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Weekly Column

More Shoes: There's More to the Apple/Intel Deal Than Even Bob Thought At First

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

There's this expression, "Waiting for the second shoe to drop." It means that a first clue is often followed by a second clue that gives more information about what's happening. Lots of us use the expression, but where does it come from? (Funny you should ask. The explanation can be found in this week's links.)

Shoes are dropping all over, in this case concerning a story I thought we had finished with: Apple and Intel. You see, IBM announced its new dual-core PowerPC processors a few days ago, and they pretty much contradict much of what Steve Jobs was saying about how he'd compared IBM's processor timeline with Intel's, and frankly, they simply didn't compare. IBM's G5 dual cores look easily comparable to Intel's Pentium Ds, both in terms of computing power and electrical power consumption. So what's really up?

One theory propagated by a very good ArsTechnica column (it's in this week's links) is that Apple simply over-negotiated its supply deal with IBM, asking for so much that IBM finally told Steve Jobs to take a hike. This is certainly within the capabilities of both Apple and IBM. Apple always asks for the moon and IBM sometimes walks away from a big deal that doesn't appear to be profitable enough.

While all this is very possible, it is not likely what is happening here.

The very fine writer of the ArsTechnica column, and indeed, any number of other very fine writers over the last several days have made an incorrect assumption in their analyses of the IBM announcement. They are assuming Apple won't use the new dual-core PowerPC chips.

But Apple WILL use the new chips.

Remember in his original announcement of the Intel alliance, Steve Jobs said the full changeover to Intel would take two years, that it would be a year before the first Apple Intel machine appeared and those machines would start toward the low end, presumably with the Mini and iBook. He also said that there were be many exciting and powerful Mac models yet to be introduced that would use PowerPC chips.

So what are to we to expect from Apple? Would the company petulantly reject these new dual-core processors for the subsequent generation or two of high-end Macs yet to come before the Intel changeover is complete? That would be crazy. Apple will use the highest-power IBM chips it can get for its top-end Macs right up to the point where it makes the jump to Intel.

Go back to the transcript: He told us that. It was a shoe dropping only we didn't know it at the time.

This simple knowledge changes everything. And it certainly justifies a second look back at the Apple/Intel announcement and what the heck is really going on.

For all Steve had to say about IBM's supposedly puny processor roadmap, he had to have known these dual-core chips were coming. But since they weren't mentioned at that time in the official IBM roadmap, he didn't have to refer to them. This says a lot about the timing of the announcement. I wondered why Apple was pre-announcing the processor jump by a year or more? The timing was unknowingly set by IBM. To have the greatest impact, Apple had to make the announcement before IBM revealed the new dual-core chips so the pundits would buy the move as logical, so that the announcement would help Intel and hurt IBM the most.

Why would Apple want to hurt IBM? Apple wouldn't, but Intel WOULD. That had to have been part of the deal with Intel, to kick IBM in the corporate groin, and Jobs certainly did so. Now what's in it for Steve? This is not solely about the price of chips

The whole Apple/Intel deal gets curiouser and curiouser. I wonder if Apple even intends to go forward with the changeover? My guess is they will, but only if Intel complies fully with more unannounced terms of the deal.

Another shoe fell recently with the announcement of Intel's investment in actor Morgan Freeman's online movie distribution startup, ClickStar. Here is the most important part of that announcement: "The company's strategy is to provide the marketing and distribution expertise required to enable the release of first-run films before they're released on DVD and delivered directly to Intel's digital home entertainment devices."

What digital home entertainment devices would these be?

I've looked and can't find any. Sure, Intel has plenty of information on its Digital Home web site about digital home entertainment products from its many hardware OEMs, but there is very little you can buy right now under the Intel brand name.

Press releases aren't written lightly or without nuance. In the ClickStar announcement. Intel was declaring its intention to introduce, presumably in time for Christmas, a family of Intel-branded home entertainment devices. If they had meant devices from Dell or HP, they would have written that.

Now take a look at the ClickStar web site. It isn't clickstar.com, but clickstarinc.com, which tell us that the name is probably a placeholder. If they really intended to use the trade name "ClickStar," they would have tied-up the domain prior to the announcement. When the service finally appears, then, it will probably be called something else.

I think it will be called the "iTunes Movie Store."

See, we're back to Apple. As I have written in previous columns, Apple is working on its own movie download service (HD movies at that!), and I believe that service and ClickStar are one in the same.

Good pricing is not enough reward for Steve Jobs kicking IBM in the corporate groin at the behest of Intel. Let's guess, then, that not only will ClickStar morph into ITMS, but that Intel's "digital home entertainment devices" will be ITMS-compliant. No Microsoft, no Real, just H.264, FairPlay, and something behind Door Number Three, where we'll find yet another shoe.

This third shoe is Apple's closeout sale on the iPod Photo, which is suddenly and inexplicably $150-off all over town. Get ready for the Video iPod, which will presumably be available from more than just Apple. HP is already on board and these clues suggest Intel is likely there, too.

Apple of course has said it isn't doing a Video iPod. To suddenly change their mind is nothing new: They'd describe it as the technology finally coming along to the point where it can finally support a video device that meet's Apple's high quality standards. But I don't think that's clever enough for Apple.

This week, France Telecom's wireless unit Orange SA announced that it was buying 230,000 video headsets so customers could look like Levar Burton and watch movies on their 3G mobile phones. The stereo headsets plug in to the mobile phones. Video quality isn't very good at 320-by-240 (hey, that's precisely NerdTV quality!), but what about a higher resolution display, possibly a retinal scan display, for the Video iPod? It's the only way to extend Apple's "Year of HD" to its tiniest platform.

Nearly all of the retinal scan patents are held by Bothell, Washington-based MicroVision, a company I have written about in the past. And from the look of the SEC filings, a lot is happening up there in Bothell. As always I have no insider information at all, but it wouldn't surprise me if Apple introduced a super-high-capacity iPod and a separate retinal-scan display. It will be aimed at the very high end of the price scale, just like the Apple Cinema Display originally cost $4,000 for what now costs less than $1,000. The retinal scan display won't be cheap, but it will be cool, and it will be some permutation of HD, too.

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