IBM, Apple Are Working Out Details of Broad Alliance

By Laurence Hooper, Staff Reporter. With Stephen Kreider Yoder and G. Pascal Zachary
The Wall Street Journal

June 25, 1991

International Business Machines Corp. and Apple Computer Inc. are working out the final details of a wide-ranging accord, which industry executives said could be announced as early as Thursday.

As part of the agreement in principle, which the executives stressed isn't signed yet, IBM would license some leading-edge microchip technology to Motorola Inc., Apple's traditional chip supplier. Motorola, which also has been part of the discussions, would be authorized to make chips for Apple, IBM and any other computer maker that wished to join an IBM-Apple bandwagon.

In return, Apple would cooperate with IBM in developing a common set of standards for "object-oriented" software, an important new technology that allows prefabricated chunks of software to be combined in many different ways.

The deal would be the biggest example yet of IBM's wish to end its traditional isolationism in the computer world. Pressured by stiff competition and poor results, IBM recently has been forging pacts that bring outside technology to IBM -- and has also sent an unprecedented wave of IBM technology to other companies, including a large deal last week with Wang Laboratories Inc.

IBM, Apple and Motorola, which have yet to acknowledge explicitly that they are in discussions, declined to comment.

If completed as expected, the deal would consummate a whirlwind romance between IBM and Apple, erstwhile rivals who were pushed together by industry trends that threatened to leave them both behind.

In particular, the agreement would map a possible course for building easy-to-use software that would run on the companies' previously incompatible computers, a longstanding dream of the personal-computer industry. It would also make it more likely that IBM and Apple machines, especially in the fast-growing workstation arena, will use common technologies.

The deal would be a boon to Motorola, giving it the opportunity to stem its declining market share in microprocessors that go into desktop computers. The deal would give Motorola a toehold into IBM's business for the first time since Intel Corp. defeated Motorola in a bid to supply microprocessors for Big Blue's original PC in the early 1980s. Motorola is a distant second in the microprocessor market while PC clone makers snap up Intel's chips.

The IBM chips that Motorola plans to license are based on a technology known as reduced-instruction-set computing, or Risc. Invented by IBM and popularized by Sun Microsystems Inc., Risc technology is catching on because it is faster than conventional microprocessors.

Having the IBM chip in its product line could help Motorola make up for its embarrassing failure to win over many computer makers to its own Risc chip, the 88000. With such powerful users as Apple and IBM, a Motorola-made IBM Risc chip could be very attractive to other computer makers. What's more, under the agreement, Motorola would play a key role designing future versions of the IBM chip, saving IBM some money.

Intel wouldn't necessarily be hurt by an IBM-Motorola deal because the IBM chip would be used primarily in workstation computers, a different sector than the PC market Intel currently dominates.

An IBM-Apple alliance would be a blow to software giant Microsoft Corp., which has come under siege lately for its increasing dominance of the PC industry. Both IBM and Apple are looking for ways to lessen the influence of Microsoft, which controls key software for IBM's personal computers and also has found a way to mimic Apple's much-admired software, threatening Apple's unique qualities.

IBM, in particular, has been active lately. It has enlisted Borland International Inc., Micrografx Inc. and others to help it with key software. Just yesterday, it signed another deal with Borland and announced a partnership with Lotus Development Corp., from which it will license Lotus's Notes and cc:Mail software. As a result of the Lotus deal, IBM said it will stop co-marketing an electronic-mail package with Microsoft, deleting another area of cooperation between the firms.

By teaming up, IBM and Apple hope to sketch an alternative to Microsoft and thereby continue to control their destinies, the executives said. Specifically, a joint IBM-Apple software effort would pose a new competitive threat to Microsoft's plans for a new operating system that, like the IBM-Apple scheme, would work on several different types of computers. An operating system controls the basic functions of a computer.

The expected IBM-Apple link would also threaten an initiative launched recently by Microsoft, Digital Equipment Corp. and Compaq Computer Corp. The so-called ACE initiative will attempt to set standards for workstation computers that use Risc technology.

The proposed agreement would seem to pit Apple, IBM and Motorola against the ACE partners, which plan to use a Risc chip from MIPS Computer Systems Inc., and against Sun, the current Risc leader. It wasn't clear, however, whether Apple has made a final decision to produce computers based on IBM's Risc chip.

A Microsoft spokeswoman wouldn't speculate on the impact such an alliance may have on it. "Since a specific agreement has yet to be announced, it is hard to comment on whether it would have an impact on our business," she said, adding that there is growing support among computer makers for the ACE consortium and for Microsoft's products.

Details of the software pact also weren't clear, apparently because they haven't been finalized. But the industry executives suggested that Apple may merge its "Pink" software project -- now under development -- with work under way at Patriot Partners, an ambitious joint effort by IBM and Metaphor Computer Systems Inc. to develop a new approach to software.

Both Pink and Patriot Partners seek to provide a standardized layer of software that sits between different operating systems and a user's future programs, insulating the user from the nuts and bolts below and allowing common software to run. The extra layer would also enable new functions, such as the ability to combine small chunks of software in different ways, much as Lego blocks can make many different shapes.

Such abilities, which would make software much easier to write, are a key aspect of object-oriented software, which the executives said IBM and Apple will tout as the wave of the future.

One of the original proponents of object-oriented software, Alan Kay, currently works for Apple, while David Liddle, another vocal proponent, is chief executive officer of Patriot Partners. Both worked during the 1970s at Xerox Corp.'s famed Palo Alto Research Center, where much of the groundwork for today's personal computer technology was laid.

Both Pink and Patriot Partners are apparently early enough in the development process that their specifications could be combined. But they both also rely on unproven technology, and a combined software project likely wouldn't bear fruit until 1993, if it bore fruit at all.

Whatever the exact mechanism for cooperation, the executives said, IBM and Apple have, at a minimum, agreed to work on a single set of specifications for object-oriented software that would work with both companies' current machines. And Metaphor has been actively involved in the talks, they added, making a Patriot Partners link-up likely.

The executives stressed, however, that any IBM-Apple software cooperation won't be aimed at making current IBM programs run on Apple's current machines, or vice versa. The deal also won't mean that IBM and Apple will use the same operating system.

IBM and Apple will also try to make their computers communicate more easily, probably by licensing each others' networking technology, the executives said.

Copyright Dow Jones & Company Inc