Apple gambles with new chips, but future rosy

SAN JOSE, Calif. — Apple Computer is taking a courageous and risky step in moving from IBM to Intel chips, but the gamble will pay huge dividends to users of its Macintosh computers after Apple gets through what's almost sure to be a scary transition.

A surge of innovation could come out of Apple as the company gets access to the much wider range of chips made by Intel, and possibly even Intel-compatible chips from rivals such as Advanced Micro Devices (AMD).

Perhaps there will be Apple-branded set-top TV boxes, or ultra-low-cost Macs, or iPods that play movies, or Mac mobile phones. Perhaps the most exciting outcome is something no one has thought about yet.

Until now, the hardware and software engineers on Infinite Loop, the private street in Cupertino surrounding Apple's circular headquarters, have been straitjacketed by the limited processor lineup from IBM and its former partner Freescale Semiconductor.

Most obviously, Apple hasn't been able to introduce a notebook computer that runs IBM's latest and greatest G5 processor. The G5 generates too much heat for a notebook design, and IBM couldn't or wouldn't deliver a cooler version of the chip.

Intel, in contrast, offers a range of chips that can power everything from handheld devices to supercomputers. The Santa Clara-based technology giant will spend a staggering $5.2 billion this year on research and development — orders of magnitude more than could be justified by Apple's orders alone.

Apple also gets the security of having multiple suppliers. Sunnyvale-based AMD and VIA Technologies of Taiwan both make Intel-compatible processors, and there's no reason to expect Apple won't use them — or at least threaten to do so if Intel doesn't give Apple what it wants.

So if Intel hits a bad patch in one area, as it did recently by falling behind in the transition to 64-bit processors, Apple could start buying from AMD.

And there's also VIA, which recently introduced a new chip — the C7-M — that competes with Intel's popular Pentium M processor. If the C7-M is a better chip, or delivers the same performance at a lower price than the Pentium M, Apple could easily make the shift.

Steve Jobs, Apple's co-founder and deliverer of hope to the Mac faithful, announced the seismic jolt from IBM to Intel during a speech last week at Apple's Worldwide Developer Conference in San Francisco.

He brought Intel chief Paul Otellini on stage and, perhaps to show there were no hard feelings from years of rivalry, Otellini replayed an old commercial in which Apple boasted about how its computers toasted Windows machines using Intel processors.

The big risk for Apple is that customers will stop buying Macs until the first Intel-based systems arrive in the middle of next year. The upcoming holiday season could be particularly bleak.

Indeed, if you're considering the purchase of a Mac right now, you might want to wait a month or two. Apple could be forced to offer significant discounts to prevent sales from slumping.

But Apple has a good track record in managing big transitions — at least from the standpoint of customers — including a smooth introduction of the current Mac OS X operating system in March 2001.

Jobs talks about a crucial piece of software called "Rosetta," allowing today's Mac software to run efficiently on the new Mac operating system being created for Intel chips.

If Rosetta works as advertised, buyers of the new Macs will still be able to use all their old software and install all their old peripherals such as printers.

At the same time, today's Macs won't become instantly obsolete when the new Intel-based Macs start shipping.

I expect it will be at least three years before owners of G3, G4 and G5 Macs start to get frustrated because there's cool new software that only runs on the Intel-powered Macs that Jobs called "Mactels."

There's no way Apple could have made the huge leap to Intel without causing angst for some of its supporters, but I'm betting the long-term gain will greatly outweigh any short-term pain.

Mike Langberg is a technology columnist at the San Jose Mercury News.