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JUNE 7, 2005
By Peter Burrows Apple Hits the Intel Switch [Page 2 of 2] LOST SHARE. Jobs also addressed the issue of enabling existing Mac customers to upgrade their programs so they'll continue to work with new models. Apple announced a piece of code, called Rosetta, that will let even existing programs written for PowerPC-based Macs run on Intel-based machines, albeit with some negative impact on processing speed. Major risks remain. For starters, Apple intends to introduce its first computers based on Intel's processors within a year, and convert remaining product lines by the end of 2007. That leaves a lot of time for rivals such as Dell (DELL ) and Hewlett-Packard (HPQ ) to generate "fear, uncertainty, and doubt" about Jobs & Co.'s ability to pull off its plan. Indeed, Apple's market share fell from 10% in 1992 to 5% in 1994, the years of its transition to the PowerPC, says Nathan Brookwood, an analyst with consultancy Insight 64. While Apple had other serious problems during that period, uncertainty surrounding the processor change certainly didn't help. PERIOD OF UNCERTAINTY. Apple is bound to lose some of its customers as this migration takes place. Some users won't want to worry about which software is compatible with which Mac models -- or whether those systems will work reliably. "I don't want to play this game," says Joon You, chief technology officer for contract researcher Target Health in New York, which just bought its latest Mac last week. "I have so many other things to worry about." Instead, You plans to stop buying Macs. He also plans to stop evaluating Apple's servers and go with Sun Microsystems' (SUNW ) products. While Sun also recently began a migration to Intel for some of its wares, it's already far down that path. Apple, on the other hand, is just entering a period of uncertainty. "I think Apple made a great mistake," You says. An even greater risk in the short term is the possibility that significant numbers of Mac buyers will hold off on making their purchases, waiting for the opportunity to get their hands on an Intel-based Mac instead. The problem could be especially dangerous for laptop sales. Already, Apple PowerBooks run more slowly than Windows-compatible models. A top-of-the-line PowerBook runs at 1.67 gigahertz, vs. 2.13 gHz for a high-end Dell. QUEST FOR VIBRANCY. Then there's the question of how Mac zealots might react. "Since its inception, Apple has profited hugely from a customer base whose dedication often bordered on religious devotion," writes Charles King, an analyst with Pund-IT Research, in a recent note. "Many members of that group tend to deeply distrust the concept of computing promoted by Intel and its long-time partner Microsoft (MSFT )." Still, Jobs got off to a good start in addressing these many fears -- and he and Intel CEO Paul Otellini haven't even begun to lay out the ways they can improve the Mac. Asked whether Apple can better create innovative products than cost-conscious PC makers such as Dell, Otellini responded carefully: "Having a customer that can match our intensity [for innovation] is really exciting for us. The industry needs really interesting new products to keep it vibrant." Over the next two years, Otellini will have plenty of opportunity to justify his excitement.
 With Olga Kharif in Portland, Ore., Steve Hamm in New York, and Cliff Edwards in San Mateo, Calif. Burrows is Computer editor in BusinessWeek's Silicon Valley bureau Edited by Ira Sager
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