The news that
switch the processor at the heart of its Macintosh to chips made by
has set the computer world abuzz because it opens up the possibility of Apple's hardware being more compatible with computers running
dominant Windows operating system.
The computers that Apple is sending to developers working on programs for the new Intel-based Macintoshes run on an Intel Pentium 4 chip, apparently the same one used in Windows systems offered by
. Meanwhile, analysts and computer users have speculated that Apple computers could have both the Macintosh and Windows operating systems installed.
That guesswork was taken to a new level last week when Dell's chairman, Michael Dell, told
that his company would be "happy" to sell computers running the Mac OS.
But don't hold your breath waiting for a Dell-intosh.
Apple representatives have said that the Mac OS will work only on Apple computers, though it hasn't detailed what it will do to prevent the software from being installed on rival computers. And Apple has no plans to sell a version of Mac OS for non-Apple computers, nor does it plan to sell or support Windows on Apple machines, company representatives have said.
The company has good reasons to take such a stance, analysts say. The most notable is its reliance on computer sales. Even with iPod sales booming, sales of Macintosh computers still brought in $3.1 billion in revenue, or 46% of Apple's total sales, in the first six months of its fiscal year. In contrast, during that time period, Apple garnered just $251 million, or less than 4% of its total revenue, from sales of software, including its Mac OS.
"They don't want to be in the OS business competing against Microsoft. They want to be in the platform business," says Van Baker, a consumer technology analyst at research firm Gartner. "Apple's strength in the marketplace comes from the fact that they control both the hardware and the software. They don't want to change that."
Licensing the Mac OS to other manufacturers could dent hardware sales, particularly if rivals offered Macintosh systems at lower price points than Apple. Instead of expanding the market for Macintosh systems, Apple would risk having licensees "cannibalize" Apple's own computer sales, says Shaw Wu, an analyst who covers Apple for American Technology Research, which doesn't do investment banking.
But the company has other reasons. By putting more emphasis on its operating system as opposed to the computer as a whole, Apple would be moving toward competing more directly with Microsoft. While that might be good for consumers, it's not necessarily the best or most profitable strategy for Apple.
"You can make the argument that Microsoft has been fat, dumb and happy, that they haven't had anybody to give them a finger in the eye," says Stephen Baker, an analyst with the NPD Group, an industry research firm. "On the other hand, do you really want to be standing in front of Microsoft once they get a finger in their eye?"
And by licensing the operating system, Apple actually could lose some of its competitive advantage over Microsoft and rival computer makers, analysts say. What sets Apple apart from other PC makers is the Mac OS, the design of its computers and the tight integration between the operating system and the computers. By allowing other companies to build Macintosh computers, Apple would lose some of its unique appeal.
"My overall feeling is that if they open up the OS
to other vendors, it reduces their differentiation," says Rod Bare, who covers Apple's stock for Morningstar. Bare has no position in Apple shares and his company does not do investment banking.
But perhaps the biggest argument against licensing the Mac OS to other vendors is the company's own history. After enduring years of criticism for not licensing the Mac OS when it launched, Apple decided in the mid-1990s to allow an array of tech veterans and start-ups to clone its computers.
Some consumers took advantage of the program to buy low-cost Mac clones. But the licensing program was widely viewed as a failure for Apple itself, as it coincided with a sharp decline in the company's revenue and market share.
In fact, one of Steve Jobs' first steps after reassuming control of the company was to cancel the licensing program, leaving a number of Mac clone manufacturers in the lurch.
Apple's previous attempt to license the Mac OS simply "didn't work," says Wu.
Despite all those reasons, however, Mac clones still may end up on store shelves some day because the move to Intel likely makes it easier for other computer manufacturers to make Macintosh machines.
Apple also could eventually feel financial and consumer pressure to license the Mac OS after the Intel switch because consumers will be better able to compare Windows-based PCs with Macintosh computers and determine the premium paid for the Mac OS and the computers' design. That transparency could well force Apple to bring computer prices more in line with those of its PC rivals, which, unlike Apple, typically sell their machines at thin profit margins.
Meanwhile, with the hardware largely the same as what other computer makers are offering, Apple could see increasing demand from consumers to license its operating system and to allow for lower-priced Macintoshes.
"It becomes a political debate," says Gartner's Baker. But, he adds, "It would be a serious roll of the dice for Apple."