June 20, 2003 4:00 AM PDT

Apple gets a taste for speed

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Apple Computer appears poised to boost its Power Mac line in what could be a much-needed overhaul of its high-end desktops.

Apple is preparing to introduce a new line of machines that are built around IBM's speedy new PowerPC 970 chip, analysts say, a move that won't erase the "gigahertz gap," but should at least narrow the chasm. The chip also will put Apple on track to sell computers that run 64-bit software, the kind of design that's found on today's top workstations.

Apple is expected to detail those plans Monday, when CEO Steve Jobs delivers a keynote speech at the company's annual developer conference in San Francisco. The company moved the date of the event from its usual May slot to June, saying only that it wanted to use the conference to preview Panther, the next version of the Mac OS.

Late Thursday, Mac watchers say that the Apple store briefly displayed a series of specifications for new G5-based Power Macs. The desktops were said to range from a 1.6GHz model to a dual 2GHz machine, with the machines boasting up to 8GB of RAM, a 1GHz procesor bus, Serial ATA drives and other performance enhancements.

For years, Apple has been on the losing end of the megahertz race, using Motorola's G4 processors, which have been slowly improving in performance, while Intel and Advanced Micro Devices crank out ever-faster chips at a much swifter clip. Megahertz isn't everything when it comes to performance, but increasing the clock speed generally does boost chip and computer performance.

Apple also is expected to discuss how it will use HyperTransport, a chip-to-chip connection pioneered by AMD, in new Power Macs.

Powering up profits
Finding a way to ratchet up performance for graphic designers and other professionals that use Macs is clearly a priority for Apple. Power Mac sales are among the most profitable products that the company sells, with one analyst pegging the profit margin at about 30 percent, compared with 20 percent margins on the iMac family.

At the same time, sales have plummeted in recent quarters. Last quarter, Apple sold just 156,000 Power Macs, down from a peak of more than 400,000 a quarter in early 1999 and down from 211,000 units sold a year earlier.

Apple itself has warned in regulatory filings that it may be unable to boost its profitability without a pickup in Power Mac sales.

"If future unit sales of Power Macintosh systems fail to partially or fully recover, it will be difficult for the company to improve its overall profitability," Apple said in a December filing with the U.S. Securities and Exchange Commission.

Yet, as important as Power Mac sales are, Apple has made little progress in improving the machines' performance in recent years, largely because of an inability to get faster chips from Motorola.

"Apple's Power Mac lineup targeting the graphics professional market has received scant attention in recent years," Needham analyst Charles Wolf said in a research report this week. Projecting that Apple will introduce new Power Macs, Wolf on Wednesday upped his rating on Apple shares to "buy" from "hold."

If Apple can offer a significant performance boost, the company has a large base of graphics and design customers that may be willing to upgrade their machines, Wolf reasoned. Plus, Apple got another boost earlier this month when Quark announced it was ready to ship a new, Mac OS X-native version of its Quark XPress layout program.

Bear Stearns analyst Andy Neff said a move to IBM 970-based Power Macs is expected. "The prevailing view is that Apple will also use (the developer conference) to unveil new hardware--in particular that it will pre-announce G5-based desktops" running "IBM's new 64-bit, PowerPC 970 chip," Neff said in a research note on Thursday. An Apple representative declined to comment.

However, Neff noted that it's not certain when Apple will ship the machines. Some machines could be ready immediately, analysts said. On the other hand, the company could announce machines but not ship them for several weeks. Supplies of the existing Power Macs, particularly the high-end machines, have dwindled in recent weeks, according to sources.

Apple traditionally makes its biggest announcements during Jobs' keynote speeches at the twice-yearly Macworld Expo. However, Jobs is taking a pass on this year's scaled-back Macworld CreativePro event in New York. That has fueled speculation that the developer conference will be the launching point for the new Mac architecture.

How much muscle for the Mac?
It is not clear just how far adoption of the IBM chips will take Apple in terms of performance.

According the the specifications briefly posted on Apple's online store, the new Power Macs top out at 2GHz. Meanwhile, Intel is nearly ready with a 3.2GHz chip and is coming out with Prescott, a revamped processor that should take it to even higher speeds.

Meanwhile, Needham's Wolf said in his report that "the 970 could reach a 2.5GHz speed by mid-2004 and 4.0GHz to 5.0GHz speeds by 2005." The current top-of-the-line Power Mac has dual 1.42GHz G4 processors.

Some say the move to IBM may only be an interim step, with Apple's real future stemming from porting its operating system to Intel-based chips. Bear Stearns' Neff, among others, has called on Apple to make such a move.

IDC analyst Roger Kay said that, although the move to IBM offers benefits, it does not allow Apple to control its own destiny. Apple is still "dependent on IBM to keep moving the Power chip forward. You wonder how much stomach IBM has for that, given the size of Apple's market and whatever IBM is doing" with that chip.

In addition to offering higher speeds, a key advantage of IBM's 970 chip is that it processes information in chunks of 64 bits at a time, rather than 32 bits. While that paves the way for other performance improvements, it also requires both the operating system and programs to be rewritten in order to take advantage of the new architecture. Existing 32-bit programs will run, but won't see a performance boost beyond the gains in clock speed.

Apple has not said whether Panther is geared to take advantage of 64-bit processors. Even if it is, it is likely that Apple and others will need to rewrite their software to gain the benefits of the additional bits.

Quark, for example, is only now releasing its Mac OS X version of XPress. If Apple is indeed moving to a new chip architecture, it is unclear whether the program would be optimized for such a move. If not, Apple might have to wait another year or 18 months for a new version of the software that is designed for a 64-bit chip.

A Quark executive earlier this month declined to say whether Quark XPress 6 was optimized for any future chip architectures.

Limitations aside, a move to a new chip architecture could have both long-term and short-term benefits, analysts say.

Although a new processor would likely show up first only in Apple machines geared at professionals, the entire Mac market could get a boost, said IDC's Kay.

"I think it is a big morale booster for the Mac user base to see a brand-new next-generation platform," Kay said. "It gives them confidence that there are still some legs to the Mac platform."

 

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