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MAY 21, 2003
By Alex Salkever Will This Be the Summer of Mac? A promising new set of chips, a possible Quark version for OS X, a surge in online advertising, and a new music store could goose sales -- and the stock For three years, investors have turned up their noses at Apple. Like most tech outfits in the postbubble economy, Apple suffered sliding profits and declining sales. Its stock, which had been trading at around $15 for almost a year, saw a slight uptick at the beginning of May on news of Apple's foray into the music business, and has been around $18 since. Few on Wall Street are predicting much more upside for Apple this summer. But let me be contrarian: I think this is going to be the summer of Mac, one of its best seasons in a long time -- one that might even provide a nice lift to Apple's stock price. My logic? Several stars are set to align for Steve Jobs & Co. Although Apple (AAPL ) won't talk about it, IBM (IBM ) is developing a new set of chips that Apple could use to replace the aging Motorola processors used in its G4 line. (IBM did not confirm it was building a chip specifically for Apple, but it does say its new PowerPC chip will work on Apple platforms.) Plus, desktop publishing and graphics software giant Quark is hinting it will finally bring out an OS X version of its software. And finally, the creative markets in advertising and media should begin to rebound in the summer, which will allow media and advertising companies to proceed with long-postponed hardware upgrades. Let's take the positive factors one at a time. GOOD TIMING. First, the chips. For a long time, Macolytes claimed that the architecture of Apple's PowerPC (PPC) chips allowed them to outperform Intel wares boasting far higher clock speeds. Their rationale: PPC chips divide processing tasks and complete them in parallel, while Intel (INTC ) and Advanced Micro Devices (AMD ) chips process their tasks in larger chunks, even though they perform each individual calculation more quickly. Plus, the fact that PCs are increasingly being used as multimedia hubs to stream music, edit video, and manipulate digital photos plays to Apple's strengths, since the PPC chip works particularly well on such applications. Still, sometimes sheer number-crunching strength wins out. The new Intel chips are so fast they're eliminating much of the PPC's architectural advantage. The disparity between Intel and PPC has reached the point where even the hard-core Mac devotees admit that Apple desperately needs newer, faster chips. While many Intel chips run at 3 gigahertz, PPC chips top out at about 1.4 Ghz. Drop in a new, much faster chipset, and the PowerMac line will compare smartly with the PC competition. In the graphics, film, and biotech industries, where Apple already holds a strong hand, the new chips could prove a strong sales inducement. For home users, the new chips would come online just as consumers are increasingly looking to use PCs to handle processor-intensive tasks such as digital photography and digital music. Apple's timing is spot on. Coincidence? Perhaps, but the results are the same. WATCH OUT, SUN. The emergence of Big Blue as an innovative force in the Mac universe is a very good thing for Apple. Lackluster Motorola (MOT ) has taken the lead in the PowerPC consortium. Distracted by internal woes and a mandate to get profitable fast and stay there, Motorola hasn't paid much attention to the PPC chip. Some feel that Apple's limited market share has discouraged Motorola. Investors already complain that Motorola has too many product lines, and some industry watchers even expect Motorola to exit the chip business altogether. While Motorola has struggled in chips, IBM has soared. Under CEO Sam Palmisano, Big Blue has poured money into chip research and upgraded its factories. IBM says the new Apple chip will be of the 64-bit variety, which means it can process twice as much information per cycle as existing 32-bit chips. That's not even counting an anticipated initial speed boost in the new chip's clock cycle to well over 1.8 Ghz -- and likely well beyond that over the course of the year. The new chip could also prove extremely valuable for specialized IBM workstations -- and a possible means for Big Blue to compete with archrival Sun Microsystems (SUNW ) and its 64-bit architecture. For Apple, it means a quick injection of speed and power.
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