Steve Jobs: Souping Up Macs?
Apple recaptured consumers' attention with its hip iPod. Jobs may be thinking that the company can win over even more converts if Macs were powered with Intel chips.
Thursday, May 26, 2005
By David Kirkpatrick
Apple Computer has one of the most respected technology brands, but its share of the personal computer market, its core business, remains puny. CEO Steve Jobs seems to think it may finally be the time to change that. On Monday, The Wall Street Journal, quoting unnamed “industry executives,” reported that Jobs is considering putting Intel processors into Macintosh computers, replacing PowerPC chips from IBM in some, or all, of Apple’s product line.
It makes perfect sense that such discussions should be under way. In some form, they’ve been going on for years. Back in January 2003, Paul Otellini, who recently became Intel’s CEO, told me: “I’d love to have Apple as a customer.” In our conversation, Otellini conceded that he’d been talking to Jobs. While no deal emerged at that time, the talks have apparently heated up again.
Jobs’ options are many. For one thing, Intel badly wants to sell its chips to Apple. For another, PC makers realize that the Mac OS X operating system is superior to Microsoft's Windows, and they want a piece of that market. FORTUNE has learned that Apple, Intel, and several PC companies already have the Mac OS X operating system working on Intel chips in their labs. And then there's the fact that more PC users are considering switching away from Windows. There are more Mac fanatics now than ever before. The Mac OS X operating system is superb, especially in its new “Tiger” version, and Apple’s brilliant iPod is this decade’s signature tech device so far.
My colleague Brent Schlender addressed this in his excellent cover story back in February, “How Big Can Apple Get?”: “Most tantalizing of all is scuttlebutt that three of the biggest PC makers are wooing Jobs to let them license OS X and adapt it to computers built around standard Intel chips. Why? They want to offer customers, many of whom are sick of the security problems that go with Windows and tired of waiting for Longhorn, an alternative.” (I helped Brent report that part of the story.)
Brent’s main point was that Apple’s fundamental marketplace advantage, and the source of its increasing success, is its cleverly designed software. While the company’s product designs are some of the best in the world, its competitive advantage is not dependent on the internal guts of its hardware. The same Asian manufacturers that build Macs also build PCs, and they use many of the same components for Macs that are found in x86 machines.
Intel, for its part, has made great technical strides in the capabilities of its chips in the last year or so, prodded mostly by its relatively tiny, but feisty rival, Advanced Micro Devices. (I wrote about AMD’s successes last fall in “Chipping Away at Intel”.) Intel’s chips recently began sporting multiple processors and the capability to process 64 bits of digital information at a time, instead of 32 bits (a key factor for Apple). If it switched to Intel chips or allowed PC makers to build Intel-based Macs, Apple could benefit from the enormous economies of scale Intel achieves with its dominant market share, and from the x86’s constant advances. Apple could also bring its costs—and possibly its products' prices--down substantially. And that could boost its sales.
Unlike IBM, Intel builds low-power, low-heat chips, especially for portable computers. (As I sit on a hotel bed in San Diego writing this column with my PowerBook G4 on my lap, I can definitely feel the heat.) This is critically important in an era when more and more PC buyers want laptops.
Despite the fact that such talk about Apple switching to Intel chips is not new, and that the Journal article was inconclusive, it set off vast waves of speculation across the web. Much of the online speculation centers around the more narrow possibility that what Jobs really wants is a chip for a rumored upcoming Mac tablet computer. (See Rob Bushway's blog and Paul Thurrott's Internet Nexus.)
I’d certainly like to see an Apple tablet. While Microsoft’s Tablet PC, sold by a number of PC makers, has not as yet captured the popular imagination, it offers attractive features that you can’t yet get from the Mac. For a journalist like me, the ability to use a tablet and tablet software, such as Microsoft’s OneNote, which synchronizes audio recordings with typewritten or handwritten input, would be a boon.
Converting to Intel chips might be a smart move for Apple. Or it might not be. At the always-interesting Slashdot.org, the most popular discussion site for tech cognoscenti, the hundreds of sometimes-verbose techies who had by Thursday posted about the Journal story, tended mostly to pour cold water on the idea, though plenty also argued that Intel-based Macs could happen. (See Slashdot.org's postings on this topic.) The anti-Intel arguments mainly focus on the unique advantages that the PowerPC still offers the Mac, especially in how the chips process graphics. (The PowerPC’s graphics proficiency is a major reason all three major videogame makers—Microsoft, Nintendo, and Sony—use the chips in their latest boxes.)
Even if the Journal report is right, it could simply mean that the wily Jobs is positioning for the upper hand in negotiations with IBM. He isn't saying anything. Then again, if you were Jobs, wouldn’t you want your legacy to be a company with a 20% market share—or more—rather than one with only 2.3%?
