Analysts Debate Impact Of Apple and IBM Team In Battle With Microsoft

By , Staff writer of The Christian Science Monitor

APPLE Computer and IBM Corporation aspire to be the heavyweight champions of desktop computing, but they're looking more and more like the industry's tag-team wrestlers.

While arch-rival Microsoft Corporation has already fought and won most of the rounds, the two companies continue to haggle over how they'll work together. Last week, Apple and IBM announced a hardware agreement. Analysts say the agreement does not go far enough to challenge Microsoft's leadership.

``There's still a chance for them to gain a few points in market share,'' says Chris Shilakes, an industry analyst with Merrill Lynch. But ``I can't see them dominating.''

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Some analysts believe the battle is already over. ``The Intel-Windows desktop is where it's going to be,'' adds Martin Ressinger, technology analyst at Duff & Phelps Inc. in Chicago. Windows is Microsoft's operating system, which far outsells the rival software systems from Apple and IBM. Intel Corporation in Santa Clara, Calif., designs microprocessors that are the industry's standard hardware.

The new IBM-Apple agreement addresses the hardware side of the equation. The two companies have been building incompatible systems around the same Motorola microprocessor, called the Power PC. The new common design will allow IBM and Apple PowerPCs to run either company's operating system. This should lower the chip's manufacturing costs and attract customers who need to run both Apple and IBM-standard software.

The bigger dilemma, analysts say, is how the companies will fuse their software. Will IBM license Apple's Macintosh operating system and give up its own OS/2 system, despite hundreds of millions of dollars invested? Or will the Macintosh system run as part of OS/2? Mr. Shilakes says the companies have at most 18 months to solve the problem.

Dick Caro, a senior consultant with Arthur D. Little, is more upbeat: ``IBM sees a back-door route ... to challenge Microsoft.'' He expects the company will create an operating software that runs Macintosh programs very speedily - and OS/2- and Windows-based software nearly as fast. That way, a computer user who needs to run Microsoft programs at top speed could rely on the Macintosh versions that Microsoft sells and use Windows when there was no alternative.

Apple's current generation of PowerPC-based computers can already run Windows. But its technology is not nearly as fast or seamless as analysts believe is necessary.

The key, analysts agree, will be to sell enough PowerPC machines that independent software companies will continue to write programs that run on them. Some companies, notably Lotus Development Corporation, have already decided to drop their Macintosh development. But in those market niches where Apple is strong, software developers remain loyal.

``In most of our core markets, Mac is still king,'' says Peter Gotcher, president of Digidesign Inc., a digital-audio company. ``I don't think in the next few years there's any significant risk of Apple going away. That said, having Windows is a wonderful insurance policy.''

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