Sunday, June 05, 2005

Apple To Open OS X To Intel '086 Machines

With the rampant discussion about a possible Apple switch to Intel processors, many people are speculating that the Intel processor in question surely must not be the dreaded "086" variant that is the staple of the Windows world. And, say these alarmists, if Apple did indeed adopt bone-standard WinTel internals for its machines, then Apple's hardware business would evaporate overnight. Every time I read this reasoning, I think one word: Hogwash.

The Truth About Apple's Hardware Market

While it is certain that Apple derives a huge proportion of its profits from its hardware sales, and, that moving the internals of that hardware to an industry standard architecture built around an Intel processor would certainly be a notable change, there is really no reason to think that Apple's hardware revenue would miss a beat, as a result. Apple doesn't presently compete on price against the entry level PC machines from Dell, E-Machines, Gateway, and the rest. Apple's hardware is priced against mid- to high-end PC hardware. From a price/performance view, Apple's product line looks a lot like Sony's: both avoid the dirt-cheap bottom end of the market, and, they sell their products based more on brand appeal, high styling, and premium positioning.

Figuring Out The Possibilities

Asking a few simple questions, and, comparing the answers can quickly prove out the eventual result of Apple adopting a standard Intel-based architecture.

1. How many present Apple customers would abandon Apple hardware, if OS X would run equally well on PC machines from other makers?

2. How many current Windows users would like to buy Apple hardware, if Windows would run perfectly on the new Apple machines?

3. How many Windows users would buy Apple's OS X operating system to install as a primary (or secondary) OS on their existing PCs?

My guess is that the sort of premium computer shoppers who now comprise the bulk of Apple's user base would still continue to buy Apple hardware, so long as the price/performance remained roughly equal to similarly priced premium offerings from Sony, Alienware, and to a degree, from the mid and high end of the HP, Compaq, Acer, Dell, and other product lines.

The flip side is that diehard Windows users who now buy mid- and high-priced models from Sony, Alienware, HP, Compaq, Acer, Dell, and other product lines would love to consider the gorgeously crafted machines from Apple. And, Apple would gain a whole new wave of these more-affluent shoppers as customers.

Finally, every single owner of a Windows based PC on the planet would instantly become a sales prospect for Mac OS X. Some number of these people would buy OS X for use on their existing PCs.

Apple's stunningly designed machines would all ship standard with OS X installed. Any buyer could then install whatever flavor of Windows (or Linux, etc.) on the Mac that they chose to add.

Not Everyone Is A Cheapskate

Apple does not now compete against the Best Buy Sunday supplement PCs. And, surprisingly, most PC buyers don't actually buy those stripped down models, either. The middle and upper end of the PC market is a very busy, vibrant marketplace, where, by revenue, well over half of the business takes place. In other words, half of all PC dollars spent are for machines priced in the higher two-thirds of the models available from all manufacturers... even Dell. And, interesting from a business analysis standpoint, perhaps 80% of the profits earned in the PC industry are from selling those same mid- to high-end models. PC makers make very little profit from the Sunday supplement discount sales.

This Is Actually Good News

The bottom line here is simply that there is no real downside to Apple engineering a smooth transition to building Macs with an industry standard '086 based architecture. But, there is one whale of an upside. And, if this is the move announced by Steve Jobs on Monday, the most frightened people who hear the news should not be Mac users, but, the CEOs at Dell, Sony, HP, Gateway, and the rest. Suddenly, their comfortable little stranglehold on the lucrative middle and upper end of the PC market will be in deep trouble.


Blogger Martin said...

Hi Jack,

I agree with most of your points. I have only one concern. With Intel, Apple would be only one of many customers which makes it more vulnerable when requiring certain unique chip architectures. This could slow down the development of new product lines and impair the innovative edge Apple so badly needs to survive.
There are speculations about a double plattform solution, keeping the Power chip as is and add an Intel chip launched when the corresponding software is started up.

10:11 AM, June 05, 2005  
Blogger Jack Campbell said...

Hi Martin,

My understanding is that the move will be to the bone stock Intel platform. So, there would be no "unique chip architectures" to worry about. Apple would benefit from the same competition-based product development as all other PC makers.

10:20 AM, June 05, 2005  
Blogger Martin said...

Hi Jack,

not quite as I understand. There might be some issues with the Velocity Engine. I have no real knowledge about the different chip architectures, but there is where I got my news from:

Let's see what happens tomorrow.

7:22 PM, June 05, 2005  
Blogger fixyourthinking said...

Must've had a feeling about this one.

2:13 PM, June 06, 2005  
Blogger mahasiswa teladan said...

hi...Im student from Informatics engineering nice article,
thanks for sharing :)

11:57 PM, August 19, 2013  

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