[tech4all] Apple Faces Big Risk with Chip Change

"It's going to be a difficult transition, but if anyone can do it, Apple can," analyst Kevin Krewell, editor in chief of the Microprocessor report, said. "But there still are risks. Will people stop buying Apples for the next two years waiting for the new ones to come out? And will developers stop developing for the PowerPC while waiting for the Intel chips?"

n an alliance of two of the highest profile companies in the technology industry, Apple Computer (Nasdaq: AAPL)

has said it would begin using microprocessors from Intel (Nasdaq: INTC)

in its computers beginning next year.

As Apple positions itself to use an industry standard that powers more than 80 percent of the world's PCs, though, consumers could decide to wait for the new Intel models to hit the market in about a year, analysts said.

"This transition could get ugly," said analyst Rob Enderle. "Customers don't want to buy a technology that's going to be obsolete."

Long-Term Strategy

Apple Chairman Steve Jobs focused on the company's long-term strategy rather than near-term gains as he sought to reassure a gathering of more than 3,000 software developers that the change will go smoothly.

Apple is shifting to industry giant Intel, hoping it can deliver a high-performance chip that operates at low enough temperatures to power notebook computers and smaller devices like the Mac mini.

Neither of Apple's current partners -- IBM (NYSE: IBM)

and Freescale Semiconductor, a spinoff of Motorola (NYSE: MOT)

-- has done so. IBM also has been unable to produce a 3 gigahertz chip that matches the processing speed of the newer Intel chips used in machines running Microsoft (Nasdaq: MSFT)

Windows.

Intel, by contrast, has developed a large family of powerful microprocessors designed specifically for notebooks. It's also known for continually pushing the speed limit for its desktop microprocessors.

"As we look ahead we can envision some amazing products that we can build, but we don't know how to build them with the future PowerPC road map," Jobs said during his presentation at Apple's Worldwide Developers Conference at Moscone West in downtown San Francisco.

Jobs said the first Apple/Intel products will appear in about a year, and the entire Apple line will shift to Intel by 2007.

Teaming Up

Appearing on stage with Jobs, Intel Chief Executive Paul Otellini lightheartedly acknowledged the sometimes acerbic rivalry between the companies. During product introductions in the mid-1990s, Jobs often mocked the speed of Intel processors and boasted that Apple "toasts" the competition.

But any hard feelings were not evident Monday. "We're proud that the most innovative computer company and the most innovative chip company are finally teaming up," Otellini said.

Neither Jobs nor Otellini revealed which chips Apple was expected to use initially, nor in which computers they would first appear, though experts expect them to first show up in laptops.

Bill Davies, secretary of Mac-Nexus, the Sacramento-area Macintosh users group, said the Apple desktop G5 is a powerful machine, but he can't say the same for Apple's laptops.

"Mac laptops are underpowered, and as the trend is for people to expect 'desktop' performance from a laptop, Apple needs to fix that," he wrote in an e-mail.

Apple has a history of radical changes as it moved new products to market. In the mid-1980s it shifted from an older operating system to the Macintosh. In 1994 it abandoned a less sophisticated Motorola chip for the PowerPC. And early this decade it moved from its creaky OS 9 operating system to the more modern OS X.

Analyst Kevin Krewell, editor in chief of the Microprocessor report, said Apple's strategy could result in better products, but it has significant challenges.

Stealth Project

"It's going to be a difficult transition, but if anyone can do it, Apple can," Krewell said. "But there still are risks. Will people stop buying Apples for the next two years waiting for the new ones to come out? And will developers stop developing for the PowerPC while waiting for the Intel chips?"

While developers might anticipate major headaches in shifting to a new chip, Jobs sought to reassure them on several fronts. First, he said, a version of the highly praised Macintosh OS X operating system has been designed to run on both the PowerPC and Intel designs -- a five-year stealth project that has been rumored but never confirmed. During his demonstrations he used a Macintosh running an Intel Pentium microprocessor.

Second, Apple will be handing out software that could make it easier to modify programs to run on the new Intel chips.

And finally, every Intel-powered Macintosh will come with a program called Rosetta that will allow unmodified software to run on the Intel machines -- though not as quickly as programs written for the Intel technology.

During his demonstration, Jobs ran unmodified Adobe (Nasdaq: ADBE)

Photoshop, Microsoft Word and Quicken financial software on the Pentium Mac.

'Easy Transition'

The demo apparently convinced some software writers. "It seems like this will be a pretty easy transition," said Ben Forsyth, head of technology at San Francisco-based FileWave USA. "The transition to OS X was pretty painful, but now we have a better [software] code base to work from."

Wall Street appears to be reserving judgment. Apple stock closed down 32 cents at US$37.92. Intel shares fell 16 cents to $27.17. Apple's longtime partners didn't fare much better: IBM's shares dropped 79 cents to $75, and Freescale was down 48 cents to $20.33

[tech4all] Apple Faces Big Risk with Chip Change

Apple Faces Big Risk with Chip Change

Long-Term Strategy

Teaming Up

Stealth Project

'Easy Transition'

Reply via email to