Analysis: Intel and Apple--Apples and Oranges?

SAN FRANCISCO--With a buzz factor that far exceeds its market share, Apple Computer is the darling of technophiles, graphics artists, and vocal nonconformist computer users around the world. The world's largest chip company might also be smitten with the Mac maker, according to a report in today's Wall Street Journal.

Apple and Intel have held talks in the past about coming together on creating a personal computer. But Monday's report stated that Apple will agree to use Intel chips in Macintosh computers at some unspecified date, a development that was viewed with a healthy dose of skepticism by veteran industry analysts who have heard this rumor before. An Intel spokeswoman declined to comment on the report, and an Apple spokeswoman did not immediately return a call seeking comment.

The largest obstacle between Apple and Intel is the incompatibility between the two different chip architectures in their current products. Apple's Macintosh computers are based on the PowerPC instruction set developed by current Apple supplier IBM and former supplier Motorola. Intel's chips use the x86 instruction set, which has provided the operating orders for Windows-based PCs since the 1980s.

Software developed for one architecture does not run on the other architecture without a software emulator that usually slows performance dramatically. Therefore, if Apple were to switch to using x86 chips, it would have to get all of its Mac-friendly software partners to port their applications to a version of Mac OS based on the x86 architecture.

First Transition

When Apple made the transition from Motorola's 68000 family of processors to chips based on the PowerPC architecture in the early 1990s, the company lost about half its market share, says Nathan Brookwood, principal analyst with Insight 64 in Saratoga, California.

"Software transitions are always painful," Brookwood says. "Maybe [Apple] can get [independent software vendors (ISVs)] to recompile everything, but getting them to do that is something ISVs don't really enjoy."

But Apple has already taken tentative steps in the direction of x86 chips. An x86 version of Darwin, a collection of Unix-based code that provides the foundation of the Mac OS X operating system, can be downloaded from Apple's site. But that is not the kind of full-featured Mac OS release that would be required to support x86 chips in large volumes.

"They could do it if they wanted to," says Dean McCarron, principal analyst with Mercury Research in Cave Creek, Arizona. "Doing ports of software is much easier than it was 10 years ago. But why would they want to?"

Why Do It?

Apple's main motivation for moving to x86 chips would be to lower its costs or gain access to technology that it doesn't think IBM will have in the near future, McCarron says. And since Apple is unlikely to compete directly against Dell anytime soon, it's more likely that the company is worried about IBM's road map, assuming the report is accurate, he says.

IBM has struggled with yield issues since it became the sole supplier of PowerPC chips to Apple. IBM has also said very little publicly about its road map for PC processors beyond the current PowerPC 970FX chip, which is also known as Apple's G5 processor. Much of its development resources of late have gone into chips for gaming consoles, such as the Cell processor that will power Sony's Playstation 3 gaming console, and a PowerPC-based chip at the heart of Microsoft's Xbox 360 gaming console.

An IBM spokesman did not return a call seeking comment on the company's road map.

Apple Pentium M Notebook?

On the other hand, Intel has made great strides designing chips for notebook PCs, the fastest-growing segment of the PC market. Apple's PowerBook notebooks are based on the older G4 chip, a situation that has not pleased Mac users pleading for a notebook based on the powerful but hot G5 processor.

Intel's Pentium M processor is quickly becoming the company's most attractive asset and, without a suitable competitor expected from IBM any time soon, Apple might be chatting with Intel about the possibility of a Pentium M notebook, McCarron says.

Intel has also built Mac OS-friendly features such as 64-bit technology and support for multiple software threads into its newer desktop processors, says Roger Kay, vice president of client computing with research firm IDC.

However, the software issues are daunting, and the move could also expose Apple to the commodity hardware market that Apple cofounder and chief executive officer Steve Jobs has long disdained, Kay says. Apple can currently prevent other companies from developing systems that offer its unique combination of the Mac OS X operating system and PowerPC chips, but if it switched to Intel's chip, Mac OS could theoretically run on millions of computers around the world. This might expand the market for Mac OS, but it might also lead to wide-scale piracy or cloning, he says.

A more likely scenario would involve Apple and Intel getting together to build a video-player IPod based on one of Intel's XScale processors, analysts say. The software development involved in moving the IPod product to XScale would not be as difficult as a PowerPC-to-x86 transition, they say.

Intel and Apple have worked together in the past, with Apple using some of Intel's networking chips. It's also possible that the companies could develop a partnership based on something other than a Pentium processor or XScale chip, such as flash memory or wireless networking chips, analysts say.

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