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Background of Apple and Intel - NY Times

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  • John Rethorst
    http://www.nytimes.com/2005/06/11/technology/11app le.html?pagewanted=1&8hpib By JOHN MARKOFF Published: June 11, 2005 SAN FRANCISCO, June 10 - Nearly a
    Message 1 of 1 , Jun 10 11:09 PM
      http://www.nytimes.com/2005/06/11/technology/11app
      le.html?pagewanted=1&8hpib

      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."

      But Mr. Jobs disputed this assessment, simply stating that
      I.B.M. had failed to meet its technology road map. The
      issues in the end, he said, came down to speed and the
      absence of a chip that consumed less electricity than
      traditional processors designed for PC's.

      "As soon as I heard Steve say that the factor where Intel's
      road map was superior was processing power per [watt] I
      knew right away that it was exactly what I have been
      reading and saying and so have many others, that this is
      the real key to the future of high performance computers,"
      Mr. Wozniak wrote.

      As it happens, Intel's was not the only alternative chip
      design that Apple had explored for the Mac. An executive
      close to Sony said that last year Mr. Jobs met in
      California with both Nobuyuki Idei, then the chairman and
      chief executive of the Japanese consumer electronics firm,
      and with Kenichi Kutaragi, the creator of the Sony
      PlayStation.

      Mr. Kutaragi tried to interest Mr. Jobs in adopting the
      Cell chip, which is being developed by I.B.M. for use in
      the coming PlayStation 3, in exchange for access to certain
      Sony technologies. Mr. Jobs rejected the idea, telling Mr.
      Kutaragi that he was disappointed with the Cell design,
      which he believes will be even less effective than the
      PowerPC.

      Now that Mr. Jobs has broken with I.B.M., however, Apple is
      free to pursue a potentially intriguing consumer
      electronics strategy with Intel.

      Intel has been looking for ways to get its chips into
      devices that can compete with game consoles as living-room
      entertainment hubs. In fact, all three next-generation
      video game machines made by Microsoft, Nintendo and Sony
      are based on I.B.M. chips. And analysts say that both
      Microsoft's Xbox 360 and the Sony PlayStation 3, scheduled
      to arrive next spring, will be positioned as home media
      hubs in addition to being video game machines - and priced
      far lower than the Intel-powered, Windows Media Center PC's
      that are also aimed at the living room.

      Should the new consoles find wide acceptance as broad-based
      entertainment engines, Intel will need to respond - and one
      attractive alternative would be an inexpensive Macintosh
      Mini based on an Intel processor, able to run the vast
      library of PC games.

      Before he can set his sights on that new market, Mr. Jobs
      faces the task of shoring up his base, his customers and
      developers. On Monday, he made the case to the software
      designers who must be willing to rewrite their software for
      the new Macintel world.

      Early indications are that he made a convincing
      presentation.

      "The reason people buy Mac is the software, and I think the
      real fun is yet to come," said Scott Love, the president of
      AquaMinds, a software concern in Palo Alto that sells a
      Macintosh program called NoteTaker used by writers,
      researchers and students. "We'll be able to develop a
      program that will just work on both I.B.M. and Intel based
      computers."

      Even more important will be Mr. Jobs' ability to persuade
      the Macintosh faithful to join him in his journey from
      I.B.M. to Intel. That is where he has an advantage over
      virtually every other executive.

      "He is still committed to the idea of an Apple culture,"
      said Peter Schwartz, the co-founder and chairman of the
      Global Business Network, a consulting firm in Emeryville,
      Calif. "It is the counterculture to the dominant Windows
      culture."

      Indeed, Mr. Jobs has always set himself apart from other
      corporate executives. After all, which other American
      business executive would have thought to name the holding
      company for his executive jet airplane "Marmalade Skies"?
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