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Technology Stocks : Apple Inc.
AAPL 143.15+4.0%3:59 PM EDT

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To: Cogito who wrote (36499)3/26/2003 3:58:02 PM
From: Don Green  Read Replies (2) of 211494
Apple Switch

Latest PC Magazine March 18, 2003
By John C. Dvorak

Prediction: Apple Computer Corp. will switch to Intel processors within the next 12 to 18 months.

The story starts with January's Intel sales conference. The surprise keynote speaker was Steve Jobs. And then, in the front row of Steve Jobs's keynote address at the last Macworld Expo were top Intel executives. Shortly thereafter, Pixar announced that it would become an Intel shop. That was all step one. Step two is coming.

Apple has been concerned about Motorola dragging its heels in the processor wars and failing to achieve clock speeds that are even half of what AMD and Intel are achieving. Apple has attempted to rationalize clock-speed issues, but the company knows that it cannot do this forever. Worse is the feud between Motorola and Apple, which began after Apple suddenly pulled the plug on the license it gave Motorola to clone the Mac.

Change is good. Apple has a unique ability to get away with changing processors radically. It has used the 6502, then the 68K, and now the PowerPC. Each transition happened almost flawlessly. On the PC side of the fence, no Z-80 maker survived even the transition to the 8080. Apple has also cultivated a fanatical following, who have long since accepted the fact that Apple eschews long-term backward compatibility. The legacy concept does not hold the power over Apple users that it does in the PC universe.

Apple's only concern is cannibalization. It cannot change architectures with a pipeline full of PowerPC products. So expect a slow transition that will start with the high-end workstations. Apple's concern is that Motorola may muddy the situation, so Jobs will have to convince Motorola and customers that the PowerPC will not be phased out but will remain as part of a dual-processor architecture.

Scenario. Apple will announce its Intel initiative by showing a transition machine that uses both the Intel and Motorola processors. "So current Mac owners will not have to worry." This will be a high-end machine optimized to run Photoshop. Apple is adept at creating dual-processor architectures, so this won't be too radical. We've heard rumors of this kind of scenario for some time, under the code name Marklar.

Itanium. What will be radical is the company's choice of processor. Apple will announce its use of the Itanium chip, which can be used in such a multiprocessor design and will become the first desktop use of the chip. The choice of the Itanium is suggested by four factors. First, there is zero evidence that Apple is talking to AMD—and it would if it were staying with the x86 legacy chips. Second, Apple likes to make jazzy announcements in which it claims to be the first or the most aggressive in a market. The Itanium fills the bill perfectly, because Jobs can lord it over current PC makers with all sorts of performance claims.

Third, if Apple optimizes the OS X kernel for the Itanium, the likelihood of the Apple OS being ripped off by normal PC users is nil. And finally, by choosing the Itanium, Apple will have an ally in Intel, who will put its design team to work for Apple and perhaps even invest in the company, knowing AMD is not in the picture.

The Apple switch cannot be just a short-term fix for the megahertz dilemma. Jobs is part of the anti-Microsoft Silicon Valley clique, and despite the fact that Microsoft helped Apple financially, the favor was designed to benefit Microsoft more than Apple. Jobs is a peer of Bill Gates. He sees the numbers Microsoft has racked up. Apple has enough confidence in its hardware designs that it can again risk licensing the Mac OS to the Intel platform. The perfect ploy would be to make an Itanium-only Mac OS with some sort of backward compatibility with Microsoft code. The fact that Apple recently released Keynote as a standalone software product says the company is ready to go after the Microsoft cash cows: Office and Windows.

Timing is everything. Announcing the new architecture in July at the next Macworld Expo would be ideal, since it takes place in the media center, New York City. Whether Apple can actually have a working unit by July is questionable, but Jobs has been known to drive his people hard. Waiting until 2004 is too risky, but that might be the reason Apple is upset about the 2004 Macworld show being moved back to Boston. And consider the fall 2003 possibility: Comdex. Now that would get some attention.
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