Apple and Intel: Best buddies

http://bigtech.blogs.fortune.cnn.com/2008/06/13/apple-and-intel-best-buddies/

Apple CEO Steve Jobs introduced the MacBook Air on stage at Macworld 2008. The laptop was born after Intel dug into its research pile to fulfill an unusual request from Apple. Photo: Jon Fortt

When Apple first announced the switch to Intel chips three years ago this month, Intel chief technology officer Justin Rattner didn’t expect a chummy research relationship, even though the Silicon Valley companies’ headquarters are just 15 minutes apart. Friends had warned him that Steve Jobs and his crew of iconoclasts have little patience for the futuristic stuff of research labs – they’re on the hunt for bold ideas they can build into products within months, not years.

So when Rattner, who leads Intel’s (INTC) research efforts, gave a presentation to Apple (AAPL) brass about the range of projects his scientists were cooking up, he was pleasantly surprised to leave the meeting with a list of a half a dozen that Apple executives wanted to hear more about. One thing that wasn’t surprising: Apple wanted the technology pronto.

“Sometimes it’s a little scary because we’re just not used to going that fast,” Rattner says. “They say, ‘We want to do this next year,’ and we go, ‘Whoa … next year?’ We’re just not built for that. But once you get past all that, I think it’s particularly exciting because they really pull it. And I think MacBook Air is a great example.”

If there were lingering doubts about how well longtime enemies Apple and Intel would work together, the svelte MacBook Air laptop should dispel them. Many observers (including this writer) were unsure what to make of the machine when Jobs introduced it in January, especially given that it lacked two common features: a DVD drive and a removable battery. But in the months since, it has taken its place among Jobs’ brilliant if unconventional bets. The MacBook Air has been the top-selling computer on Apple’s online store for most of the year, even though a similarly appointed laptop without the narrow profile sells for hundreds of dollars less. And Intel can proudly say its researchers helped make it possible.

“That was the first time they actually worked together on a custom project,” says Tim Bajarin, president of the Creative Strategies consulting firm. “Before that, everything was pretty much off the shelf. As a result, the relationship grew even further.”

Intel Chief Technology Officer Justin Rattner didn’t expect such a fruitful research relationship with Apple.
A few years back, few would have figured Intel and Apple could become buddies. After all, Intel and Microsoft (MSFT) were frequent targets of Apple’s keynote antics during its Macworld presentations. Jobs and his entourage demonized both companies as purveyors of inelegant, cookie-cutter technology. Intel was often cast as the foil when Jobs whipped the covers off of some thin, new PowerPC laptop that had a chip from IBM (IBM) inside: You can’t get this sort of thing with Windows laptops, he’d say, because those Intel processors are so darn chunky.

Still, not everyone was convinced the two companies would be lifelong foes; early in the decade, Bear Stearns analyst Andy Neff correctly predicted that Apple would soon embrace Intel for its scale, innovation and track record for delivering the goods on time. Fulfilling Neff’s vision, Jobs last year invited Intel CEO Paul Otellini onto the stage of Apple’s Worldwide Developer Conference to accept a custom-designed plaque as thanks for having “come through every single time for us.” Otellini, clearly moved, called working with Apple one of the best things that’s happened in his career.

What the crowd didn’t know at the time is that Jobs was also thanking Otellini for delivering on a favor. Months earlier, Apple had come to Intel looking for a special order: a small, thin chip package – the sort of component you would need to build an uncommonly slender computer. Apple didn’t say exactly what it needed the package for, and Intel engineers at first thought they couldn’t help. “Initially we either said, ‘We don’t have that,’ or ‘We have that on a roadmap 3-4 years from now,’ ” Rattner says.

In fact, Intel soon discovered it had the requested technology close at hand. Years earlier, researchers had dreamed up a similar chip in a tiny package, but the idea had been put on the back burner after PC makers gave it a ho-hum reception. The concept just had to be dusted off. “We had that small chip package pretty much sitting on the shelf,” Rattner recalls. Within a year, Intel had updated it to meet Apple’s needs and delivered it in volume.

What does the future hold for the unlikely partnership? Expect more collaborative efforts like the MacBook Air. Rattner says the two companies are working on more projects that are “equally aggressive” – which probably means there are both tough technology challenges and tough deadlines.