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Putting Intel Inside, Apple Rolls Out Line of Fast PCs

The launch and record revenue last quarter help lift the computer maker's shares 6.3%.

January 11, 2006|Terril Yue Jones | Times Staff Writer

SAN FRANCISCO — Steve Jobs did the talking Tuesday, but it was Paul Otellini many people heard.

Jobs, the chief executive of Apple Computer Inc., was rolling out his company's first computers powered by chips made by Intel Corp., headed by Otellini.

But as Jobs extolled the performance of Apple's new Intel-powered desktops and laptops -- and announced record quarterly revenue -- many analysts watching the presentation at the annual Macworld Conference & Expo here interpreted the alliance as a subtle warning by Intel to its traditional PC partners that they need to innovate more.

A TV commercial promoting the new iMacs and MacBook Pro says Intel processors have been "freed" from being "trapped inside PCs -- dull little boxes -- performing dull little tasks."

The message should be a "kick in the pants" to Dell Inc., Hewlett-Packard Co. and other PC makers that use Intel chips, said Tim Bajarin, president of the Silicon Valley consultancy Creative Strategies.

"I think Intel is trying to spur their existing PC customers to be more creative," he said.

Intel in recent years has aggressively developed and marketed chips to handle audio and video more efficiently. Like many tech companies, Intel wants to expand its influence to the living room and control how people watch TV, listen to music and share photos in the Internet era.

Problem is, computer makers -- and most consumer electronics companies -- have had little success convincing customers that their vision of a totally connected home is worth the time, money and hassle.

Apple, on the other hand, is known for developing software that allows users to easily make slick slide shows and home movies, said Roger Kay, president of research firm Endpoint Technologies. Although Apple has just more than 4% of the U.S. computer market, its sales are growing fast with the help of its wildly popular iPod music players.

"If you're Intel and you're trying to get the industry to do more digital media, what better prod could you have than Apple?" Kay said. "Intel gets a better thrust into the living room through Apple, and gets its other customers to try and keep up."

The commercial was produced by Apple and did not require Intel's approval, said Deborah Conrad, an Intel vice president of sales and marketing who is in charge of the chip maker's Apple business. "It's tongue-in-cheek, it's a cool ad," Conrad said. "It doesn't mean we agree that all our customers are making boring little boxes."

Apple's new computers use Intel's Core Duo processor announced last week that has two computing engines on a single microprocessor. The machines are up to five times faster than the ones they replace. "These things are screamers," Jobs said.

Apple did not incorporate any of the functions Intel unveiled last week as part of its Viiv package of applications, such as the ability to access TV and movie content online with network, studio and other partners.

Viiv PCs are designed to boost the market for multimedia computers using Microsoft Corp.'s Windows operating system. The "Viiv strategy is much more important to Intel growing new business than it is to Apple," said Nathan Brookwood, principal analyst at semiconductor consultancy Insight64.

Apple said last year that it would replace IBM Corp. as its primary chip supplier and that its first computer with an Intel processor would arrive by June of this year.

Also Tuesday, Apple said it had record revenue of $5.7 billion last quarter, boosted by sales of a record 14 million iPods. That disclosure and the early unveilings of the Intel-based machines helped lift shares of the Cupertino, Calif.-based company $4.81, or 6.3%, to a record $80.86 during regular trading Tuesday, and an additional $1.03 after hours.

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