005 10:54:57 AM PDT by Ernest_at_the_Beach
SAN FRANCISCO (MarketWatch) -- Apple Computer Inc. said Monday that it will begin using microprocessor chips made by Intel Corp. in its signature Macintosh computers beginning next year, ending a longstanding relationship with International Business Machines Corp.
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Apple
(AAPL: news, chart, profile) made the announcement as Chief Executive Steve Jobs delivered the keynote speech at the company's annual conference for software developers in San Francisco.
"Our goal is to provide our customers with the best personal computers in the world, and looking ahead Intel has the strongest processor road map by far," Jobs said in a statement released at the start of his talk.
The chip transition is a stunning about-face for Apple, which has fought a long, mostly uphill battle against competing computer products that run on Intel (INTC:
chips and rival software from Microsoft Corp.
The switch to Intel likely will allow Apple to lower prices at a time when it is trying to boost its meager share of the PC market by capitalizing on consumers' devotion to the company's iPod digital music player.
However, by embracing Intel after years of railing against its dominance of the PC market, Apple risks alienating its famously loyal base of users and developers.
"The most visible risk is that there could be some pushback in the developer community, as the move would require programmers to rewrite some applications," Piper Jaffray analyst Gene Munster wrote in a research note.
Still, Munster predicted that the long-term gains from the new partnership will outweigh any "short-term pain."
Using Intel will give Apple a consistent supply of chips, bring the price of Macintoshes more in line with its competitors and reach a potentially larger developer community, which would lead to more commercial applications for the Mac, according to the analyst.
Effects on IBM
The Mac maker's switch signals a shift in the fortunes of the chipmaking unit at IBM
, which has manufactured Power PC processors for the Macintosh for more than a decade.
Apple reportedly has been upset about Big Blue's inability to engineer a next-generation chip that can be used in its notebook computers. Desktop Macs run on the powerful G5 product, but the chips generate too much heat to be used in PowerBook and iBook laptops.
Apple uses the so-called G4 chip, manufactured by Freescale Semiconductor
(FSL:
news, chart, profile) , for its notebook computers and the Mac mini PC. Freescale shares fell on the report, even though Apple sales represented only 3% of the company's 2004 sales of $5.7 billion.
According to the CNET article, Apple would shift its lower-priced computers such as the Mac mini to Intel chips in mid-2006 and higher-end machines such as the Power Mac in mid-2007.
IBM sold its own PC unit to a Chinese rival late last year, and has had recent success with its non-PC chips, some of which are being used to power Microsoft's Xbox video-game hardware.
Representatives for Apple and IBM could not be reached Sunday for comment. Intel and Freescale said they could not comment on what each referred to as "rumor and speculation."
Reports of an Apple-Intel partnership lit up Internet blogs and message boards on Sunday, with reports that Apple apparently is targeting laptops and the development of its rumored portable Tablet PC, and that an Intel alliance could be a means to capturing greater share of the computer business.
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"As a dedicated Mac fanatic since 1987, I don't care what chip is in the box as long as it's doing the job and helps Apple to develop the platform." -- Elise Bauer Pacifica Group |
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Building on iPod momentum
Apple has made great strides toward that goal with its breakout iPod digital music player. Earlier this year, Morgan Stanley estimated that iPod users switching to Macs from PCs could boost Apple's share of the global computer market to 5% from 3% in 2005.
Yet a pact with Intel would come at a time when iPod sales appear to be slowing. Goldman Sachs said in a research report Thursday that iPod shipments could be flat this quarter.
Also last week, Apple settled a customer class-action suit over the iPod's battery life that could cost $100 million or more, involving one of the first three generations of the iPod. See full story.
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On Friday, Shares of Apple Computer lost $1.80, or 4.5%, to $38.24.
Testing brand loyalty
The switch also could pose some significant product branding issues that could hurt Apple in the short term, according to some analysts.
Apple's biggest hurdle could be appeasing its dedicated, often fanatical customer base, which could recoil from seeing an "Intel Inside" sticker on a Power Mac.
"The world associates Intel with [Microsoft Corp.'s
(MSFT:
news, chart, profile) ] Windows," said Elise Bauer, a partner at the Pacifica Group in Livermore, Calif., which provides strategic marketing consulting to technology companies.
"Intel is coupled with Windows to the point where we call it a 'Wintel' box. If Apple is now embracing Intel, then there's some rebranding for both companies, Intel and Apple, to do around that. Now you'd have 'Mactel' and 'Wintel.' The branding challenge for both Apple and Intel is to create a distinction," she added.
What's more, software developers would have to rewrite software applications to maximize the performance of the Intel processors.
Still, most Mac users' loyalty may be solid enough that Apple effectively can do no wrong, Bauer suggested.
"As a dedicated Mac fanatic since 1987, I don't care what chip is in the box as long as it's doing the job and helps Apple to develop the platform," she said. "What I care about is that Apple stays in business and continues to thrive."
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Jonathan Burton is MarketWatch's investments editor, based in San Francisco. |
fyi
It looks like it is now official, folks.
It's official, their CEO just announced it, running the presentation off of an Intel PC.
http://www.engadget.com/entry/1234000137045772/
Does this mean IBM will be freed to sell its Power PC chips to clone manufacturers who will again be able to offer budget legacy Apple compatibles?
I think there are some real mysteries in this move....things happening that are not yet apparent!
Not sure!
IBM can sell the PPC chips to whoever they want, but it's doubtful Apple will allow the future licensing of their software to be compatible with them.
????
The pentium M, Intel's processor for portables is the far and away leader in low power/performance, and one of the primary reasons Apple is switching.
I guess Mac heads will have to stop touting the superiority of the PowerPC platform over x86...
Wonder if Apple is going to dump the dual CPU computers now?
Jobs apparently just apologized to the Intel CEO on stage about it. He said no problem.
It puts Apple in direct competition with Microsoft for the first time.
Either they will take a bite out of Microsoft (no pun intended), or they will quickly wither away.
Why would they? Intel manufactures dual-core CPUs. In addition, if Apple goes for the Pentium M or some variant, it won't be hard to make a dual-core version of that particular CPU. Intel's dual-core implementation is just the gluing of two CPUs together, anyway. It's not a true solution ala AMD's.
Apple's first and foremost competition right now is Linux, which also has a *nix core and who recently passed them in number of shipping systems relegating Apple to third place for the first time. Apple was getting squeezed by IBM, who is pushing Linux everywhere instead while starving Apple for chips, which left them with little other choice.
Intel offers not just increased performance, but reduced power consumption. Transition will be complete by WWDC ‘07.
But Intel? They're getting whomped by AMD in performance and heat. AMD has proven they can ship volume, having seen their marketshare go way up in the last several years. Honestly, can anyone say with a straight face that Intel has the best x86 architecture? I have a feeling Intel made a really sweet deal with Apple, maybe even including a loss-leader.
Satellite shot with crosshairs shows building where a team has been working on the “Just in Case…” scenario. Every release of Mac OS X has been compiled for Intel for the past 5 years. Here comes the demo!
This has been suspected for a long time, especially since Darwin (the core of OS X) has been available for x86 for years. I'm just amazed how easy they've made it for developers to port and make fat binaries. Ported Mathematica in two days? Damn!
But in the end, I wonder if this means I'll be able to simply replace Windows XP with OS X on my PC? Sweeeet!
Gray said that Mathematica is encumbered by "ancient code that hasn't been changed since the Reagan administration," but despite that, it only took about two hours to get Mathematica's Mac OS X code running on an Intel-bsaed Mac. "We're talking about twenty lines of source code out of millions, from a dead cold start. This is nothing like Carbonizing. It's prety good when the biggest problem from your port is to figure out what to do with the rest of your weekend."
Thank God. This is what I was most worried about. If it's this easy to convert, then Motorola/IBM/Freescale can go screw. If you can't get the job done, we'll go with someone who can.
Don't you think this at least means the end of Microsoft Office for Mac OS?
I wouldn't bet on it. Ask Be how well that plan tends to work ;)
That's now the job of MS Xbox and Playstation fans.
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