Apple Shifts to Intel Chips

Apple Computer Inc. (AAPL) Monday said it will switch its Macintosh computers to the same Intel (INTC) chips used in systems that run Microsoft Windows, severing its long and at times stormy relationship with International Business Machines Corp. (IBM).

Apple share were down 3 cents at $38.21 on Nasdaq. IBM shares were down 52 cents at $75.27 on the New York Stock Exchange. Intel shares were down 15 cents at $27.18 on Nasdaq.

"Our goal is to provide our customers with the best personal computers in the world, and looking ahead Intel has the strongest processor roadmap by far," said Steve Jobs (search), Apple's CEO. "It's been ten years since our transition to the PowerPC, and we think Intel's technology will help us create the best personal computers for the next ten years."

Jobs said Apple will begin offering Macs with Intel processors by June 2006 and will switch its entire product line by the end of 2007.

Apple has publicly expressed frustration with IBM as a supplier in recent quarters. IBM had problems producing enough working versions of its PowerPC 970 (search) chip, which Apple calls the G5. Also, IBM has yet to produce a version of the G5 that consumes less power and would be suitable for use in Apple's laptop personal computers.

Rumors of Apple's wish to jump to Intel have been circulating for years. The switch to Intel chips will be expensive, complicated and could cost Apple some of its share of the global PC market, analysts have said.

"It could cost hundreds of millions (of dollars) of re-engineering. It's not easy work. It's deep work at the base of the (software) kernel," said analyst Brian Gammage at research group Gartner.

"I don't know that Apple's market share can survive another architecture shift," Insight 64 analyst Nathan Brookwood told News.com. "Every time they do this, they lose more customers."

With the change, the PC world has effectively been sewn up by Intel-compatible processors. The other processor supplier to the PC industry is Intel's smaller rival, Advanced Micro Devices Inc. (AMD).

Apple said it expects Microsoft (MSFT) and Adobe Systems Inc. (ADBE) to create future versions of Microsoft Office and Creative Suite, respectively, for the Macintosh that support both Power PC and Intel processors. Adobe is the maker of document-sharing software that is the near-standard on PCs.

Apple has a near 2 percent share of the global personal computer market, but after years of decline it is now gaining on its rivals as its iPod (search) music players re-establish the firm as a trendsetter in design and software.

News.com reported that Apple would begin the transition to Intel with its lower-end computers, such as the Mac Mini (search), in mid-2006 and higher-end models a year later.

Although IBM suffers a setback with the loss of Apple, the company could reap a financial windfall from deals with Microsoft (MSFT), Nintendo and Sony Corp. (SNE) to put microprocessors it is producing in next-generation video-game consoles.

A new microprocessor that IBM co-developed with Sony and Toshiba Corp, code-named Cell and planned for Sony's next PlayStation (search) console, is being touted as capable of delivering 10 times the performance of today's PC processors.

Reuters and the Associated Press contributed to this report.