Copyright (c) 2005, Dow Jones & Company Inc. Reproduced with permission of copyright owner. Further reproduction or distribution is prohibited without permission.San Francisco -- NEARLY TEN YEARS ago, the rivalry between Apple Computer Inc. and Intel Corp. was so intense that Apple made a TV commercial featuring an Intel "bunny person" -- a hooded character in a chip-plant clean-room suit from Intel's own commercials -- charred with fire. The point was that Apple's personal computers were "smoking" the performance of PCs using Intel microprocessors.
Yesterday, though, Apple Chief Executive Steve Jobs and Intel CEO Paul Otellini hugged onstage at Apple's annual gathering for software developers here, as the two announced a historic agreement for Apple to use Intel microprocessors.
The deal paves the way for Apple to introduce new, more powerful Mac computers, including laptops, in increasingly small, thin forms. Apple said it will introduce some Mac models running on Intel chips by June 2006, and complete the transition of its entire line of computers by the end of 2007, ending its use of PowerPC chips from International Business Machines Corp. and Freescale Semiconductor Inc.
Mr. Jobs described the move to Intel chips as the third major technological transition in the company's history, with the first being Apple's move to PowerPC microprocessors in the mid-1990s from an earlier generation of chips made by Motorola. The second transition was Apple's switch to Mac OS X, the umbrella name for its current generation Mac operating system, which is far more stable and flexible than prior versions. The current operating system is far less tightly wedded to the microprocessor chip than was the prior version, called OS 9.
Yet the switch to Intel for Apple is a major undertaking that carries all sorts of risks. Apple must not only ensure that the Mac operating system runs well on the new hardware, but it has to persuade its thousands of software developers to adapt their application programs, such as word processors and graphics programs, to run on the new systems.
Mr. Jobs said the company will ship the future machines with a utility program called Rosetta that automatically adapts PowerPC programs so that Intel-based Macs can run them. He demonstrated several programs running with the technology, though users would likely eventually want to shift to new software to exploit the full performance of the new hardware.
Analysts said demonstrating Rosetta was important for reassuring users. The technology change "is huge," said Michael Gartenberg, an analyst at Jupiter Research, "but it should have very little impact on Apple's customers."
While Apple only recently struck the deal with Intel, Apple yesterday confirmed longstanding rumors that it has for years been laying the technological foundation for a possible switch to chips made by the Santa Clara, Calif., semiconductor giant.
In a speech, Mr. Jobs described how Apple's OS X has been leading a "secret double life" on the Apple campus in Cupertino, Calif., where a squad of engineers has for five years stealthily maintained versions of the Mac operating system that run on Intel chips, even as Apple was selling only computers based on PowerPC chips from IBM and Freescale.
Few Apple employees outside the company's executive ranks and the engineers actively involved in the project were aware of its existence. To emphasize the clandestine nature of the project, Mr. Jobs showed a satellite view of Apple headquarters with a circle around the building where the company's engineers toiled in secrecy.
"We were very conscious of the fact that we didn't want Apple to be in that position again" of being tied tightly to one microprocessor design, Mr. Jobs said. The Intel development project, he said, gave Apple "options."
The tinkerings paid off when Apple ran into a set of technical obstacles that could have paralyzed the progress of its computers. In his speech, Mr. Jobs lamented the fact that the IBM-made PowerPC chip known as the G5 wasn't able to reach the barrier of 3 gigahertz in clock speed, one measurement of a chip's power, despite a promise Mr. Jobs had made to deliver Macs running at that speed.
IBM also hasn't been able to create a G5 chip that can run in notebook computers. Such a failing could have created a hole in Apple's product line as more PC users shift to portable computers. "Apple needs a high-performance notebook," says Van Baker, an analyst at Gartner Inc.
Mr. Jobs said that Intel's main draw wasn't its existing products but the company's plans for future chips, which he said offer a superior combination of computing power and low power consumption -- a critical feature for laptop computer and other mobile devices that run on batteries. Though Messrs. Jobs and Otellini declined to discuss specific products or chips, Apple has consistently sought to shrink its computers into more compact designs like the cigar-box sized Mac mini.
The Apple-Intel deal does not mean Apple will be selling Mac OS X for Intel-based computers sold by other hardware makers, despite persistent industry speculation about that possibility. Mr. Jobs said someone who takes the operating-system software from an Intel-based Macintosh and tries to put it on another machine will find that it does not run. He would not describe the security methods used to prevent that possibility, or how difficult they would be to defeat.
But Mr. Jobs said Apple could "envision some exciting products" for the future, adding "we don't know how to do that with the PowerPC roadmap."
IBM yesterday defended its PowerPC chips, saying that they are widely used in everything from supercomputers to mobile devices. In a statement that didn't name Apple, Big Blue touted the adoption of its chips by videogame-console makers, including Microsoft Corp., Sony Corp. and Nintendo Co. "IBM is focused on the highest-value opportunities in each marketplace," the statement said.
Freescale CEO Michel Mayer sent an email to the company's employees expressing disappointment over Apple's decision. His missive, however, noted that the Macintosh business accounted for less than 3% of Freescale's revenue, and suggested that the company will benefit from focusing on other areas. "It is increasingly clear that the center of technology innovation is moving away from the personal computer," he wrote.
For Intel's part, Mr. Otellini said Apple represented significant sales volume. But a bigger draw for the chip maker is being associated with a major innovator in PC hardware, at a time when other manufacturers are content to deliver "me-too" systems. The combination "could put some excitement back into this business," Mr. Otellini said.
What's more, some analysts speculated that Intel may not be as responsive to Apple's needs after the honeymoon between the companies is over, given that it represents only 2.3% of new world-wide PC shipments.
Long term, "even with Apple's 'coolness' and mind share, Apple will end up being one of Intel's smallest customers among the major" PC makers, wrote Goldman Sachs analyst Laura Conigliaro in a research report yesterday. As a result, she said, Apple might not receive the custom work from its current chip suppliers, IBM and Freescale, that have allowed Apple to improve graphics performance and design computers in novel forms.
Mr. Jobs discussed several efforts to help software developers to convert their products so that they will run on either Intel or PowerPC microprocessors. The conversion job could take only a matter of weeks for many developers, who created their products using a programming technology called Xcode, Mr. Jobs said. For fewer than 20% of programs, developers will have to start using Xcode before their products can make the transition; he didn't estimate how long that process would take.
Bruce Chizen, CEO of software maker Adobe Systems Inc., called the shift "a really smart move," and pledged that Adobe would deliver its "Creative Suite," a bundle that includes popular programs such as PhotoShop, for the new platform. Roz Ho, general manager of Microsoft's Macintosh business unit, also said the company would adapt its popular Office suite of programs for the Intel-based Macs.
Using Intel chips does mean that a user could run Windows on future Macs as efficiently as other PCs do. Mr. Jobs said Apple will not provide technical support to anyone who decides to do so. Even if it doesn't, some analysts suspect that the improved capability to run Windows could make the new machines more acceptable to companies.
Wolfram Research Inc., seller of the popular mathematics program Mathematica, showed off how the company had quickly produced a version of the program for Intel-based systems after a phone call from Mr. Jobs last Wednesday night.
Despite Apple's desire for secrecy, word of Apple's alliance with Intel first leaked out two weeks ago, when The Wall Street Journal reported the two companies were in discussions about a deal. "Most of you are hearing about this for the first time," Mr. Jobs told Mac developers in his speech yesterday, "unless you read The Wall Street Journal."
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Charles Forelle, David Bank and Robert A. Guth contributed to this article.
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Journal Link: Apple CEO Steve Jobs discusses the transition to using Intel processors in a video report, at WSJ.com/Free.
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Chip Switch
Apple will introduce Macs with Intel chips next June. What it means:
-- With Intel, Macs can be more powerful and, because the chips emit
less heat, smaller
-- Software developers must adapt programs using tools from Apple
-- Apple will help existing programs run on Intel-powered Macs,
though some performance penalty is likely
Sources: Apple Computer; WSJ research