Monday, June 06, 2005

Apple Switching to Intel Chips

According to published reports, the ten-year stormy relationship between IBM and Apple is over. Apple will be switching from IBM-manufactured PowerPC chips to Intel chips in the future. Apple's decision represents a major risk for the company which must now re-write its software for the Intel platform. The dispute between Apple and IBM was rooted in Apple's request that IBM manufacture a wider variety of PowerPC chips for the Macintosh - specifically chips designed for mobile users. Intel is a recognized leader in designing and building chips for laptops. IBM was reluctant to puruse this path due to profitability concerns for a low-volume business. Apple currently has just 2% of the world-wide PC market.

In recent years, IBM has demonstrated a renewed focus away from low-growth areas to high-growth areas. IBM has realized that it can't be a player in all technology areas - witness the recent sale of the PC company to Lenovo. In addition, over the past decade, IBM has been steadily increasing its focus in consulting and services - both high growth areas. As evidence, the bold move in 2002 when IBM bought the consulting arm of PricewaterhouseCoopers.

Although IBM's stock has been hurt of late due to poor Q1 performance, there are signs that IBM is taking the right steps to get back on track. Time will tell if this strategy will be successful.

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