Silicon Insider: Is Apple Poised to Topple the PC Big Boys?

Sept. 13, 2006 — -- In one of the strangest conjunctions of bad luck in the history of high tech, one of the world's largest industries -- personal computers -- suddenly seems up for grabs.

Let's go back a year.

At that time, PCs seemed the most stable of industries. It was filled with giants, all of them lumbering pleasantly along, squeezing profits that remained in an increasingly commodified marketplace.

On the Windows side, the big guns -- Dell, Hewlett-Packard, Sony et al -- were jostling around, competing against each other, picking up or losing a percentage of market share in desktops, and waiting for Microsoft to finally deliver Vista and make the game exciting again.

The whole "Wintel" world had grown stale and unimaginative.

Meanwhile, on the other side of the Great Divide, Apple continued its long turnaround under Steve Jobs, consistently earning good press for quality new models.

Indeed, Apple was generating the only real excitement in the entire industry: The penumbra of excitement surrounding the iPod was converting a growing number of bored Windows users to switch to the Mac.

Still, these converts represented only a few percentage points in market share shift.

Looking back, everything suddenly changed with Apple's announcement that, 20 years late, it would finally begin offering Macintoshes with Intel microprocessors.

It was an important announcement, but certainly not as earthshaking as it would have been in 1986.

Yet the decision seemed to bring some kind of closure on the entire PC industry -- and in the process created some kind of strange attractor that has sewn chaos in the personal computing world ever since.

Don't ask me why -- I'm just reporting what has been unmistakable ever since.

More Microsoft Delays, Flaming Batteries

The first thing that happened was Microsoft announced that it wouldn't hit its (second) target delivery date of Vista in October.

With that news, the last remaining faith the world had that Microsoft was still a dynamic and innovative company all but evaporated.

MS now suddenly looked old and confused. Meanwhile, the news was a gut shot to the Wintel world: The big PC makers had counted on the 2006 Christmas season to be a big revenue breakout.

Now they would have to stumble through with the same old product catalog. Scratch Microsoft.

Then, disaster struck. In one of the biggest product screw-ups in modern times, Sony, not only one of the world's biggest laptop computer makers but also a leading supplier of batteries to other laptop makers, shipped out millions of faulty batteries.

"Faulty," in this case, meaning: "Will burst into flames."

Thanks to the digital-camera boom, one of those exploding batteries got captured on tape … burning up not a Sony Vaio, which would have been justice, but a Dell laptop.

The image was literally burned into the minds of a billion viewers around the world.

Dell had to recall 4 million laptop batteries.

It was exactly the kind of bad publicity you can't make contingency plans for. The company's stock dropped, and it kept falling when Dell announced that it not only wouldn't hit the market's quarterly projections for its revenues, but it wouldn't even match last year's numbers.

Scratch Dell.

Still, even with Microsoft falling behind, the Windows world could still count on its hardware components, right?

After all, Intel has been one of the most consistently excellent -- and certainly one of the most successful -- electronics companies of all time.

By consistently upholding Moore's Law and cranking out a new generation of 8086/x86/Pentium descent every couple years for the last three decades, the company has powered the digital revolution and kept the PC industry ever-exciting and new.

Well, that is until Intel decided to get a little too clever. With perpetual competitor and cloner Advanced Micro Devices gaining ground at the high end of the microchip business, and the menacing Samsung attacking almost everywhere else, Intel decided to run an end-around play: a new generation of multiple-processor chips that would outperform anything Samsung had and underprice anything else AMD could devise.

Good plan, wrong timing. AMD, far more nimble these days than Intel, not only captured the high ground with the latest generation of Athlons, but also raced Intel to market with a multicore chip.

Meanwhile, Samsung hasn't given an inch.

So Intel -- its morale lower than almost any time in its history -- announced last week the massive layoff of thousands of employees.

It's the first time ever the company, long the bellwether of economic health in tech, has done so when the rest of the semiconductor industry has been still going strong.

Scratch Intel.

Board Scandal Interrupts HP's Smooth Sailing

The one big company that seemed to be navigating smoothly through these dangerous shoals was Hewlett-Packard Co.

Having emerged from the long nightmare of Carly Fiorina presidency, HP under Mark Hurd seemed to have righted itself and to have started to exhibit some of the qualities that once had made it famous.

Morale, devastated just two years ago, was back up, as was product quality. HP looked poised to rip the baton of PC industry leadership from the hand of a stumbling Dell Computer.

There was nothing blocking its path to victory except for its board of directors.

I don't need to recount here the events of last week.

If you'd like a more complete analysis of its implications, you might want to read the opinion piece I have in today's Wall Street Journal.

For now, we need only note that it is quite possible that the former -- as of Tuesday -- chairman of the board may soon face an indictment from the California State Attorney General's Office for her role in illegally spying on her fellow board members.

Now that's the kind of publicity you just can't buy.

Scratch HP -- though of the list so far it has the best chance of a quick recovery.

OK, so who does that leave?

Surveying the rubble of what was just a few months ago a giant, thriving and thoroughly predictable industry, there is only one headquarters left standing.

Apple Computer.

Apple's Resurgence a Miracle, but What's Next?

Who'd have predicted that a few years ago?

The resurrection of Apple is one of the great modern business miracles.

Credit, of course, goes to Steve Jobs, and of course he is always happy to take it.

It should also be shared with those thousands of imaginative, loyal and hardworking Apple employees toiling in Jobs' shadow.

Now, powered at last by the right chip, with a superior operating system that won't be challenged anytime soon as well as elegant product designs and legions of potential customers ready to abandon their dreary Windows machines, Apple seems poised to recapture vast chunks of the PC business, perhaps even regaining the preeminence it lost in the late 1980s.

Wait, though.

Did you read the news this week? It seems that sales of the Apple iPod have begun to flatten out.

The iconic consumer electronics product of the 21st century has apparently lost its cultural edge, its cool, its place in the Zeitgeist.

Unless Jobs manages to pull yet another rabbit out of his R&D lab -- which he didn't do Tuesday when he announced the availability of movies on iTunes -- this crucial profit generator for Apple may soon fade away.

That's going to make it hard for Apple to take advantage of this emerging opportunity and finance a run for the top of the PC world.

Scratch Apple, maybe.

So, what does it all mean? I'm not sure.

I can't remember ever seeing an entire industry of this size and maturity knocked on its collective butt in such a short interval of time. My hunch is that the next few months are going to be a real test of management in the PC industry.

This is when the great CEOs are separated from the poseurs, the real leaders from the mere followers.

The first company back on its feet wins all the marbles. Ready, set, go.

Tad's Tab: The latest from the teen tech trenches, Malone's 15-year-old son, Tad Malone.

You may have read about the controversy over online guitar tablature ("tab") sites and the music industry's attempts to shut them down for copyright infringement.

After the disastrous publicity over music downloads, didn't music companies learn a thing? How exactly is listening to a song, figuring out the notes yourself, and writing them down for your friends, in breach of copyright law?

But leaving that aside, just exactly how will music companies benefit from shutting down sites that support their music and help sell albums?

I've bought three guitars, an amplifier, a half-dozen sound effects pedals, and a library of CDS -- all because of the skills I learned from guitar tabs. Am I really the customer these companies want to lose?

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone, once called the Boswell of Silicon Valley, is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is best-known as the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com "Silicon Insider" columnist since 2000.