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Weekly Column

The Osborne Effect: Sometimes What Everyone Remembers Is Wrong

Status: [CLOSED]
By Robert X. Cringely
bob@cringely.com

Last week's column about Apple and Intel generated more e-mail than I could possibly answer, so I am sorry if I didn't get to yours. Please don't take it personally. More on Apple/Intel below, but first I must make a correction concerning the so-called Osborne Effect, which this column and a hundred others cited during the past week as proof that Apple was taking a huge market risk by switching to Intel processors. It turns out that the history we all think we remembered wasn't exactly correct, according to Mike McCarthy, who was working at Osborne Computer when the company folded. Mike has always been my hero.

Adam Osborne was accused of pre-announcing the DOS version of his CP/M line -- in fact, he told reporters there wouldn't be a DOS version for at least a year because it was too expensive for his price-sensitive line. He announced the Executive -- the follow-on model to his successful first Osborne -- one month before delivery, and sales dropped in half for a couple of weeks while inventory cleared out. Then the Executive actually went on sale -- and sales dropped, from about 10,000 a month for the original model, to essentially zero for the new model.

The reason for the drop was that the Osborne Executive was not competitive with the Kaypro, a slapped-together rival priced at a couple hundred less ($1,795 instead of $1,995 for the Osborne 1), but it had a much larger screen -- 9 inches compared to O1's five inches.

The Executive came out, much better built, more manufacturable, but with a mere 7-inch screen. There was deep disappointment among Osborne fans. Worse, it was priced at $2,195 -- a two hundred dollar increase in a very price-sensitive end of the market! Four hundred dollars more than Kaypro for a brand name but a smaller screen? No thank you! Buyers walked away. Osborne sales dropped to fewer than a thousand a month for the next three months--which was enough to choke the high-flying company, which was forced to declare bankruptcy after a mere five months of this.

But the buyers just walked across the street to the Kaypro. Kaypro sales jumped to nearly 10,000 a month -- in other words, they captured all the disgusted Osborne buyers. Which proves the Osborne's disaster had nothing to do with, as legend has it, the "pre-announced DOS machine." The Kaypro was and remained for the next 18 months a CP/M machine.

So poor Adam Osborne is off the hook. Spread the word.

Now back to Apple and Intel. While last week's use of the term "merger" may have been a bit too strong, it is clear that both companies have a lot to gain if this alliance is done properly.

Some of last week's questions now have answers. First, Phil Schiller's old PhotoShop demos probably were a bit over-hyped and the Altivec Factor, while real, probably wouldn't have been much of a factor two years down the road when these new Apple machines were shipping in volume. The low-end machines get Pentium Ms while the higher end machines will get dual-core Pentium Ds.

Yes, the G5 is nominally a 64-bit processor, but beyond addressing a heck of a lot more memory, Apple doesn't at present use those 64-bits for much. And Intel is bringing AMD64 -- sorry, EM64T -- to their Pentium product line. By next year, there will be 64-bit support in all, or nearly all, of their desktop chips. So Apple doesn't have to make any sacrifice for 64-bit. In fact, this may be part of the timing of the move -- they had to wait for 64-bit support in affordable Intel chips.

Apple didn't go with AMD, I've been told over and over again, because AMD has production problems. I don't buy this. Apple's production needs are modest and down-the-road to boot. Chip companies will promise ANYTHING if the delivery horizon is far enough away. I'm sure AMD could deliver the chips. And they may still do so if Intel and Apple don't merge in some way. But for now Intel is Apple's new processor partner.

And what Intel brings to this party apparently includes some chipset design, which IBM never did for Apple. Especially important, I'm told, is the Trusted Computing support that found its way into a few Intel motherboards just last month. Trusted Computing was supposed to have been one of the signal virtues of Longhorn until that capability was thrown in the toilet to make possible a delivery schedule that remains several years late. We think about Microsoft as having something to gain from Trusted Computing, but so does Intel, and without Apple, Intel apparently has no partner capable of leveraging that capability -- the Hollywood connection. So the idea that Digital Rights Management and the demands of movie studio honchos were behind this move may be correct, but in reverse because it suits INTEL's needs more than Apple's.

Apple didn't go with the Cell Processor despite a hard sell by Sony. They simply didn't like the chip and thought that it was much better suited to a game system than a general purpose PC. So no PS3 game development will be taking place on Macs. In fact it will be happening almost entirely on Sony Cell workstations, the first of which was shown this week at a Power.org meeting in Barcelona.

Where this all leaves IBM, I find especially fascinating. Yes, the volume of chips Apple was asking for was miniscule compared to what IBM will be selling to Sony, Microsoft and Nintendo for games. And yes, it is within IBM's character to walk away from Apple by refusing to put enough resources into meeting contractual obligations (that three gig G5, remember). But the part I want to understand is what Apple takes with it on the way out the door?

Remember that the PowerPC program was established by Apple, IBM, and Motorola. All three companies contributed intellectual property to the project, and all three earned royalties from their contributions. IBM failed to meet its roadmap obligations, and on top of that, apparently said that it wasn't willing to do what it would take to retain Apple's business. These two positions apparently worked together to weaken the IBM-Apple bond in critical ways, with the result being -- as was told -- that Apple is coming away from the relationship with a somewhat greater share of PowerPC IP than it would otherwise have had. How odd.

What isn't clear is whether this simply means that Apple gets a royalty (or a bigger royalty) on all those xBox 360 chips, or whether Apple is somehow walking with actual technology that can be given to a new partner, like an Intel for example.

While this all sounds like crossing dinosaurs with rutabagas, stranger things have happened. I wonder if we'll see some hybrid chip appearing under the Intel name?

Of course, none of this will mean much for a year or more, and a lot can happen in that time. Next month, for example, Apple promises to deliver a new version of iTunes. Why? It's the next step in Apple's HD movie delivery scheme and promises to keep us so engaged between now and Christmas that we won't even think about Intel.

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