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TheStreet Open House

Apple Remains Locked in Transition

Apple announced last June that it would be switching the chips at the heart of its computers from the PowerPC processors manufactured by IBM (IBM) and Freescale Semiconductor (FSL) to ones made by Intel. Despite initial fears , the transition seemed to have little noticeable effect on Apple's computer sales or operations immediately after it was announced.

But if the transition was a nonissue at first, it seems to be having more effect now, especially with the company releasing its first Intel-based machines earlier this month. Blaming a "pause" in demand, company officials said sales were flat in the holiday quarter compared with the fiscal third quarter.

And they warned of soft overall sales in the current period, in part because the new Intel-based notebooks won't ship till next month.

And then there was Macworld. Prior to the show, rumors abounded about the exciting new products the company would debut. In the end, Apple unveiled little more than the new Intel-based Macs, which some analysts attribute to just how difficult the transition is for the company.

"Not too many companies have as ambitious a product schedule as Apple does. To think they can maintain that kind of rollout through this whole year through the Intel rollout may be expecting too much," says Stephen Baker, an analyst with researcher NPD Group.

An Apple representative declined to comment on the Intel transition beyond what the company said on its earnings call.

In terms of the transition's effect on sales, the timing of the new Intel-based releases is crucial, says IDC's O'Donnell. Consumer notebooks are the fastest-growing segment of the PC industry, and Apple may miss out on sales the longer it waits to update the iBook, its entry in that space, he says.

The timing of the new iBook release and its price are "going to have a huge impact," he says.

But the early release of the Intel-based machines may also weigh on sales.

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