Monday, June 06, 2005

The New York Times > Technology > Apple Plans to Switch From I.B.M. to Intel for Chips

The New York Times > Technology > Apple Plans to Switch From I.B.M. to Intel for Chips: "Even as a chip maker, I.B.M. has moved aggressively beyond the PC industry, focusing on making the processors for video game consoles from Nintendo, Microsoft and Sony, and specialized chips for other uses, like the Internet router computers made by Cisco Systems and cellphone technology by Qualcomm. I.B.M. also uses its Power microprocessors in many of its own server computers, which run corporate networks.
By contrast, the chips I.B.M. makes for Apple represent less than 2 percent of chip production at its largest factory in East Fishkill, N.Y. And while the microelectronics business as a whole is strategically important for I.B.M., it is a small part of the revenue of a company that increasingly focuses on services and software. A. M. Sacconaghi, an analyst for Sanford C. Bernstein & Company, estimates that the company's technology group - mostly microelectronics - will account for less than 3 percent of I.B.M.'s revenues and 2 percent of its pretax income this year.
I.B.M. supplies about 50 percent of the microprocessors used by Apple, providing them for desktop and server computers. Freescale makes the processors used in Apple's notebook and new Mac mini computers.
For years, according to industry analysts, the work for Apple has been barely a break-even business for I.B.M. When the two companies were negotiating a new contract recently, Mr. Jobs pushed for price discounts that I.B.M. refused to offer. For I.B.M., "the economics just didn't work," said one industry executive who was briefed on the negotiations. "And Apple is not so important a customer that you would take the financial hit to hold onto the relationship.""

On a related note, I just finished reading iCon Steve Jobs : The Greatest Second Act in the History of Business. The book covered lots of material already documented elsewhere (it would be surprising if it didn't, as a Steve Jobs biography), but I thought it was a useful read, overall. The book closes, omininously (penultimate paragraph, p. 334), with:
"Yet there's one more battle he wants to win. It has nothing to do with money, fame, or glory. Like all the best fights, this one is personal. Steve Jobs is going to best Bill Gates. This fight is Shakespearean, elemental, and emotional; watching it unfold should be the most fascinating business sorty of this young millennium."
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