Witnessing History: Apple’s Strategy

June 19, 2005

Witnessing History: Apple’s Strategy

Witnessing History: Apple’s Strategy

by Arnold Reinhold

It’s rare that one gets to watch grand strategy played out right before one’s eyes. Apple’s decision to switch from IBM to Intel as its microprocessor supplier is one of those moments in corporate history.

Apple, particularly after the home-run it hit with the iPod, is seen as a threat by Sony and Microsoft. Both companies have tapped IBM as their supplier for next-generation game consoles, a market that is bigger than personal computing and booming. That gave them far greater leverage than Apple in guiding IBM’s PowerPC road map, a situation that Apple couldn’t tolerate.

At the same time, Intel saw itself being reduced to a supplier of commodity chips for products built to run Microsoft’s Windows operating system, with little prospect of the kind of product differentiation that justifies higher margins. Intel’s Itanium effort collapsed in the face of AMD’s 64-bit, x86-compatible Opteron. With Apple as a customer, Intel no longer has to wait for approval from Redmond to innovate.

Different Is Good

For Apple, the move has both risks and opportunities. Had IBM been willing and able to evolve the PowerPC line to meet Apple’s visions, there was little reason for Apple to switch. Apple’s strongest marketing message was Think Different. When competing against a behemoth like Microsoft, the more difference the better. And PowerPC’s different object code made it almost impossible for cross-platform viruses and malware to propagate.

More Work to Do

Apple will have to manage yet another major product transition, the fourth in its history if one counts the switch from Apple II to Macintosh. But Steve Jobs, Apple’s CEO, is good at it, demonstrating a version of the very complex Mathematica application running under Apple’s OS-X on a Pentium box after just a 2 hour re-compile. For most software vendors, there will be more work to do in this transition.

There is an arcane architectural difference between the PowerPC and the Pentium called the “endian problem.” The computer industry never standardized on how to number bytes within larger blocks of information called “words.” There are two ways to do it and Intel’s approach differs from the approach Apple has used in the past. It is considered good programming practice to write software that is endian independent, but lapses cause pesky bugs that have to be tracked down one at a time.

Overcoming a Big Obstacle

However, standardizing in Intel will lure developers, who had been only Windows shops in the past, to the Mac. Endian issues were a big obstacle to supporting both platforms. It should also be possible to port Wine-like software to the Mactel. The open source Wine is a package designed to allow Windows applications to run as-is on x86 Linux boxes. Whether Microsoft raises legal objections remains to be seen.

Another issue is selling Apple’s OS-X on Intel boxes from other manufacturers. Apple has said no, for now, but major PC manufacturers have reportedly expressed interest. A few carefully selected deals could greatly expand the OS-X market.

What Apple Does Best

The Intel product line, with its economy of scale, low power consumption, and integrated digital rights management will open up a range of possibilities for consumer products that offer what Apple does best: new capabilities that you never knew you wanted but can’t wait to get once you see them in action. With its iPod success, Apple now knows what it’s like to have a dominant position in a market. They must have noticed it feels a lot better than “me too.”


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