Analysts Mixed On Apple & Intel Deal

New York— Apple's decision to replace its IBM's PowerPC chips with Intel processors signals a landmark shift in the company's history, a change that one industry analyst said could herald the end of it as a PC manufacturer.

Apple's decision to embrace Intel at the expense of its long-time processor partner IBM is likely to cause a major reverberation in the tight Apple consumer and developer communities that could see the niche PC vendor struggle for the next few years as it integrates Intel's technology. Several industry analysts said sales could be endangered during this period as consumers may shy away from the company during the transition, but Jim McGregor, principle analyst for In-Stat, Scottsdale, Ariz., paints Apple in even more dire straits.

“I think this move is the death of Apple Computer,” said McGregor.

He cited the one to two years it will take to integrate Intel's designs into the Apple hardware and rewrite the Macintosh operating system to work with the new chips as creating a dead period in Apple sales.

“Consumers are going to say, 'Should I buy an IBM Apple now? Probably not, because the support for those is going away soon,'” he said, adding that the Intel powered Macs are likely to run below optimum speed due to necessary changes in the Mac OS to mate it with the Intel processors.

However, other industry watchers were less apocalyptic.

Stephen Baker, NPD's industry analysis director, Port Washington, N.Y., said, “Most consumers are pretty processor-agnostic these days. If the product works and performs, it's all that really matters. Apple can keep its identity because their identity really comes (for consumers) from the box and the design. I think software is much less a concern for consumers.”

Toni DuBois, Current Analysis' senior analyst, desktop PCs and servers, La Jolla, Calif., initially had mixed thoughts, but said in the end Apple has a lot to gain from the changeover, and she is anxious to see the company's Intel-based designs. The upside of the deal has Apple gaining a better performing chip with better thermal management for notebook computers.

The one area all three analysts agreed upon was that Apple's back was against the wall and it had to move away from the IBM chips if it hoped to compete, particularly in the notebook computer category. The decision to jump to Intel must have been a bitter pill for Apple's CEO Steve Jobs as he spent a great deal of time and effort demonstrating the superiority of Apple's processors over Intel's at many Macworld shows during the past five years. But making the change was the price of doing business, Baker said.

“At some point everybody does things they never thought they would do, and Steve is a pragmatist when it come to the survival of the business. Witness Apple's acceptance of $150 million from Microsoft,” he said.

“This was a leap they had to make,” DuBois said. “This will allow them to expand their appeal.”

IBM had not significantly upgraded its PowerPC platform in a decade, said McGregor. It had no 64-bit processor in the pipeline, and the Apple's mobile processor is outdated.

Now that Apple is going forward with the switch, the company's task to make this a success is nothing less then monumental, DuBois said. Apple and its software developers will have to rewrite their code and learn to protect the Mac OS on a more openly available processor.

McGregor thought the company should have made an even bolder move.

“I'm really struggling to see them pull this off. A better solution would be to drop the computer hardware and offer the software as an alternative to Microsoft.”

“[Apple is] hoping the switchover will be seamless, but this is probably a bit more complicated than Apple is leading everyone to believe,” Baker said, adding that in the end bringing Intel onboard is less likely to add to Apple's low single-digit market share, but instead limit its losses.

The impact the decision will have on the Apple faithful is unknown at this point, but the general consensus is these fans who have bought into Apple's long-standing “us against them” relationship that Apple executives have fostered over the years with the Wintel world are simply going to have to learn to live with this new reality.

“When the shift is completed, Apple's dispensing of the PowerPC processor is likely to put off some of the company's die-hard fans, but overall the general computer shopper will not care what is inside,” Baker said.