[IP] What's Really Behind the Apple-Intel Alliance
June 11, 2005
What's Really Behind the Apple-Intel Alliance
By JOHN MARKOFF
SAN FRANCISCO, June 10 - Nearly a quarter-century ago, Apple Computer ran a
snarky ad after its
onetime rival encroached on its territory: "Welcome, I.B.M. Seriously." This
week, however, Steven P.
Jobs had a different message for Big Blue, which had since become a chief ally:
"Goodbye. Seriously."
Mr. Jobs, 50, a co-founder of Apple, is famously brash and mercurial. Even so,
the Apple faithful - not
to mention I.B.M. itself - were caught by surprise by Apple's decision to end
its 14-year relationship
with I.B.M. and team with Intel for its computer chip needs.
The buzz that began Monday among developers, bloggers, analysts and Apple
followers trying to guess
Mr. Jobs' true designs has not let up. After all, Mr. Jobs is a legend in no
small part because he defied
the monster combination that is Wintel - as the digerati call the Windows and
Intel alliance - and lived
to talk about it.
Apple's decision in the 1980's to use a different chip from the one put in most
personal computers "fit
in with the idea of Think Different," Stephen G. Wozniak, who founded Apple
with Mr. Jobs in 1976, said
in an e-mail exchange. "So it's hard for some people to accept this switch."
So what could a Macintel possibly hope to accomplish?
Potentially, quite a lot. In striking the deal, Mr. Jobs, Apple's chief
executive, has opened a range of
tantalizing new options for his quirky company.
Many people in the industry believe that Mr. Jobs is racing quietly toward a
direct challenge to Microsoft
and Sony in the market for digital entertainment gear for the living room.
Indeed, Sony's top executives
had tried to persuade Mr. Jobs to adopt a chip that I.B.M. has been developing
for the next-generation
Sony PlayStation.
An Intel processor inside a Macintosh could put the vast library of
Windows-based games and software
programs within the reach of Mac users - at least those who are willing to run
a second operating
system on their computers.
Moreover, having Intel Inside might solve an important perception problem that
has long plagued Apple
in its effort to convert consumers who are attracted to the company's
industrial design, but who have
stayed away because the computers do not run Windows programs.
There is an immediate risk in the tie-up with Intel, however: Mr. Jobs could
soon find himself trapped if
his best customers stop buying I.B.M.-based Macintoshes while they wait for
more powerful Intel-based
systems, which are likely to begin arriving in January 2006.
"There is going to be a long wait," said Mark D. Stahlman, a Wall Street
analyst at Caris & Company. The
power-conserving 64-bit Intel chips that Apple is counting on to rejuvenate its
laptop products will not
be available until early 2007, he pointed out.
In an interview, Mr. Jobs rejected the notion that Apple might suffer from what
is known as the
"Osborne Effect," a term that describes the fate of the computer pioneer Adam
Osborne whose firm
went bankrupt when he announced a successor to his pioneering portable computer
before it was
available.
At Apple's Worldwide Developers Conference on Monday, Mr. Jobs talked of a
transition that would
appear almost seamless to customers. "As we look ahead we can envision some
amazing products we
want to build for you and we don't know how to build them with the future
PowerPC road map," he said.
Nothing was seamless about how the deal with Intel came together.
Several executives close to the last-minute dealings between Apple and I.B.M.
said that Mr. Jobs waited
until the last moment - 3 p.m. on Friday, June 4 - to inform Big Blue. Those
executives said that I.B.M.
had learned about Apple's negotiations with Intel from news reports and that
Apple had not returned
phone calls in recent weeks.
Each side disputes what led to the breakup. People close to I.B.M. said pricing
was a central issue, while
Mr. Jobs insisted on stage Monday that I.B.M. had failed to meet promised
performance measures.
On stage, Mr. Jobs noted that he had promised both a 3-gigahertz Macintosh as
well as a more
powerful PowerPC-based portable computer, promises that he had not been able to
deliver.
In the end, Mr. Jobs was given no choice but to move his business to Intel,
when I.B.M. executives said
that without additional Apple investment they were unwilling to pursue the
faster and lower-power
chips he badly needs for his laptop business.
"Technical issues were secondary to the business issues," said an executive
close to the I.B.M. side of
the negotiations. Because the business was not profitable, I.B.M. "decided not
to continue to go ahead
with the product road map."
But Mr. Jobs disputed this assessment, simply stating that I.B.M. had failed to
meet its technology road
map. The issues in the end, he said, came down to speed and the absence of a
chip that consumed less
electricity than traditional processors designed for PC's.
"As soon as I heard Steve say that the factor where Intel's road map was
superior was processing power
per [watt] I knew right away that it was exactly what I have been reading and
saying and so have many
others, that this is the real key to the future of high performance computers,"
Mr. Wozniak wrote.
As it happens, Intel's was not the only alternative chip design that Apple had
explored for the Mac. An
executive close to Sony said that last year Mr. Jobs met in California with
both Nobuyuki Idei, then the
chairman and chief executive of the Japanese consumer electronics firm, and
with Kenichi Kutaragi, the
creator of the Sony PlayStation.
Mr. Kutaragi tried to interest Mr. Jobs in adopting the Cell chip, which is
being developed by I.B.M. for
use in the coming PlayStation 3, in exchange for access to certain Sony
technologies. Mr. Jobs rejected
the idea, telling Mr. Kutaragi that he was disappointed with the Cell design,
which he believes will be
even less effective than the PowerPC.
Now that Mr. Jobs has broken with I.B.M., however, Apple is free to pursue a
potentially intriguing
consumer electronics strategy with Intel.
Intel has been looking for ways to get its chips into devices that can compete
with game consoles as
living-room entertainment hubs. In fact, all three next-generation video game
machines made by
Microsoft, Nintendo and Sony are based on I.B.M. chips. And analysts say that
both Microsoft's Xbox
360 and the Sony PlayStation 3, scheduled to arrive next spring, will be
positioned as home media hubs
in addition to being video game machines - and priced far lower than the
Intel-powered, Windows
Media Center PC's that are also aimed at the living room.
Should the new consoles find wide acceptance as broad-based entertainment
engines, Intel will need to
respond - and one attractive alternative would be an inexpensive Macintosh Mini
based on an Intel
processor, able to run the vast library of PC games.
Before he can set his sights on that new market, Mr. Jobs faces the task of
shoring up his base, his
customers and developers. On Monday, he made the case to the software designers
who must be
willing to rewrite their software for the new Macintel world.
Early indications are that he made a convincing presentation.
"The reason people buy Mac is the software, and I think the real fun is yet to
come," said Scott Love, the
president of AquaMinds, a software concern in Palo Alto that sells a Macintosh
program called
NoteTaker used by writers, researchers and students. "We'll be able to develop
a program that will just
work on both I.B.M. and Intel-based computers."
Even more important will be Mr. Jobs' ability to persuade the Macintosh
faithful to join him in his
journey from I.B.M. to Intel. That is where he has an advantage over virtually
every other executive.
"He is still committed to the idea of an Apple culture," said Peter Schwartz,
the co-founder and
chairman of the Global Business Network, a consulting firm in Emeryville,
Calif. "It is the counterculture
to the dominant Windows culture."
Indeed, Mr. Jobs has always set himself apart from other corporate executives.
After all, which other
American business executive would have thought to name the holding company for
his executive jet
airplane "Marmalade Skies"?
Steve Lohr contributed reporting from New York for this article..
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