The coming year for Apple Computer (AAPL) is full of questions, and many of them are connected one way or another with the switch to using microprocessors from Intel (INTC). How Apple will or won't build around this or that Intel platform is likely to be answered when CEO Steve Jobs takes the stage at the annual Macworld conference on Jan. 10.
But to me, a more interesting question is one that goes straight to the heart of the relationship between Apple and its newest chip supplier. As Apple includes Intel's chips inside its machines, will it also point to the Intel brand on the outside? In particular, will Apple place an Intel medallion on computers, or mention Intel in the ads for computers that house Intel chips?
ADDICTIVE. This would be a good moment to recall what at least one customer has called the "cocaine" of the computer industry: Intel's marketing subsidies -- a program known as "Intel Inside," named for the ubiquitous logo, labels, and audio-visual cues that show up in the various print and electronic advertising efforts of PC makers that use Intel chips. It was Toshiba executives who made reference to the addictive nature of the subsidies, according to an antitrust lawsuit filed by Intel rival Advanced Micro Devices (AMD). Intel, which says AMD's case is without merit, prefers the term "co-marketing."
Whatever word you use to describe the practice, Intel is the master of helping its partners sell computers, in part by helping them foot the bill for advertising. If you're Dell (DELL), Hewlett-Packard (HPQ), Gateway (GTW), Toshiba, or IBM (IBM), the more you advertise, the more you sell. And the more you sell, the more you want to advertise to sell more.
It's an interesting little cycle that keeps PC makers coming back at regular intervals. For every Intel chip a PC company buys, it gets some cash back, calculated as a percentage of its ad budget. For a company that ran a $7.5 billion profit on sales of $34.2 billion in its 2004 fiscal year, Intel can well afford to spread a little marketing cash around.
MISSING CHIMES. And when it really wants to push a product, it just adds more cash to its co-marketing efforts, as it did with the Centrino line, a combination of a low-power microprocessor, a chipset, and wireless networking chips all packaged together for notebook PCs. Centrino was, and continues to be, a big hit. First, it was a fine product. But Intel also promoted the heck out of it, spending some $300 million in marketing.
Is Apple going to accept "Intel Inside" money and all that goes with it? I have a hard time envisioning a scenario under which it would. The thought of Apple slapping "Intel Inside" emblems on a Powerbook strikes me as so antithetical to the Steve Jobsian sense of aesthetics that it's laughable. The same would have to go for the Intel plugs in print and TV ads. I don't expect any of those Intel Pentium chimes in pitches for the next Mac. Apple already spends plenty of its own money on marketing and advertising.
And while Intel's name and its many brands are among the most recognizable in the world, the name doesn't inspire the same degree of loyalty that Apple's does. On Dec. 14 Intel announced a deal under which Intel will become a sponsor of BMW's Formula One racing team, and both will collaborate on technology inside the car. Intel's vice-president for partner marketing says the deal is about building "greater affinity for our brand." While millions know who Intel is and what a Pentium chip is, the names don't necessarily make hearts skip a beat the way they do at the mention of the iPod, or the Mac.
"LESS "WINTEL" TAINT." One of Intel's big hopes in landing Apple as a customer is that some of Apple's coolness and customer loyalty will rub off. Intel will no doubt get its share of the credit for the fruits of the alliance, perhaps a home-entertainment computer that makes previous Microsoft-led efforts in that arena look positively primitive. That will no doubt create positive buzz for Intel and help it shed at least some of the taint of being part of the "Wintel" alliance with Microsoft (MSFT).
And that may be all the incentive Intel needs to cut Apple slack that it won't give other PC makers.
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Hesseldahl is a writer for BusinessWeek Online in New York
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