Video: Apple's big bite

updated 1/10/2006 7:27:13 PM ET 2006-01-11T00:27:13

Apple Computer Inc. on Tuesday unleashed its strongest weapons yet to chip away at Microsoft Corp.’s dominance of the PC market.

In unveiling computers and laptops with Intel Corp.’s microprocessors, Apple is tapping not only the latest chip technologies that rival makers of Windows-based PCs will use but also the vast marketing power that Intel, the world’s largest semiconductor company, delivers.

The company’s stock shot to a 52-week high as Tuesday’s news coincided with word on impressive holiday sales numbers for Apple’s hugely popular iPod music players. The company had a record $5.7 billion in sales during the holiday quarter as it sold 14 million iPods — nearly three times as many as it did in the same period a year ago. Apple to date has sold more than 850 million songs and 8 million videos at its iTunes Music Store.

With the success of its iPod players and flashy retail stores, Apple has already begun stealing customers from the Windows camp. After years of hovering around 3 percent, Apple last year cracked 4 percent of the U.S. PC market.

The move to Intel chips will only boost Apple’s sales and will instantly erase the perception that Macintosh computers lag behind Windows-based PCs in performance, analysts say.

“Now consumers can buy a Mac that is three times faster and for the same price,” said Nathan Brookwood, analyst with Insight 64 research firm.

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Apple CEO Steve Jobs unveiled the new computers at the Macworld Expo on Tuesday, showing off an iMac desktop and a notebook based on Intel’s new two-brained processor, the Core Duo.

The new iMacs will have the same all-in-one design as previous models and will be available with 17-inch and 20-inch screens for $1,299 and $1,699. The MacBook Pros — with 15.4-inch displays — start at $1,999.

Jobs said that the MacBook Pro is up to four times as fast as previous Mac laptops, with the new iMacs running two to three times faster than the IBM-powered iMac G5.

All the new computers will include Apple’s Front Row software and a remote control, which lets users watch videos, listen to music or browse photos from across a room.

Apple iMac
Apple
The new iMacs are two to three times faster than the previous iMac G5, Jobs said.

The machines also will be bundled with Apple’s newly announced iLife ’06 suite of digital lifestyle programs. In one of the updates, the latest version of iPhoto will let Mac shutterbugs share pictures much like bloggers, and podcasters share content.

“This is podcasting for photos,” Jobs said.

With a few clicks, users can post an online feed to which others — including Windows users — can subscribe. As changes are made to the album, subscribers automatically receive the updates.

The iLife suite also will enable the one-click export of video to iPods as well as a simple, drag-and-drop method of creating DVDs. The program also will support third-party DVD burners.

Embracing Intel
Apple’s historic shift to Intel microprocessors came months earlier than expected. When it first announced plans to switch in June, Apple said it expected to begin making the transition by mid-2006. Jobs said Tuesday the entire Mac line will be converted to Intel by the end of this calendar year.

“Companies don’t typically under promise and over deliver, and that’s exactly what Apple has done,” Sam Bhavnani, analyst with Current Analysis, said of the early launch.

For years, Apple shunned Intel, which has provided chips that power a majority of the world’s PCs, along with Microsoft’s Windows software. In the late 1990s, Apple even ran TV ads with a Pentium II glued to a snail.

But on Tuesday, Jobs was joined onstage by Intel CEO Paul Otellini to unveil the new jointly designed computers. Otellini wore a clean room suit that the chip company has famously used in its ad campaigns — and that Apple once lampooned in its own ads.

Apple premiered a new television ad Tuesday touting its new partner: “For years, it’s been trapped inside PCs, dutifully performing dull tasks when it could have been doing so much more. Starting today, the Intel chip will be set free and get to live inside a Mac. Imagine the possibilities.”

Apple had become increasingly frustrated in recent years as its chip suppliers, IBM Corp. and Motorola Corp.’s spinoff, Freescale Semiconductor Inc., failed to meet its needs for faster more energy efficient chips. Of particular concern was IBM’s apparent inability to develop a G5 chip that would work well in notebook computers.

Intel, on the other hand, has been focusing on developing chips specifically tailored for notebooks. During last week’s International Consumer Electronics Show, Intel unveiled its latest, the Core Duo, which features two computing engines on a single piece of silicon. It was that chip that Apple decided to fit into the new iMacs and MacBooks.

Windows on a Mac?
Though the change to Intel has occurred faster than expected, it still poses some risks.

Besides potentially alienating a fan base that’s accustomed to doing things differently, Apple’s move opens up the issue of backward compatibility and the possibility that PC users might run pirated versions of Mac OS X, Apple’s critically acclaimed operating system, on their generally cheaper non-Apple computers.

Jobs demonstrated new software, called Rosetta, that will let owners of the new Intel-based Macs run older applications. But he did not comment on how the company will lock its operating system to its hardware.

With Intel processors inside the new Macs, users could technically and theoretically load Windows onto a Mac computer, although it would require some technical expertise to pull it off. That would allow a user to run both Microsoft and Apple’s operating systems on the same Apple machine.

Neither Apple nor Microsoft appeared bothered by the prospect.

Phil Schiller, Apple’s senior vice president of worldwide product marketing, said in an interview Tuesday that the company won’t sell or support Windows itself, but also hasn’t done anything to preclude people from loading Windows onto the machines themselves.

“That’s fine with us. We don’t mind,” Schiller said. “If there are people who love our hardware but are forced to put up with a Windows world, then that’s OK.”

“Any new machines that are on the market that run Windows are great,” said Scott Erickson, director of product management and marketing for Microsoft’s Mac business unit.

Though Windows sales could benefit, Microsoft risks losing ground unless its operating systems keep up with the Mac OS X. Windows Vista, the next major update, won’t be available until later this year — and its promised features copy many of those already in Mac OS X.

The two companies also announced a five-year pact for Microsoft to continue offering a version of its Office business software for Macintosh computers. No money changed hands; Erickson said the announcement was aimed to quell customer concerns that Microsoft will stop developing software for its rival.

Microsoft said a new version of Office designed for Apple’s new Intel-based computers would be released, but did not give a release date. Erickson said the company last released a version of its Office business software for Macs in May of 2004, and Microsoft generally releases updates every two to three years.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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