Intel Inside Your Next Mac? Not Far Fetched.

The Wall Street Journal this morning reports Apple is well into negotiations to put its OS X operating system on Intel PC hardware to create a new line of Macintosh computers. Wow, that's a story worth a second cup of coffee.

Apple, which is at a worldwide PC marketshare run-rate of about 2% or less, has been at a huge disadvantage for years because its IBM-built PowerPC chips lack many of the applications that run natively on Intel's hardware instruction set.

My hypothetical reaction to a hypothetical move by Apple to source Intel chips for PCs, laptops, and servers:

• The iPod is a key catalyst to the so-called digital convergence that is going on around us at an accelerating pace. Apple is on the ascendancy. Therefore, it's time to goose up the PC side of the business. To look at the Intel architecture, up to now the "dark side" to Mac fanatics, makes good business sense for Apple.
• Apple's bastion of market strength is in the media professions. It is hard pressed to keep up, as a minor player, with the twice a year improvements of the two big graphics chip companies, ATI and nVidia. On an Intel platform, Apple could keep up with the product curve and share costs with other Intel-based PC makers. Intel-PC price-performance with the OS X operating sytem would help Apple keep its F500 customers.
• There may be something about IBM's ability to deliver on the company's PowerPC futures that Apple wants to avoid talking about. After all, Apple CEO Jobs promised a 3 GHz Mac G5 and has not been able to deliver. Moreover, IBM is very busy working on the 2006 Sony PlayStation 3, whose volumes will swamp the Apple chip purchases. Lastly, the PowerPC as a workstation chip is a torch only carried by Apple -- with acknowledgement to IBM's non-Intel workstation products. IBM's design focus on the PowerPC has primarily been on building killer RISC server chips. Apple's needs are no longer strategic to IBM, and perhaps even to IBM's semiconductor division.
• Meanwhile, Intel has capacity for sure, and its roadmap has enough working silicon proof points to have a low technology risk.
• The enormous global ecosystem built around the Intel PC business could provide immediate benefits to Apple's cost structure. Some of those costs savings, ala Dell, could be passed on to customers -- making Apple a better value.
• Intel is right in the middle of -- an industry driver in many case -- to the home digital revolution. On an Intel platform, Apple would be able to leverage a lot of R&D -- much of which is not open source. The strategic question is how can Apple leverage iPod and OS X into a greater home presence?
• With WINE and other Windows emulators that are readily available, it will be much easier for an OS X system on Intel to run non-Mac programs. That would make the Windows-to-OS X application migration a lot less painful for potential buyers. Apple has no doubt stumbled on the market research that says Microsoft customers are not happy campers, and that Apple is a brand these disaffected would consider.
• As Linux on the desktop (invariably on Intel) begins to gather some momentum, Apple could smother the Linux competition while being differentiated from the Wintel crowd in the commodity PC markets.
• By putting some hooks into Intel's new soft BIOS technology, Apple could restrict Intel OS X to Apple's PCs should it choose to continue to sell integrated hardware-software "platforms" (in the latest Intel jargon). Or it could sell OS X for $189 a box at retail like Microsoft does Windows XP and make good profits from Mac cloners.

An Intel-Apple deal could be done in weeks. It could be implemented in product prototypes this year with shipping products early next year. I see no technology hurdles. This deal would be a good example of creative destruction.

But let's leave the reader with another thought to ponder: if Microsoft's xBox 360 was indeed prototyped on Apple PowerPC G5's, what would Apple's home future look like if a Mac could have the gaming and home media services of an xBox? Pretty good, I'd think.

Peter S. Kastner