VARs Wary of Apple's Transition to Intel

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VARs expect Apple-on-Intel to make Mac-based solutions cheaper and to give Macs a more secure development road map. But many customers are put off by Apple's embrace of the enemy and are anxious to see that the switch doesn't divert its own unique develop

The dust has largely settled following Apple Computer Inc.'s announcement that it would use Intel Corp. microprocessors in its Macintosh computers—a shift that will start in some models by mid-2006 and will include all Macs by the end of 2007—but resellers are still trying to analyze the impact the big switch will have for their customers and business.

"It caught some customers and resellers by surprise," said Andy Slusher, sales manager at CTG, an Apple reseller in Atlanta. "We've spoken to a few customers and the full impact of it hasn't reached them. The loyalists always liked the fact that Apple has kept itself separate. It's going to be a bit of a tough pill to swallow."

As long as the move doesn't slow Apple's own development or prospects, however, most customers will probably accept it, Slusher said.

Apple previewed its Mac OS X Tiger running on an Intel-based Mac to more than 3,800 developers at its Worldwide Developers Conference in early June.

"My sense is that there is a general wait and see attitude among customers," said Brian Schwartz, technology specialist at CDW, in Chicago. "As a broad brush, folks are a little apprehensive about bringing something new into the environment without it being fully tested. It sounds good and ultimately will mean lower costs, and better manageability, performance and security."

Technology considerations made the move logical, analysts said. "If Apple hadn't made this move, they would have a hard time making products that customer would find compelling, especially in the mobile space," said Rob Enderle, principal analyst, at the Enderle Group, a San Jose, Calif.-based technology consulting company.

Even it was ultimately necessary, though, the decision makes some worry that Apple will muddy its position as a unique platform.

"I have a lot of mixed emotions about it. The feeling of most of our customers at first blush is that Steve Jobs sold out," said David Josephson, CEO of the MacMD, a Manhattan-based Apple VAR that serves SOHO, consumer and business users.

But the technical benefits are undeniable. "In the long run, Intel's chips are smaller, cooler and faster, and that's what Apple needs," he said.

Resellers are hoping that customers' wallets will be the first things to benefit from Intel-based Macs, however.

"This certainly holds the potential for the erosion of Mac prices," said Carmi Levy, senior research analyst at the Info-Tech Research Group, in London, Ontario. "Intel possesses economies of scale that Freescale [Semiconductor Inc., a Motorola spinoff] can only dream of. That will translate into less expensive Macs, while allowing VARs and resellers to maintain their margins in the process. Everyone should be happy."

Some analysts, however, question whether Apple will have the buying power to warrant price cuts on the processors. "Even after the conversion, it is doubtful that they are going to get the deep price discount that Dell does, for example," said Jim McGregor, principal analyst at In-Stat in Scottsdale, Ariz.

Click here to read more coverage of Apple's travails in the channel.

Apple has only a 2 percent market share in the PC market. "They also have to cost that other OEMs don't of developing their own applications, which probably won't make the Mac cheaper," he said.

Another consideration is whether Apple will choose to avail itself of Intel's substantial co-marketing programs, which would further increase the value of its investment in Intel's processors, Enderle said.

"Apple probably won't use the program because it wants it own brand," he said. "The Intel co-marketing program is very powerful, though. Apple, by not using it, will be in effect paying more because it isn't getting the co-marketing rebate."

Impact on buying patterns

Another concern is how, even with a year-long wait for products, Apple's announcement will impact buying patterns. "Some of my customers have slowed their buying decisions because of the change, while others have accelerated it because they want new hardware before the change over," said Rob Kolter, owner of Kolter.com, an Apple reseller in Trinidad, Colo.

At least in large installations, analysts predict that purchase plans will remain stable. "Large organizations have very defined refresh schedules," Levy said. "If the road map has a company replacing products this year, pushing that out to wait for the latest and greatest will force them to sit on older hardware longer, which will increase support costs."

Single users and small companies may have the luxury of waiting, though. "The smaller SOHO market and consumers will wait longer [to get on board], but any companies with 50 employees on up aren't going to care, because their product buying cycles are eighteen months," Josephson said.

Resellers also hope that Apple's move to Intel chips will make their jobs easier when it comes to selling Apple technology to their customers' IT departments. "We are looking at how this move will make it easier for businesses to adopt IT technology," Schwartz said. "Many have been hesitant to adopt Apple technology and this may be a bridge for them."

"Without question this will help us with IT directors," Slusher said. "Dual platform support is a big undertaking. As the platforms get a little closer, it will be easier. We see it as a positive development and leverage it as much as possible."

The availability of Intel-based systems for both the Mac and Windows operating systems has the potential to make supporting both platforms easier for VARs. "Standardizing onto relatively common hardware should make life easier for VARs and resellers in the long run," Levy said. "Since all the systems will be using the same basic hardware architecture, one technician can cross train on both."

In the end, resellers and analysts predict that the coming months will be business as usual as they wait for Intel-based Macintosh computers. "I don't see this as having a large impact," Levy said. "It's going to be a very gradual change. Organizations, both large and small, will gradually move over to the new hardware."

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