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Chips Fall: Apple Drops IBM

In a risky move that could further shrink its minuscule slice of the PC market, Apple Computer Inc. announced plans Monday to switch its Macintosh computers to the same Intel Corp. chips used in systems that run Microsoft Windows.

Apple, which for years suggested its users "Think Different," will join all other PC makers in using microprocessors built on an architecture that took root in 1981 and eventually turned Apple into a niche player.

By moving to Intel chips, Apple is abandoning the so-called PowerPC architecture that it developed with IBM Corp. and Motorola Inc. in the early 1990s.

Over the years, Apple touted PowerPC as more powerful than the processors that run Windows PCs, with Apple CEO Steve Jobs even comparing some Macs to supercomputers.

On Monday, Jobs quickly changed his tune.

"Our goal is to provide our customers with the best personal computers in the world, and looking ahead Intel has the strongest processor roadmap by far," he said. "It's been ten years since our transition to the PowerPC, and we think Intel's technology will help us create the best personal computers for the next ten years."

Jobs told a conference of software developers that Apple will begin offering Macs with Intel processors by June 2006 and will switch its entire product line by the end of 2007.

The move was driven by the fact that the makers of PowerPC chips
Motorola spinoff Freescale Semiconductor Inc. and International Business Machines Corp. — could not keep up with Apple's expectations.

When Motorola was the primary supplier of G4 chips for Macs, Apple grew frustrated with the rate of improvement. In 2002, it signed a deal with IBM to provide advanced chips for its high-end desktop computers, the Power Mac G5.

But the IBM-Apple deal was rocky almost from the start.

Jobs said Macs would top 3 gigahertz in processing speed by the end of last year, but IBM could not deliver. The IBM chips also were scarce for desktop computers and nonexistent for notebooks, which by some measures have now begun to outsell PCs in the United States.

They simply ran too hot and consumed too much electricity for portables.

Analysts were skeptical about Apple's latest move.

In the past, major transitions have led to defections by customers and software developers, said Nathan Brookwood, an analyst at the research firm Insight 64.

In the mid-1980s, the Mac captured as much as 10 percent of the overall PC market, he said. But when Apple switched from Motorola 68000 processors to PowerPC chips, the Mac's share dropped to below 5 percent. When the Mac's operating system later changed to OS X, it fell to below 3 percent.

"I have a lot of trouble understanding why they would do it," Brookwood said of the transition to Intel processors. "Unless there's something magical, I would have to believe it's not a good move. My concern is that every time Apple makes an architecture shift, many of its customers and development partners say enough is enough."

By wrestling away Apple's business from IBM, Intel would tighten its dominance of the PC processor business. The company holds more than an 80 percent share of the market.

"We are thrilled to have the world's most innovative personal computer company as a customer," said Paul Otellini, Intel's CEO. "Apple helped found the PC industry and throughout the years has been known for fresh ideas and new approaches. We look forward to providing advanced chip technologies, and to collaborating on new initiatives, to help Apple continue to deliver innovative products for years to come."

Although IBM suffers a setback with the loss of Apple, its Mac chip sales were just a fraction of its total semiconductor revenues. Recently, IBM has signed deals to provide the chips for the next-generation video game machines of Microsoft Corp., Nintendo and Sony Corp.

A new microprocessor that IBM co-developed with Sony and Toshiba Corp., code-named Cell and planned for Sony's next PlayStation console, is being touted as capable of delivering 10 times the performance of today's PC processors.

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