By Alex Salkever The Christmas season brings certain traditions for Apple lovers. Rather than drink eggnog or chase their significant other under the mistletoe for a smooch, Apple fans start to speculate on what new goodies fearless leader Steve Jobs will roll out at the semi-annual Macworld confab in San Francisco. The conference, which runs from Jan. 4 through Jan. 9, next year is a favorite place for Jobs to reveal his top-notch offerings to a friendly home crowd. The consensus now holds that Apple (AAPL) will mostly trot upgrades on the existing lines onto the stage in front of throngs of screaming faithful.
That's all well and good, but not earth-shattering by any means. I believe, however, the real fireworks will start long after Macworld -- in fact, about 6 to 10 months out. That's when Apple lovers can expect to start hearing rumors of the long-awaited G5 laptop. The machines, which would incorporate the ballyhooed 64-bit G5 chips, could spur huge sales in Apple's professional laptop lines.
In fact, the chips appear to be falling Apple's way on multiple fronts. With its IBM (IBM) alliance and big bet on the G5, Apple has finally hitched its wagon to the right horse. IBM is barreling ahead full-speed with development of more powerful and higher performing Power PC chips, including improved versions of the PPC 970, which is the guts of the G5.
TOO HOT TO HANDLE. And to a greater degree than Motorola (MOT) ever managed, IBM has developed a broader customer base for its PPC product line. All of this bodes particularly well for Apple's future chip needs. "Motorola couldn't afford to invest a lot of money into its Power PC lines. But IBM has a number of good reasons to want to support that chip, and Apple will benefit from that," says Peter Glaskowsky, a hardware analyst with tech consultancy InStatMDR and editor of The Microprocessor Report.
For the record, IBM says it hasn't heard of any G5 laptop plans. And Apple, as usual, says it can't comment on products in development. But Apple watchers and chip experts say all the pieces needed for G5 laptop are coming together.
Existing versions of the G5 chips can't run in laptops because they generate too much heat and consume too much energy. This has several nasty side effects. Laptops built with these hot and bothered chips would run down batteries in a flash. Keeping the inner enclosures of the laptops cool enough to prevent the processors from malfunctioning would also prove difficult. Finally, chilling the exterior case of the laptop sufficiently to comfortably rest on someone's lap would likewise be tough.
THE SERVER LINK. The simple solution to all of these problems is to introduce a low-power, slower-speed chip specifically for laptops. That's what Apple and Motorola have done in the past with G4 laptop chips. And that's what Intel (INTC) has done with its Centrino line of processors. Building a specialized version does require some modifications to the guts of the chips and the way they process bits and bytes of information, as well as tweaks to how they consume power.
Much of the requisite modifications needed to convert a G5 desktop chipset into one that works in a laptop may have already taken place, however. Here's my logic: On Nov. 15, IBM introduced a version of its PPC 970 chips designed to run in a so-called blade server. These wafer-thin machines can fit in a rack stacked sideways or top to bottom. The racks keep all the boxes in a central place and make for an easy point of connectivity as well as easy access and physical management.
Rack-mounted servers are rapidly taking over much of the tech landscape, particularly in areas where companies link clusters of them together to mimic supercomputer capabilities. Called high-performance computing, it's a market IBM is eager to exploit with its PPC 970 chips.
COOL IT DOWN. Here's the connection: Rack-mounted blade servers share some of the same problems as laptops, namely, heat output and power consumption. Often measuring less than an inch thick, they must work in close quarters where ventilation is scant. For that reason, keeping them cool is difficult, with possible heat-extraction mechanisms limited due to the surroundings and the small physical enclosure of the server itself.
The simplest way to reduce heat is to trim the amount of power going into a chip. That's what IBM has probably done with its PPC blade servers, which are slated to hit the shelves in March, 2004. This implies that a low-power G5 laptop chip is only a small step away from the existing product. "The only thing lacking in the current 970 to make it a laptop is a low-voltage mode. The technology of the PPC 970 is very rapidly approaching the point where such things become slam dunks," says Glaskowsky.
Another indication that the G5 may soon be laptop-ready is the chipmaking improvements that IBM is already fine-tuning at its production facilities. Big Blue has sunk billions into installing state-of-the-art chip-fabrication technology into several of its massive production plants, including one in Fishkill, N.Y.
TINY DYNAMOS. As a result, IBM should soon start using the new, 90-nanometer fabrication processes to build PPC chips. That's nearly a 40% improvement over the current technology, which allows chipmakers to design features and circuits on a silicon wafer only if they stay 130 nanometers apart. To give an idea of how small that is, 100,000 nanometers equal the thickness of a human hair.
The upshot? IBM can punch the same circuitry onto a much smaller piece of silicon. That could up the speed of the PPC chips significantly, since the electrons that carry the information would travel smaller distances. The shorter distances also mean less power consumption and heat output, since the so-called pipeline for data processing requests would be physically shorter, too.
Further, the small size of the circuit map required means IBM could make more chips from a single silicon wafer and, as a result, PPC 970s should become cheaper to manufacture. IBM has indicated it will increase the available processing speed of the PPC 970 chips to 2.4 gigahertz in the coming year. That would put Apple within shouting distance of the top-level Intel and AMD (AMD) processors in terms of pure clock speed.
BLADE RUNNER. As a side benefit, Apple's nascent server business will likely gain from IBM's moves to push the envelope on its PPC line. Glaskowsky and others expect that Apple will soon be able to offer a blade-server line based on the chip configuration IBM plans to put into its JS20 blade servers.
That gets Apple a seat at the table in one of the hardware business' fastest growing segments. Tech tracker IDC found that in the third quarter of 2003, blade-server sales grew by 763% vs. the same quarter last year. That still only totals $164 million, a very small percentage of the $11 billion global server market for that quarter. And Apple sold just 4,800 servers in that quarter, less than half a percent of the total global market.
Still, the blade-server market is growing in key areas where Apple has strong niches, such as biotech and special effects and animation for films. While it will probably never come close to Apple's much bigger desktop and laptop business, the server lines promise nice profit margins. "[Apple is] still a pretty small player. But their presence has grown," says Mark Melenovski, a server analyst at IDC.
BETTER THIS TIME? So what kind of a boost could Apple expect from the introduction of a G5 laptop? That's hard to predict, but I suspect it would be significant. With the economy rebounding and, in particular, the advertising sector on the mend, some stars appear already aligned for a strong showing of a new Apple laptop line.
Consider what happened in 2001, the year Apple introduced the G4 PowerBook. Overall net sales income fell by 33%, but net sales income of portable computers (including the iBook) rose 2%.
Some of that was no doubt due to the industry trend toward laptops. But the fact that a new release could completely buck a generally weak economy as well as Apple's abysmal 2001 results could bode well for a big boost from a similar release in 2004. Salkever, Technology editor for BusinessWeek Online, is alternating with Charles Haddad on Byte of the Apple