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IBM Left in the Dark

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There's no shortage of rumors as to just what really went on between Apple and IBM with regards to the souring of their relationship, and rehearsing them all here would be an exercise in futility. However, John Markoff of the New York Times has offered his take, based in-part on "close sources," and I thought it worth mentioning here.

Apple purportedly pulled a bit of a fast one on IBM, with Jobs only informing IBM of the decision late in the day Friday, right before Monday's big announcement. IBM apparently learned of the possibility of the deal the way most of us did, through the early reports of the WSJ. The question is, why? Jobs' WWDC presentation heavily implied that IBM simply couldn't deliver. The infamous image of the missing 3GHz PowerMac behind Jobs on stage certainly made it seem like Big Blue couldn't get the job done, and Jobs came off looking like he had to make a tough, but thoroughly necessary decision. IBM, not surprisingly, tells it a different way.

"Technical issues were secondary to the business issues," said an executive close to the I.B.M. side of the negotiations. Because the business was not profitable, I.B.M. "decided not to continue to go ahead with the product road map."

In other words, Apple wasn't interested in paying IBM's prices, and the prices that they would pay weren't enough for IBM to consider taking the road map further. Given Apple's lack of fear with regards to impressive price tags, this leads me to think that IBM was potentially looking to increase the prices of the PowerPC 970 in a significant way to justify spending more time on the project. Then again, no one can deny that the PowerPC 970 had a heat problem. The water-cooled PowerMac, the non-existent G5 laptop, and the 1-year overdue 3GHz part are all signs of problems at IBM. How much more scratch did IBM want to make these problems go away, and was it certain that these problems could be solved by the almighty dollar? Jobs' actions seem to suggest that, if this scenario is correct, he apparently had little faith in IBM. That, or the Blue Man Group seemed like a smarter way to preserve those profit margins.


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