Desktop Computing Redefined: Apple Moves Step Closer to the PC

Possibility of Apple to transit its computers to Intel’s microprocessors have been widely discussed for years, but the actual announcement was still rather unexpected in the industry. With the transition to Intel, Apple gets a number of new opportunities, but faces some stiff challenges as well. Could the shift be a major strategy change for Apple? X-bit labs today explores this along with analysts from Jon Peddie Research, Insight 64 and Petrov Group.

by Anton Shilov
06/07/2005 | 11:20 PM

UPDATE: Adding comments from Boris Petrov of Petrov Group on page 8.

 

Apple Computer has switched its Macs to Intel processors. This has been a greatly talked about move for a number of years already, but was a definitely a surprising decision at last. The PC manufacturer which controls only about 1% of the global computer shipments, but is broadly discussed all around the world, has not announced, which of Intel processors it would use and what benefits they will bring to its loyal clients.

Apple, Intel Collaborate: “Mactel” is Born

Apple announced plans to deliver models of its Macintosh computers using Intel microprocessors by this time next year, and to transition all of its Macs to using Intel microprocessors by the end of 2007, which is basically less than 2.5 years from now. Pretty rapid transition, isn’t it?

The Mac system for developers which was showcased at the most recent Apple’s Worldwide Developer Conference was based on an Intel Pentium 4 processor 3.60GHz with 64-bit capability, which may indicate that Apple targets NetBurst-based processors for its systems. That seems reasonable: those chips do not require water-cooling, as IBM’s latest PowerPC microprocessors, but still deliver quite high performance. It is especially important that Intel’s future chips are primarily dual-core, which is likely to reduce necessity for Apple to make expensive 2-way systems. Intel is planning to introduce its “second-generation” dual-core chips late next year and probably Apple is confident about those. But is it really about the NetBurst, or Intel Pentium 4-based systems are provided to developers only to allow them to recompile the software for x86 architecture?


Photo by ASCII24 web-site

“Our goal is to provide our customers with the best personal computers in the world, and looking ahead Intel has the strongest processor roadmap by far. It's been ten years since our transition to the PowerPC, and we think Intel's technology will help us create the best personal computers for the next ten years,” said Steve Jobs, Apple’s CEO.

Apple CEO seems to be confident in Intel’s roadmap and plans to use the giant’s chips for the next decade, which basically means that there will be an industrial alliance which may be called Mactel – Mac + Intel. The comment from the CEO also implies that the Pentium 4 and derivatives may only be the beginning of the “Intel Inside” plans for Apple and that the real ramp may be associated with different products.


Photo by ASCII24 web-site

A rumour suggests that the first Mac products to be transited to Intel’s processors are not really high-end Power Mac systems, but value computers, such as Mac mini. In fact, this makes a lot of sense for Apple: Intel has demonstrated its East Fork platform, fully build on components for the Centrino mobile platform, which is based on dual-core Intel Pentium M processor code-named Yonah, Intel’s next-generation chipset internally referred as Calistoga, features the company’s forthcoming wireless LAN controller as well as a specially developed platform driver. Given that East Fork may be equipped with a single-core chip, the cost of Mac mini based on the platform has potential to remain in the $499 - $599 range per box. In addition to Mac mini, Apple may transit its iMac, eMac and iBook lineups to Intel Centrino components too in 2006.

The same rumour claims that Power Mac computers will migrate to x86 only in mid-2006, which may mean that Apple has no real plans to use NetBurst architecture in its Macs, but will switch right to Conroe, Intel’s second-generation dual-core processor for desktops. Another option for Apple would be to use both G5 and Intel Presler (Intel Pentium D 900-series), the company’s second first-generation desktop dual-core chip, in Power Mac systems already next year, however, this would add some confusion to the customers.

Intel to Make Apple’s Dreams Come True

“As we look ahead, we can envision some amazing products. And we don’t know how to build them with the existing PowerPC architecture,” said Steve Jobs, the CEO of Apple Computer during a conference dedicated to the transition to x86 microprocessors from Intel Corp.


Photo by PC Watch web-site

Well, Mr. Jobs is probably right – Intel’s processors can deliver loads of benefits to Apple in long-term, but probably can bring a lot of troubles in short-term. Just not to be unsupported by evidence, we weighted a number of  options Apple gets with its transition to Intel’s processors. In fact, that’s a pretty long list:

The most important thing for the company is that Apple’s main advantage – high-quality desktop OS – remains with the company. Furthermore, Apple promises that its Rosetta emulation tool will allow Mac users to keep their old software written for the PowerPC and run it on new Intel-based Macs. While the news that no new software has to be bought by existing clients for new Macs as well as the fact that Apple will continue the development of Mac OS X are definitely positive, they also bring a number of difficulties too…

Apple Plays with Fire: Shortage of Software May Occur, Mac Clones May Arrive

Given that software designers will still have to program their applications so that they could run under Mac OS operating system, developers who have been creating software for Mac OS X and IBM PowerPC processors will have to recompile their products to run on Intel’s Pentium chips, which may leave initial buyers of Intel-based Apple computers without a good choice of software.


Photo by PC Watch web-site

“More than the software more than the hardware, the soul of the Mac is the OS,” Steve Jobs says.

In fact, there are very substantial short-term difficulties Apple may face with its strategy shift:

While the list itself is relatively short, the absence of Apple’s operating system on other’s computers is crucial for Apple to keep selling its own personal computers. It is clear that from a hardware standpoint Apple computers will not be different from Dell’s boxes in two years time. Hence, everything that Apple can offer its customers will be a set of an operating system and apps, which may appear to be better than Windows and supporting applications.


Photo by ASCII24 web-site

While clones are a major threat for Apple, it does not necessarily mean that the company does not want to make a yet another clone-approach attempt. HP currently sells iPod players by Apple under its own brand-name and it does not seem that they are unsuccessful with this type of business. Provided that Apple’s hardware will be aligned with what the industry uses, providing the same level of availability and flexibility, third-party computer makers or resellers may enter Mac business, especially in case Macs will get cheaper and faster with Intel inside.

“At Last, a Real Choice in Operating Systems and Apps” – Jon Peddie, JPR

X-bit labs publishes a column provided by Jon Peddie, principal analyst at Jon Peddie Research, below.

Everyone has heard the news by now that Apple will move to an X86-based platform next year. Apple’s move exposes weakness in IBM’s processor business. We believe that it also shows real bravery on the part of  Apple in putting its corporate ego aside to do right thing and possibly the best thing for the company an its shareholders.


Jon Peddie

Apple Finally Goes x86

But even more importantly, it give the company an opportunity to prove to the world what it and its customers have been saying about Apple’s superior operating system (OS) and user interface (UI) experience. We’ve never heard anyone say they didn’t like the look and feel of an Apple. The OS X is considered one of the finest triumphs of Apple ever; it’s two years ahead of Microsoft’s Longhorn and it has probably functioned as major prototype for a lot of Longhorn ideas.

Now we find out that Apple has been experimenting with x86 processors for some time, and in fact has had their operating systems running on them for over five years. OS X was developed from the start to be cross platform. So if Apple wanted to, they could have offered OS X to the x86 world a year ago. However, Leopard the new x86 version of OS X will not come out until 2006, approximately about the time Longhorn comes out.

Think about it. If Apple ever offered a version of its operating system to all PC users, it would be the first serious competition Microsoft has faced since the early days of the Macintosh and the PC. The Mac OS is much more of a threat than Linux because OS X brings a suite of very appealing applications along with it. Linux definitely does not.


Steve Jobs, photo by PC Watch web-site

As Steve Jobs said, “More than the software more than the hardware, the soul of the Mac is the OS.”

Dramatically Different PC World Approaching

However, Phil Schiller, Apple’s president told the developers that Apple would not allow its operating system to run on anyone’s but Apple’s machines. No clones for now. But, there is plenty of reason to expect to see dual boot systems. Schiller added that Apple would do nothing to prevent Apple machines from running both Windows and Apple operating systems. Nevertheless, once Apple goes to x86 they can’t avoid clones (like AOpen’s miniMac Pentium M-based mini PC, codenamed Pandora.)

This will also attract more applications to the Mac. All Apple applications will have to be reported and complied, but Apple has had the tools for some time to do that and even Microsoft said all of its Apple apps will be translated.


Apple iMac

So is it a good thing? Like Steve Jobs asked the developers, “Why did we do this, wasn’t everything OK?”  Well, no, everything wasn’t OK. Now Apple has a shot at gaining some real market share. It puts Microsoft in a defending position, which will be good for the industry (although Microsoft can, and, no doubt, will play hard ball if it feels too threatened.)

Apple is going to have a real challenge in managing the Osborne effect. Many users may well elect to wait out transition and forgo buying PowerPC machines and wait for the new Intel-based machines. Luckily Apple has money in the bank and plenty of iPods to sell.

There’s going to be a dramatically different PC world in 2007, and we can thank Apple for helping to create it.

“Apple’s Share Loss Results Not From its Strategy, but From its Constant Shifts in Strategy” – Nathan Brookwood, Insight 64

X-bit labs publishes a column provided by Nathan Brookwood, principal analyst at Insight 64, below.

Apple Design Win – Clean Sweep for Intel and Otellini

It’s been less than three weeks since Paul Otellini moved into the CEO’s cubicle at Intel, and already he’s put his mark on the company. Try as they might, neither Andy Grove nor Craig Barrett could ever claim that all major personal computer suppliers used Intel's chips. Apple’s announcement at yesterday’s Worldwide Developer Conference marks a clean sweep for Intel and Otellini. Apple’s audacious move may create some near term problems for the company, but there's little doubt that when the dust settles on this action, Apple will finally be driving down a processor roadmap with no dead ends in sight.


Nathan Brookwood

Today’s announcement signals the start of Apple’s third attempt to find a viable long term CPU strategy for its Macintosh line. During its first decade, Apple relied on the Motorola 68K. Just as the Mac’s market share peaked at twelve percent, Apple began its migration to the PowerPC, a move that triggered a long slide in market share to the current level of about two percent of PC units on a worldwide basis. I’m sure Apple and its faithful legions hope that today’s move will arrest that slide, and commence a new era of market growth for one of the industry’s favorite underdogs. Insight 64 has not yet bought into that vision.

Apple’s Market Share Will be 1-1.5%

From our perspective, Apple’s share loss results not from its strategy, but from its constant shifts in strategy. The Wintel world places great emphasis on backward compatibility; I can still run most of my old Windows 3.1 programs on my dual-core Windows XP system. Apple’s customers must deal with periodic tectonic shifts in system architecture. Each shift forces ISVs and users to acquire new software and to learn new ways of doing old things. This is expensive, time consuming, and unproductive.


Photo by PC Watch web-site

In the course of each transition, some disaffected users abandon the cause and move to the more placid Wintel world where users upgrade software on their own schedules, rather than those of their platform vendors. By the time the dust settled on the 68K to PowerPC transition, Apple’s market share had been halved to six percent. It finally stabilized in 2000, just in time to begin its next descent as Apple shifted from MacOS 9 to OS X. (The company can’t even decide whether to use Arabic or Roman numerals to label its major releases!).

Insight 64 believes this latest announcement will once again cause some Macolytes to scratch their heads and wonder if it’s worth it. Should they continue on their arduous trek, or is now the time, given that Apple has sanctioned at least half of the evil “Wintel” empire, to throw in the towel and sell their souls to the Win devil as well.

We anticipate that when the dust settles on the PowerPC to x86 transition, Apple’s market share will be lower than it is today, ending up somewhere between one and one and a half percent. At some point, even with Steve Jobs’ awesome ability to attract attention for the company, Apple’s declining market share will doom it to footnote status. At two percent, doesn't have too much further to go in this regard.

The Transition to x86

During yesterday’s announcement, Apple suggested the migration from PowerPC to x86 environments would be a simple, straight-forward exercise that requires little effort on the part of Macintosh software developers. Pardon us if we don’t agree with this view. Developers must translate most software from PowerPC to x86 binary code. These two architectures couldn't be more different. (One tidbit: PowerPC addresses characters in memory from left to right, like this sentence, but x86 tfel ot thgir morf sretcarahc serots.


Steve Jobs and Paul Otellini, photo by PCWeb web-site

Compilers cannot always sort out problems like these, so humans must manually inspect hundreds of code modules during the port.) Apple hopes that a software emulation package it calls “Rosetta” will permit users to run old, unmodified PowerPC code on new x86 platforms, but emulation has had a mostly checkered past.

Apple may be relying on a new emulation package (QuickTransit) from Transitive Technology, a UK-based startup. Transitive makes impressive claims regarding the performance of its product, but has only recently begun shipping a production version of its software to selected Silicon Graphics customers. Both the translation and emulation approaches require extensive testing to validate proper software operation. Even when the underlying architecture does not change, ISV’s must still qualify the operation of software on platforms with new processors or peripherals; the change in instruction set architecture seriously complicates this problem. It helps somewhat that Apple is ready to ship x86 development platforms running its OS X almost immediately, but this does not mitigate the extensive work its development partners must undertake.

It should not be unreasonable to anticipate some slowdown in PowerPC Macintosh shipments above and beyond the normal seasonal factors over the next few quarters. Given today's announcement, most Mac users will defer system purchases until the new x86 platforms arrive. Nobody wants to buy the last PowerPC-based system. Macintosh users with immediate requirements will have no choice but to buy those soon to be obsolete platforms, but others with the flexibility to time their purchases will surely delay as long as possible. Any new PowerPC platforms introduced during this period will likely be met with a tepid market response.

Silver Linings

Today’s announcement does contain several positive elements. The shift to Intel architecture surely will be the last such transition the company has to make. There just are not that many alternatives left in any event. Even if Apple does not share the rest of the Wintel market's Windows vision, its hardware requirements have far more in common with those of Dell, HP and other Wintel OEMs than they do with Cisco, Ford, PlayStation, and other PowerPC OEMs. It made sense for Intel to invest hundreds of millions of dollars in a processor (Centrino) aimed specifically at notebook computers, given that it could sell fifty or sixty million of these chips per year. How could IBM or Freescale ever justify this kind of expense, just to satisfy Apple's need for one or two million chips per year?

Apple’s key ISVs, Microsoft and Adobe stood on the stage with Apple and pledged their support for this new CPU strategy. Had either of these companies withheld that support, Apple's plan could easily have become a non-starter.

The move opens up two new potential markets for Apple. Since the company won’t do anything to preclude these new platforms from running Windows (even if Apple has no plan to market them with Windows), it should be possible for adventurous users, or even adventurous OEMs to market the Apple x86 platforms with Microsoft's OS. While such a combination might not appeal to the masses, it would certainly be of interest to those who value the elegance of Apple’s industrial design but who cannot stray from the Windows software model. Conversely, once Macintosh software runs on x86-based industry standard platform, a “Mac Clone” market may emerge. Apple’s last half-hearted attempt at cloning during the early days of the PowerPC transition, ended in disaster and litigation.

During a Q&A session following yesterday's announcement, Phil Schiller, an Apple VP, said Apple “will not allow running Mac OS X on anything other than an Apple Mac.” Insight 64 suggests Mr. Schiller and Apple’s attorneys review section 1 of the Sherman Act, 15 U.S.C. @ 1 (1976) and section 3 of the Clayton Act, 15 U.S.C. @ 14 (1976) before they finalize their views on this matter.

IBM – The Unhappiest Company in the World?

Apple has invented a computer that was aimed at home and office users, something which big companies did not consider to become multi-billion dollar industry in a few decades. IBM was the only one who decided to go the same route and at last invented the thing we know as IBM PC right now. Since the produce quickly became popular among third-party PC makers, IBM decided to offer something, which was not an open standard, in order to gain control over the emerging market in the mid-eighties. Unfortunately for the company, its PS/2 system has never become popular and International Business Machines has been losing PC market share gradually, which eventually led to selling off its PC business unit to Chinese Lenovo Group in late 2004.

Standing in front of its sold PC business unit, the business which was inspired by IBM, and without any future with its PowerPC architecture in the desktop PCs, IBM may seem to be the unhappiest company at this point among all the involved into the Apple-IBM-Intel intrigue. The outcome of Apple’s decision to switch to microprocessors made by Intel Corp. may be rather significant, as not only Apple and Intel are affected, but also companies like IBM and Freescale. Furthermore, Apple’s abandon of IBM’s chips may influence IBM’s processor business strategy. But analysts believe that IBM is really not that affected.

“What will happen to IBM's CPU business? Will they just scrap a lineup of desktop chips? Not likely,” mulls Jon Peddie, principal analyst at Jon Peddie Research.

The fact that IBM can’t get the PowerPC to 3GHz and it can’t manage the power issues indicates real problems in IBM’s processor process. IBM is building processors for Microsoft, Nintendo, and Sony; what are the implications for them? Apple’s defection eliminates a competitor for IBM’s limited engineering capacity so the move might actually be beneficial for those projects and those companies have contributed considerably more resources, claims Jon Peddie.

The analyst thinks that the move does have an impact on Freescale which is producing the PowerPC for Apple. Unless IBM and Freescale can quickly come up with another customer for the G5, Freescale will probably discontinue the product. In addition, The PowerPC G5 uses the execution core of IBM’s 64-bit Power series processors, which are used by IBM’s for their eBusiness servers, however, IBM builds that chip and that product will probably continue.

Petrov Group head analyst Boris Petrov thinks that not Apple’s disappointment in the PowerPC, but IBM’s business approach was the reason for the former to switch to Intel Corp.’s chips.

“We believe that this departure should have been expected since Apple and IBM have different roadmaps. IBM is no longer in PC business and who really ‘ditched’ whom is not clear,” Boris Petrov claims.

“IBM no longer sells standard products – Apple’s processor was the last product. IBM’s exit from semiconductor products started several years ago and is now fully completed,” Mr. Petrov believes.

The analyst thinks that the Cell processor is important but that is now done and over. However, Power architecture and Linux continue to be critical fuel to IBM’s corporate revenue growth – from $100 billion to $200 billion in the next ten years, according to Petrov Group.

“We believe that Cellular Computing concept approach, of which the Cell is only a small part, is the direction of IBM. Apple and PCs are, therefore, on different path from IBM’s – at present,” Mr. Petrov said.

Conclusion

Both Apple Computer and Intel Corp. are pretty tight-lipped over the future of Macintosh computers, but the shift in the computer strategy of Apple seems to be a lot more than a shift in the desktop and mobile computers strategies, but another example of a major ongoing change of the company as a whole.

For years Apple had indicated that customer experience and loyal customers were more important than affordable products for the masses. Well, it looks like now the company seems to have changed its vision and targets its latest products – particularly Mac mini and iPod Shuffle – for “anyone”, even though without certain functions, but at an affordable price.

“Starting at just $499, Mac mini is the most affordable way to enjoy Mac OS X and iLife,” said Steve Jobs. “Just plug in your display, keyboard and mouse and you’ve got an incredibly compact Mac for a price that almost anyone can afford.”

  

“iPod shuffle is smaller and lighter than a pack of gum and costs less than $100,” said Steve Jobs, Apple’s CEO.

Being talked about all around and selling loads more iPod players than Mac computers, Apple really has opportunities to grow. However, poor price/performance ratio IBM’s PowerPC offered definitely restricted those growth opportunities: a lot of customers did not want to buy expensive computers with slow hardware inside. With Intel, Apple can offer faster PCs – both desktops and notebooks – at the same or lower price tag, which would definitely be good for the computer maker and its loyal and potentially new customers. Quite naturally, Apple will be able to produce broader product lineups thanks to large product portfolio of Intel Corp. In fact, extensive families of chips and platforms offered by Intel, its ability to supply loads of processors and huge brand recognition probably played a significant role in the fact that Apple has chosen Intel over Advanced Micro Devices.

It is necessary to note that Apple right now is associated with a great user experience, be it iPod or Mac. To put the fact straight: Apple is a brand-name firstly and a technology company, secondly. Given publicity Apple receives now from the media, the company should definitely offer something “for the masses”, which, it looks like, it is going to do.

Obviously, Apple will run into a number of difficulties porting software to x86 and trying to confine the number of Mac clones on the market in the short-term future, but probably growth opportunities in longer-term convinced the company’s management in the necessity of a pretty uneasy shift to Intel’s chips.

Whether Apple, who once controlled 12% of the personal computer market, will vanish into oblivion this time, as a result of its “third major shift” within a decade, or will regain its positions, remains to be seen. Hopefully, over $7 billion in bank and great iPod sales will allow the company not only to survive, but prosper.