Readers: Apple Vs. Dell? Maybe

Whoever first said "Be careful what you wish for" was a sage. Too bad I'm not smart enough to listen.

Last week, I offered three predictions for Apple (Nasdaq: AAPL  ) after CEO Steve Jobs announced a deal in which Macs would begin using Intel (Nasdaq: INTC  ) chips next year. Specifically, I said speculation that the surprising combo would reignite competition with Microsoft (Nasdaq: MSFT  ) was wishful thinking and then told readers:

1. Don't expect Mac clones, ever.

2. Don't expect dramatically cheaper Macs.

3. Expect a deal with Intel rival Advanced Micro Devices (NYSE: AMD  ) .

More than 170 of you responded, and the results, predictably, were mixed. Some of you thought I was spot on. Others said I was dead wrong. Most, however, agreed with my three predictions but questioned my assertion that Apple's real rival is Motley Fool Stock Advisor pick Dell (Nasdaq: DELL  ) . We'll get into all that in a moment. But let's start by addressing the most frequent complaint about last week's article, which can be boiled down to this simple question:

What about the Mac OS?
Several of you thought I was, um, crazy to call Apple a device company. That's a slap in the face to the Mac OS, you cried. One reader was even more pointed: "(Jobs) couldn't care less if every computer in the world was an iMac running Windows. The soul of a Mac is its operating system (software), not the box it runs on (hardware). Apple owns the most advanced operating system with the Mac OS."

Point taken. The Mac OS is the soul of the Mac; it's just not what drives sales for the company. Indeed, when former CEO Gil Amelio allowed the Mac OS to be licensed it nearly killed Apple. That's why Jobs killed the clones when he returned as CEO.

Yeah, I know that mixing in Jobs' NeXT operating system with the old Mac to spawn Mac OS X had a huge hand in re-establishing Apple's image as a premium PC brand. But it wasn't until the iPod caught fire last year that the company dramatically reversed its financial fortunes.

Mactel Corp.
Oh, irony, how I love thee. The same day that I published my predictions, columnist Robert X. Cringely did the same. His take was vastly different, however. In a nutshell: Intel will -- wait for it -- buy Apple. That's right, folks; get ready for Mactel Corp.

Few readers thought Cringley's prediction could come true, but his argument isn't all that bad. It's just far fetched. In sum: Apple and Intel combine to wrest control of the desktop away from Microsoft because the chipmaker has had enough of Mr. Softy's incessant bullying. OK, I get it. But what happens to the relationship with Dell after the deal closes? And how about Hewlett-Packard (NYSE: HPQ  ) ? Think either will like competition from their chief supplier? Yeah, probably not.

Dell is a partner, stupid
Another popular theory, not surprisingly, is that Apple will license the Mac OS, and that Dell will become a partner. That looked prescient as I wrote yesterday afternoon. That's when Fortune columnist David Kirkpatrick got Michael Dell on the record saying he would offer Mac OS-powered PCs to his customers if Apple were to allow it.

That's a major coup for Kirkpatrick, but I'm going to give extra credit to a reader who wrote this to me last week: "Apple will merge with Intel within 28 months...Dell is not the competitor. In fact, they will license OS X from Intel as a choice for their users..." Not precise, but pretty interesting nonetheless. If only we didn't have to wait 27 months to find out the whole story.

AMD? How about AM-Dead?
My take that Apple would source chips from AMD brought responses from a surprising number of Intel defenders. Only one reader -- from Italy, no less -- was an unabashed AMD fan, predicting that both Apple and Dell would ultimately source from the upstart chipmaker. I'll believe that when it happens.

The arguments against AMD varied widely, but the most popular had to do with money. Intel has a lot of it and AMD doesn't, you wrote. Interestingly, this is a point of view echoed by none other than AMD CEO Hector Ruiz. Other readers call that a convenient excuse. Listen to this: "The biggest reason Apple went with Intel over AMD is because Intel can offer Apple a platform, whereas AMD can only offer them a CPU. Sure, right now AMD has the better processors, but Intel is offering Apple the chipsets, networking technology, and probably motherboards Apple needs to build a whole computer. If Apple went with AMD, it would have had to go contract with additional third parties to get the computer built..."

That's an interesting take, but doesn't the so-called downside of working with AMD mirror the way Apple already does business? And wouldn't costs come down, regardless, because of the standardized nature of the x86 architecture? I remain convinced that Apple will seek a second source for chips in the next few years, especially after being burned so badly by dealing with one supplier -- that is, IBM (NYSE: IBM  ) -- in recent years.

I want my Mac TV
Another popular prediction that appeared in my in-box has to do with Apple becoming an entertainment company. The edgier responses even suggested the Mac maker would get into gaming. Here's an example: "Apple is going after Microsoft (and Sony (NYSE: SNE  ) at the same time), but this time the battle is not the PC but the home media center.... Apple has so much leverage to aggressively (get into) the gaming market. It has the killer graphics, the (software) connections, the marketing know-how (proved many times), and oh-so-much cool factor."

Much as I like this prediction, I think it fails to address one obvious point: Short of opening the OS to other manufacturers -- which Jobs says he won't do -- Apple needs to sell a lot of Macs to take over the family room and, ultimately, become an entertainment titan. Jobs is smart enough to know that Dell and other PC makers won't let that happen without a major fight. Teaming with Intel to create faster and more cost-competitive Macs is only the first salvo.

Oh, let's just make everyone happy
Remember that R.E.M. song Shiny Happy People? That's what this last theory reminds me of -- it's also my favorite of the bunch. In this scenario Apple becomes a pure software company. But this is not the boring old tale of how Apple must reverse its prior sins; instead, it's about a Jobs vision that dates back to 1992. Follow along, please:

"Steve Jobs' history with his previous company, NeXT Computer, Inc., may provide some useful perspective. Like Apple, NeXT was praised for its combination of software and hardware, and its machines had devoted followers in certain niches (custom app development, academics, certain 3-letter U.S. government organizations).

NeXT decided that its object-oriented software was its prime asset and, in 1992, the company announced a port -- of the NeXTSTEP operating system and development tools -- to the Intel platform. NeXT stopped producing hardware the next year, but shipped NeXTSTEP 3.1 for both Motorola and Intel machines, and announced a Sun Sparc port.

About this time, BYTE magazine praised NeXTSTEP as "probably the most respected piece of software on the planet." Eventually, NeXTSTEP ran on four platforms: Motorola, Intel, Sparc, and HP. Developers could develop quad-fat binaries that would run on any of the four platforms, by merely remembering to check the appropriate option boxes when they compiled the code.

And then Apple bought NeXT, and Jobs took over Apple. Those who hoped NeXT would take over the world in the '90s draw comfort today from the fact that many of the class names in Apple's Cocoa frameworks begin with "NS_", as they did when those classes were part of NeXTSTEP.

So, is Steve Jobs repeating himself?"

In other words: Could the Mac be easily designed to run on any computer, regardless of the underlying processor? Wish I knew. Any comment, Steve?

You can't predict the unpredictable
Finally, some of you think it's impossible to guess correctly what Apple has planned, like this reader, to whom I'll give the last word: "Michael Dell will still be pondering how to cut costs when Apple announces its iLink, a device like an earpiece that picks up your brainwaves and controls your devices, your car, your house, and, well...everything but your girlfriend."

Now that's a prediction. Fool on!

Motley Fool contributorTim Beyershas officially put the iLink on his Christmas list. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. To see what other stocks are in Tim's portfolio, check out his Fool profile, which ishere. The Motley Fool isinvestors writing for investorsand has adisclosure policy.


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