New MacBook Pros are here! Get the lowest prices anywhere: Apple Price Guides updated Sept 17th (exclusive coupons)
 


Wednesday, May 25, 2005, 01:00 pm PT (04:00 pm ET)

Apple switch to Intel feasible, but highly unlikely

Apple Computer has been meeting with Intel, but the talks between the two companies are not likely to result in the Mac maker agreeing to switch its computers to Intel processors.

When Apple chief executive Steve Jobs was asked on Sunday night at the Wall Street Journal "D: All Things Digital" conference whether Apple would begin using Intel chips, he basically said no.

"We've had talks with Intel," said Jobs, expressing little interest in weighing the subject further.

Several hours later, a report in Monday's edition of the Journal cited two industry executives saying recent talks between the two companies would result in Apple agreeing to use Intel chips. Intel spokesman Chuck Mulloy and Apple spokesman Steve Dowling declined to comment on the report, which they deemed "rumor and speculation."

In a research note commenting on the rumors, UBS Investment Research analyst Ben Reitzes this week said any move to embrace Intel could help lower Apple's cost structure, allowing it to better compete in the low-end PC market and possibly sell more software.

Still, the analyst waved caution at the report. "We have discussed this possibility with Apple management on several occasions and believe that it is possible on a technical basis," Reitzes said. "However, speculation of such a move has surfaced over the years with no outcome."

Instead, UBS is looking forward to news of Apple's more immediate and material projects, including an expected positive update on sales of its new Tiger OS during the company's World Wide Developers Conference in June. The firm also believes Apple plans to introduce several new exciting products, ranging from iPods to digital entertainment devices, later this year.

Shane Wu, an analyst for American Technical Research shared similar sentiments with his clients on Tuesday. "From a technical perspective, we believe using Intel is feasible," said Wu, who at one point claims to have been privy to demonstrations of an early version of Mac OS X running on Intel x86 chips.

"However, from a marketing standpoint, we believe using Intel x86 may prove difficult as Apple has marketed over the past 10+ years the merits of its operating system and PowerPC architecture as superior to Wintel," the analyst said. "Many of Apple's diehard loyalists view Macs (with its OS and PowerPC processor) and themselves as the Jedi knights versus the evil empire (Microsoft and Intel), or the Siths or 'darkside'."

Wu believes a switch to Intel could backfire and alienate some of Apple's most loyal customers, turning the Mac into a less differentiated and more commoditized platform. He says an often overlooked reason behind consumers choosing the Mac is its high-performance provided by PowerPC processors.

"The PowerPC architecture is superior in floating point calculations used for high-end graphics and video," said Wu. He believes this is the key reason why all three of the leading game consoles — Sony PS3, Xbox360, and Nintendo Revolution — will use PowerPC processors as opposed to Intel x86 chips.

Contrary to popular belief, Wu's firm, American Tech Research, does not think there is a material cost advantage to Apple in using Intel chips over IBM's PowerPC chips: "From our industry and channel checks, we believe IBM has sacrificed profitability to drive price points attractive for Apple and the game console manufacturers to use PowerPC." Besides not having to pay a tax to Microsoft for use of its operating system, low-cost processors from IBM are a key reason why Apple makes more money on each computer than most PC manufacturers, the firm said.

If Apple and Intel were planning to work together, the firm says a more likely area of collaboration would be on industry standards such as PCI Express, WiFi, gigabit ethernet and codecs such as H.264 HD video.

But perhaps the most compelling analysis of the Intel and Apple rumors comes from Kevin Krewell, editor-in-chief of the Microprocessor Report. He believes the reported talks between Apple and Intel were intentionally fed to the Wall Street Journal to motivate IBM to more quickly address low-yield and high power consumption problems with its latest PowerPC G5 processor.

"It's just too much software to have to change," Krewell said of converting the current version of Mac OS X to run smoothly on Intel processors. He believes Monday's Wall Street Journal report was simply geared towards putting more "pressure" on IBM to fix the problems with its PowerPC processor.