May 15, 1997 5:00 PM PDT
PowerPC chipmaker shuts down
The news comes on the heels of last week's announcement that the company was laying off 25 percent of its workforce and only days after Apple Computer (AAPL) executives said they will not use Exponential's X704 processor in any systems for the foreseeable future.
Exponential was developing highly touted, ultrafast 500- and 533-MHz PowerPC processors but found that it could deliver only a 410-MHz chip by the third quarter of this year. When the processor did not meet its target speeds, Apple's interest waned.
"We didn't see a significant performance advantage vs. what we were getting from the G3 processor from IBM and Motorola," Phil Schiller, vice president of desktop and server product marketing for Apple, said earlier in the week.
Exponential was affected immediately by Apple's decision. "The opportunity in the PowerPC market just doesn't justify us going forward. We have a potential revenue stream, but it's just too far out to keep us going," said Rick Bergman, vice president of marketing at Exponential.
The lack of demand, coupled with the fact that Apple has yet to license a much-needed ROM (read-only memory) chip that would allow clone vendors to use the X704, ruined Exponential's chances for creating a viable PowerPC chip business, the company said. In the end, Exponential could not raise enough money to start up volume production of the X704.
Exponential will, however, continue to seek funding for its Austin, Texas, design center, according to Bergman. There are 30 employees in Austin; a handful of coworkers from San Jose, California, will join them. The Austin office will continue to develop a high-performance processor based on Intel's x86 architecture, according to a source with the company.
Analysts agree that IBM and Motorola were closing the gap quickly. "PowerPC processors [from IBM and Motorola], after languishing for a while, suddenly got a lot faster," said Michael Slater, publisher of Microprocessor Report. IBM and Motorola are planning this summer to begin shipments of next-generation G3 PowerPC processors that are expected to close much of the performance gap with Exponential's X704.
In addition to the increased competition from IBM and Motorola, Slater pointed out that Apple's market woes made it difficult for Exponential to get more financing since Apple was targeted as the primary customer for Exponential.
Other sources claim that Apple may have established a situation that made it very difficult for Exponential to survive. "We're sad about how poorly Apple has treated Exponential. [Apple] tried to keep the processor for themselves," said a source at a Macintosh clone manufacturer that was interested in using the processor. The comment was made one day before Exponential shut down.