Apple to ditch IBM, switch to Intel chips

By Stephen Shankland

http://news.com.com/Apple+to+ditch+I...s/2100-1006_3-
5731398.html

Story last modified Fri Jun 03 17:08:00 PDT 2005


Apple Computer plans to announce Monday that it's scrapping its partnership
with IBM and switching its computers to Intel's microprocessors, CNET
News.com has learned.

Apple has used IBM's PowerPC processors since 1994, but will begin a phased
transition to Intel's chips, sources familiar with the situation said. Apple
plans to move lower-end computers such as the Mac Mini to Intel chips in
mid-2006 and higher-end models such as the Power Mac in mid-2007, sources
said.

The announcement is expected Monday at Apple's Worldwide Developer
Conference in San Francisco, at which Chief Executive Steve Jobs is giving
the keynote speech. The conference would be an appropriate venue: Changing
the chips would require programmers to rewrite their software to take full
advantage of the new processor.

IBM, Intel and Apple declined to comment for this story.

The Wall Street Journal reported last month that Apple was considering
switching to Intel, but many analysts were skeptical citing the difficulty
and risk to Apple.

That skepticism remains. "If they actually do that, I will be surprised,
amazed and concerned," said Insight 64 analyst Nathan Brookwood. "I don't
know that Apple's market share can survive another architecture shift. Every
time they do this, they lose more customers" and more software partners, he
said.

Apple successfully navigated a switch in the 1990s from Motorola's 680x0
line of processors to the Power line jointly made by Motorola and IBM. That
switch also required software to be revamped to take advantage of the new
processors' performance, but emulation software permitted older programs to
run on the new machines. (Motorola spinoff Freescale currently makes PowerPC
processors for Apple notebooks and the Mac Mini.)

The relationship between Apple and IBM has been rocky at times. Apple openly
criticized IBM for chip delivery problems, though Big Blue said it fixed the
issue. More recent concerns, which helped spur the Intel deal, included
tension between Apple's desire for a wide variety of PowerPC processors and
IBM's concerns about the profitability of a low-volume business, according
to one source familiar with the partnership.

Over the years, Apple has discussed potential deals with Intel and Advanced
Micro Devices, chipmaker representatives have said.

One advantage Apple has this time: The open-source FreeBSD operating system,
of which Mac OS X is a variant, already runs on x86 chips such as Intel's
Pentium. And Jobs has said Mac OS X could easily run on x86 chips.

The move also raises questions about Apple's future computer strategy. One
basic choice it has in the Intel-based PC realm is whether to permit its Mac
OS X operating system to run on any company's computer or only its own.

IBM loses cachet with the end of the Apple partnership, but it can take
consolation in that it's designing and manufacturing the Power family
processors for future gaming consoles from Microsoft, Sony and Ninendo, said
Clay Ryder, a Sageza Group analyst.

"I would think in the sheer volume, all the stuff they're doing with the
game consoles would be bigger. But anytime you lose a high-profile customer,
that hurts in ways that are not quantifiable but that still hurt," Ryder
said.

Indeed, IBM has a "Power Everywhere" marketing campaign to tout the wide use
of its Power processors. The chips show up in everything from networking
equipment to IBM servers to the most powerful supercomputer, Blue Gene/L.

Intel dominates the PC processor business, with an 81.7 percent market share
in the first quarter of 2005, compared with 16.9 percent for Advanced Micro
Devices, according to Dean McCarron of Mercury Research. Those numbers do
not include PowerPC processors. However, Apple has roughly 1.8 percent of
the worldwide PC market, he added.

Apple shipped 1.07 million PCs in the first quarter, and its move to Intel
would likely bump up the chipmaker's shipments by a corresponding amount,
McCarron added.

CNET News.com's Michael Kanellos and Richard Shim contributed to this
report.