Going for Broke [Will Apple and Intel merge?]

PBS ^ | June 9, 2005 | By Robert X. Cringely

[ScuzzyTerminator]

Going for Broke

Apple's Decision to Use Intel Processors Is Nothing Less Than an Attempt to Dethrone Microsoft. Really.

By Robert X. Cringely

The crowd this week in San Francisco at Apple's World Wide Developers Conference seemed mildly excited by the prospect of its favorite computer company turning to Intel processors. The CEO of Adobe asked why it had taken Apple so long to make the switch? Analysts on Wall Street were generally positive, with a couple exceptions. WHAT THE HECK IS GOING ON HERE!? Are these people drunk on Flav-r-Ade? Yes. It is the legendary Steve Jobs Reality Distortion Field at work. And this time, what's behind the announcement is so baffling and staggering that it isn't surprising that nobody has yet figured it out until now.

Apple and Intel are merging.

Let's take a revisionist look at the Apple news, asking a few key questions. The company has on its web site a video of the speech, itself, which is well worth watching. It's among this week's links.

Question 1: What happened to the PowerPC's supposed performance advantage over Intel?

This is the Altivec Factor -- PowerPC's dedicated vector processor in the G4 and G5 chips that make them so fast at running applications like Adobe Photoshop and doing that vaunted H.264 video compression. Apple loved to pull Phil Schiller onstage to do side-by-side speed tests showing how much faster in real life the G4s and G5s were than their Pentium equivalents. Was that so much BS? Did Apple not really mean it? And why was the question totally ignored in this week's presentation?

Question 2: What happened to Apple's 64-bit operating system?

OS X 10.4 -- Tiger -- is a 64-bit OS, remember, yet Intel's 64-bit chips -- Xeon and Itanium -- are high buck items aimed at servers, not iMacs. So is Intel going to do a cheaper Itanium for Apple or is Apple going to pretend that 64-bit never existed? Yes to both is my guess, which explains why the word "Pentium" was hardly used in the Jobs presentation. Certainly, he never said WHICH Intel chip they'd be using, just mentioning an unnamed 3.6-Ghz development system -- a system which apparently doesn't benchmark very well, either (it's in the links).

So is 64-bit really nothing to Apple? And why did they make such a big deal about it in their earlier marketing?

Question 3: Where the heck is AMD?

If Apple is willing to embrace the Intel architecture because of its performance and low power consumption, then why not go with AMD, which equals Intel's power specs, EXCEEDS Intel's performance specs AND does so at a lower price point across the board? Apple and AMD makes far more sense than Apple and Intel any day.

Question 4: Why announce this chip swap a year before it will even begin for customers?

This is the biggest question of all, suggesting Steve Jobs has completely forgotten about Adam Osborne. For those who don't remember him, Osborne was the charismatic founder of Osborne Computer, makers of the world's first luggable computer, the Osborne 1. The company failed in spectacular fashion when Adam pre-announced his next model, the Osborne Executive, several months before it would actually ship. People who would have bought Osborne 1s decided to wait for the Executive, which cost only $200 more and was twice the computer. Osborne sales crashed and the company folded. So why would Steve Jobs -- who knew Adam Osborne and even shared a hot tub with him (Steve's longtime girlfriend back in the day worked as an engineer for Osborne) -- pre-announce this chip change that undercuts not only his present product line but most of the machines he'll be introducing in the next 12 to 18 months?

Is the guy really going to stand up at some future MacWorld and tout a new Mac as being the world's most advanced obsolete computer?

This announcement has to cost Apple billions in lost sales as customers inevitably decide to wait for Intel boxes.

Apple's stated reason for pre-announcing the shift by a year is to allow third-party developers that amount of time to port their apps to Intel. But this makes no sense. For one thing, Apple went out of its way to show how easy the port could be with its Mathematica demonstration, so why give it a year? And companies typically make such announcements to their partners in private under NDA and get away with it. There was no need to make this a public announcement despite News.com's scoop, which only happened because of the approaching Jobs speech. Apple could have kept it quiet if they had chosen to, with the result that not so many sales would have been lost.

This means that there must have been some overriding reason why Apple HAD to make this public announcement, why it was worth the loss of billions in sales.

Question 5: Is this all really about Digital Rights Management?

People "in the know" love this idea, that Hollywood moguls are forcing Apple to switch to Intel because Intel processors have built-in DRM features that will keep us from pirating music and movies. Yes, Intel processors have such features, based primarily on the idea of a CPU ID that we all hated when it was announced years ago so Intel just stopped talking about it. The CPU ID is still in there, of course, and could be used to tie certain content to the specific chip in your computer.

But there are two problems with this argument. First, Apple is already in the music and video distribution businesses without this feature, which wouldn't be available across the whole product line for another two years and wouldn't be available across 90 percent of the installed base for probably another six years. Second, though nobody has ever mentioned it, I'm fairly sure that the PowerPC, too, has an individual CPU ID. Every high end microprocessor does, just as every network device has its unique MAC address.

So while DRM is nice, it probably isn't a driving force in this decision.

Then what is the driving force?

Microsoft.

Here is my analysis based on not much more than pondering the five questions, above, and speaking with a few old friends in the business. I won't say there is no insider information involved, but darned little.

The obvious questions about performance and 64-bit computing come down to marketing. At first, I thought that Steve Jobs was somehow taking up the challenge of making users believe war was peace and hate was love simply to show that he could do it. Steve is such a powerful communicator and so able to deceive people that for just a moment, I thought maybe he was doing this as a pure tour du force -- just because he could.

Nah. Not even Steve Jobs would try that.

The vaunted Intel roadmap is nice, but no nicer than the AMD roadmap, and nothing that IBM couldn't have matched. If Apple was willing to consider a processor switch, moving to the Cell Processor would have made much more sense than going to Intel or AMD, so I simply have to conclude that technology has nothing at all to do with this decision. This is simply about business -- BIG business.

Another clue comes from HP, where a rumor is going around that HP selling iPods could turn into HP becoming an Apple hardware partner for personal computers, too.

Microsoft comes into this because Intel hates Microsoft. It hasn't always been that way, but in recent years Microsoft has abused its relationship with Intel and used AMD as a cudgel against Intel. Even worse, from Intel's standpoint Microsoft doesn't work hard enough to challenge its hardware. For Intel to keep growing, people have to replace their PCs more often and Microsoft's bloatware strategy just isn't making that happen, especially if they keep delaying Longhorn.

Enter Apple. This isn't a story about Intel gaining another three percent market share at the expense of IBM, it is about Intel taking back control of the desktop from Microsoft.

Intel is fed up with Microsoft. Microsoft has no innovation that drives what Intel must have, which is a use for more processing power. And when they did have one with the Xbox, they went elsewhere.

So Intel buys Apple and works with their OEMs to get products out in the market. The OEMs would love to be able to offer a higher margin product with better reliability than Microsoft. Intel/Apple enters the market just as Microsoft announces yet another delay in their next generation OS. By the way, the new Apple OS for the Intel Architecture has a compatibility mode with Windows (I'm just guessing on this one).

This scenario works well for everyone except Microsoft. If Intel was able to own the Mac OS and make it available to all the OEMs, it could break the back of Microsoft. And if they tuned the OS to take advantage of unique features that only Intel had, they would put AMD back in the box, too. Apple could return Intel to its traditional role of being where all the value was in the PC world. And Apple/Intel could easily extend this to the consumer electronics world. How much would it cost Intel to buy Apple? Not much. And if they paid in stock it would cost nothing at all since investors would drive shares through the roof on a huge swell of user enthusiasm.

That's the story as I see it unfolding. Steve Jobs finally beats Bill Gates. And with the sale of Apple to Intel, Steve accepts the position of CEO of the Pixar/Disney/Sony Media Company.

Remember, you read it here first.

[WOSG]

Sorry, pure guess is wrong.

IBM has a large chip business, and with Cell processor is putting more behind it. They sold PC hardware because it wasnt making good enough margins, and they are now in the business of being a 'technology' supplier to companies liek DELL.

Moreover, Freescale wants to sell chips and would be happy to supply 100% of Apple's needs if IBM didnt want to. (Currently Apple takes Freescale's G4 and IBMs G5). It was an Apple decision, not an IBM/Freescale decision.

The way I see it, it only makes sense in this perspective: If Apple made this decision 20 years ago, we'd have gotten a viable competitor to Microsoft.

Apple must be thinking that their hardware margins are effectively 0%, and they can compete on their software basis. If that is the case, you should be able to but an "OS X" software package and put it on your own PC box.

That *or* they feel the desktop is becoming less and less relevent.

IMHO, this decision is not right - they are missing the boat on the OS wars, and they are also missing the key value differentiator they have in a closed box solution. 20 years ago, this would have been the right decision. Now, when by their own admission the CPU / OS layer is more flexible *and* you have "OS X"-like OS available on x86 ... LINUX ... this is throwing away some real Mac advantages and putting them in direct competition with more low-cost alternatives.

Mac OS X on Intel sounds a lot like Solaris/x86, which ended up going nowhere.

[WOSG]

"Because IBM couldn't push the PowerPC in the ways Apple wanted (no 3Ghz G5 or PowerBook G5 yet);"

That sounds right, although the Intel chips tend to run hotter and were running into their own performance wall. Also, low-power G6 was on the way.

"because Apple apparently thinks Intel is a more reliable long-term partner than AMD and IBM;"

Apple's other partner has been Freescale ...

" and because IBM was probably getting less sensitive to Apple's demands,"

Apple will find out that they are a smaller %age revenue demand on Intel than they were to IBM's and Freescale's chip business.

The reasons, while valid, seem to be mis-timed, in that they were *more* valid 5 to 10 years ago than now.

Intel's about to go dual core because their single core has run out of steam. Meanwhile we had dual core Apples on tap.

[WOSG]

Thanks for your insight. ... the most credible reasons I can see are:
" a direct challenge to Microsoft, and the fact IBM was dilatory in getting a laptop usable version of the G5. "

[Proud_texan]

Thanks for the update, haven't paid much attention to them in the last couple of years after they closed half their chip plants and yet still managed to lose $389 million in that operation for the year as well as sell off their HDD division. What were their profits from chips last year?

I would find the task of supplying drivers for the diverse number of add-ons for the PC to be daunting, if they go that direction it will be interesting to see how they survive the "your OS doesn't work with my off-brand/legacy video card" crowd.

[frgoff]

Simple. IBM is focusing on the game console market, Motorola is focusing on the embedded market. Intel is focusing on the PC market. Apple makes PCs.

[frgoff]

Why? Would you just chuck a $6 BILLION a year business? And don't give me this software only model. Dell makes more money than Microsoft.

[krb]

Not a chance. it was really weak when intel got DEC semiconductor division (alpha).

Compaq got that part of DEC.

Intel got the DEC StrongARM (now Intel XScale).

[ProudVet77]

Actually the guys that went to Compaq are now working back in Hudson for Intel. When Compaq got bought out by HP they sold off the Shrewsbury semicondutor that had been bought by Compaq back to Intel. Have a friend whose resume reads like this:
Digital Equipment
Compaq
HP
Intel
and he actually hasn't left the same job he's had all along.

[ThinkDifferent]

That sounds right, although the Intel chips tend to run hotter and were running into their own performance wall. Also, low-power G6 was on the way.

What low-power G6? Apple's main problem was that neither IBM nor Freescale could produce a comeptitive laptop CPU. The G5 is too hot and the G4 doesn't compete well with the Pentium-M.

Apple will find out that they are a smaller %age revenue demand on Intel than they were to IBM's and Freescale's chip business.

Yeah, but that doesn't matter. They don't need Intel to do anything they don't normally do, unlike IBM and Freescale. Apple is pretty much the only customer for the G5, and Freescale sells CPUs mostly for embedded use where low power is more important that high MHz or a decent bus.

[ThinkDifferent]

My theory is that Apple will be getting out of the hardware business altogether. Which is something they should have done a long time ago.

No, and no. Directly competing against Microsoft on commodity hardware is not a winning strategy; see OS/2, pre-Apple NeXT, and Be.

[The_Reader_David]

Thanks for the confirmation.

I'm now even more certain of my analysis.

[jpsb]

Good questions (great questions really) and his answer makes more sense then anything else I've read.

[Leonard210]

...and the fact IBM was dilatory in getting a laptop usable version of the G5.

Good analysis The_Reader_David. The fact that they've been running OS X on Intel chips in Cupertino for 5 years indicates that this has always been a priority and probably more than a "just-in-case" scenario. So, what if SJ heard from IBM that a realistic timetable for a G5 that would be laptop capable was 5 years? If I have a working alternative in a back room and my supplier tells me they essentially can not keep up, guess what I'm gonna do.

[WOSG]

"G4 doesn't compete well with the Pentium-M."

What are the spec-marks?

[WOSG]

See this note ...

http://www.themacobserver.com/article/2005/01/12.14.shtml

"Heck, I'll bet a lot of people would snatch up a lot of single-core G4 Powerbooks at 1.8GHz to 2.0GHz. That'd be a 20-33% increase in speed, which isn't too shabby.

I wouldn't be surprised if we never do see a G5 Powerbook. Apple may stick with souped-up G4s from Freescale until the "G6" is ready. And that might not be such a bad thing. The G4 still has legs and is a rather power efficient processor. " - posted early 2005..


and this posted in 2002 ...
" Anonymous wrote:
I have to wonder what life would be like if Apple used x86 chips.


Apple would be dead, just another software company trampled by the MS/Dell rhino and left for dead by the side of the road."

Now we get to find out.

[Ernest_at_the_Beach]

That *or* they feel the desktop is becoming less and less relevent.

I think the market is changing again....with all of the new game stations coming.....where does the enthusiasts requirement for hot new chips for their game machines go?

plus Intel is very interested in getting itself into the wiring of the home,.,,which is the same market Sony is going after, ...with the Cell processor....MS has the Multimedia stuff, going after it also....but Sony owns the HD TV business,,,so they may be the kingmaker.,...

[Leonard210]

Apple must be thinking that their hardware margins are effectively 0%...

I don't know where you'd get that idea. There is no indication that Apple is hurting in hardware or software sales. Quite the opposite. 400 + Apple design awards, 500,000 Apple developers selling over $500,000,000 in product through Apple retail and online 109 Apple retail stores serving 1,000,000 visitors per week, 2,000,000 copies of Tiger shipped in 6 weeks, fiscal 2005 second quarter ended March 26, 2005 posted a net profit of $290,000,000, shipped 1,070,000 Macintosh units, shipped 5,311,000 iPod units, for a 70 percent revenue growth and a 530 percent increase in net income.

There is also no indication that Apple on Intel means Apple on eMachines. If they took that approach, you are correct, they will have kissed their hardware sales goodbye as well as their 109 retail outlets. Again, however, there is no indication that they are about to do that.

[ikka]

Mac OS X on Intel sounds a lot like Solaris/x86, which ended up going nowhere.

Actually I am dumping most/all of my Linux servers and going with Solaris/x86 and a smattering of older SPARC machines also running Solaris.