What's Really Behind the Apple-Intel Alliance

Tony Avelar/Reuters
Apple's chief, Steven P. Jobs, announcing his company's move to Intel processors and the end of a 14-year relationship with I.B.M. The switch could help Apple in the market for digital entertainment equipment.

By JOHN MARKOFF
Published: June 11, 2005
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."