by William J. Cook, Jim Impoco, Warren Cohen 

    The scant history of personal computers barely spans the life of an average Dalmatian. Yet since they first appeared as hobbyists' curiosities in the late 1970s, these ubiquitous machines have transformed the economy and the way we work. In the blink of an eye, they have created industrial powers like Intel and Microsoft and shattered the hegemony of such giants as IBM and Digital Equipment Corp. And the fingernail-size microprocessors that do the heavy lifting deep inside PCs are the compute engines that will drive everything -- yes, everything -- that races along on the emerging information highway, from pocket telephones and television sets to immense supercomputers.

    No wonder, then, that next week's rollout of Apple Computer's latest Macintosh line is freighted with high anxiety. The new Macs are the first mainline personal computers built to use the new PowerPC, a high-speed microprocessor developed by a $1- billion IBM-Motorola-Apple alliance. The PowerPC's RISC design (for reduced instruction set computing) has the potential to do more work for less money and electric power than present CISC (or complex instruction set computing) microprocessors, most of which are made by Intel. If the new chips are successful -- IBM will introduce its first, small PowerPC machine next summer and the alliance desperately hopes other computer builders will adopt them -- Apple's and IBM's flagging fortunes could be resuscitated. A successful PowerPC could also blaze the way for RISC chips from other companies like DEC, Sun Microsystems and Mips Technologies. And in the upheaval, Intel's virtual microprocessor monopoly might eventually be cracked.

    For Apple, it's yet another bet-the-company adventure. In the beginning, early enthusiasts smuggled diminutive Apple II's into offices where they first demonstrated the power of personal computing. But IBM's PC, introduced in 1981, powered by an Intel 8088 microprocessor and Microsoft disk operating system, quickly stormed into the lead. Apple fought back in 1984 with the innovative Macintosh, which used Motorola's 68000 microprocessor. Apple grew into an $8 billion company, and the Mac's friendly face and handheld mouse changed forever the way the world thought computers should look and feel. But Microsoft's Windows did much the same for machines with Intel brains. IBM lost out in the process because the only proprietary elements of its PC were cloned, and an army of new vendors cranked out millions of ever cheaper and more powerful IBM compatible machines. The standard became Intel microprocessors and Microsoft operating systems -- and those two companies reaped huge rewards. Apple, with about 11 percent of the market and its own hardware and software, remained a niche company with a loyal following.

    Power play. This time, Apple's shift to PowerPC is defensive. Its Motorola chips have been eclipsed by Intel'spowerhouses, the 80486 series and nowthe Pentium chip. "Fundamentally, [PowerPC] is replacing a chip that was deader than a doorknob," says Intel CEO Andrew Grove. Joseph Graziano, Apple's chief financial officer, concedes: "For the first time in a long time, there will be less questions about the raw performance of our chips vs. Intel's."

    Making the transition will be a herculean task. Apple's goal is to ship a million PowerPC Macs -- about a quarter of its total computer production -- during the year starting next week. Initially, three new Macs will be introduced, with the least expensive reported to retail at about $2,000. The following year Apple expects three quarters of the machines it sells to use the new chips. By 1996, the company hopes to have transferred its entire computer line to PowerPC. Between then and now the trick is to position customers for the new machines while persuading them to continue buying existing Macintoshes. Prospective Mac customers may also delay purchases in order to evaluate the new products. Meanwhile, owners of current high-end Macs will be able to upgrade with a new add-in board that contains a PowerPC.

    Apple's major problem is that Macintosh software applications, such as word processing, spreadsheets and desktop publishing, the programs people buy computers to run, are written specifically for Motorola's 68000 family of chips. To make existing software run on PowerPC, the new Macs will contain a special program called an emulator that is the computer equivalent of simultaneous translation from English, say, to Chinese in United Nations debates. The emulator converts Motorola code to PowerPC code so software written for today's Macs will also run on the new ones. The industry buzz is that Apple's emulators are excellent. The hitch is that programs that run in emulation mode won't go any faster than they would on a regular Mac. One big advantage is that DOS and Windows programs will run under emulation, though, again, not as fast as on the Intel chips that they were designed for.

    Speed. Programs written in native code forthe PowerPC, however, should blaze at two to four times present Mac speed, particularly multimedia and publishing applications for whichApple's computers have been famous. Apple says more than 50 major software programs written for the new chip should be available at the rollout from vendors like WordPerfect and Lotus. Microsoft, which sold $265 million worth of Mac applications in 1992, will also write for the new machines as it has all along. "It's one of our best businesses," says Microsoft's Pete Higgins. "If you want to be in the Mac business, you have to do them all -- and it's not that hard." Apple is banking on Microsoft having PowerPC applications of its Word and Excel programs by summer.

    Apple is also counting on higher-performance machines, stringent cost cutting and aggressive pricing to boost its 11 percent PC market share. "The goal is absolutely to get above 20 percent in a few years -- a '97, '98 time frame would be my best guesstimate," says Apple's Graziano. "We've been gaining about a point per year for the past three or four years," he adds, "but frankly I'd expected we would be doing better." Wall Street is not so sure. "I don't think the new [PowerPC] processor in and of itself will expand the customer base beyond Apple," says Eugene Glazer, technology analyst at Dean Witter Reynolds, "which is basically going to replace its own customer base." During the transition, most analysts believe the company is in for a bumpy ride.

    It's not just Apple, of course, that has pushed huge bets onto the table. IBM may have even more at stake because it plans to use PowerPCs from "palmtops to teraflops" -- or from handheld personal digital assistants to supercomputers with hundreds of PowerPCs -- all able to run similar software. At the high end, such "massively parallel" machines may help Big Blue to breathe life into its ailing mainframe business. IBM, which makes chips for its own use, also hopes to sell PowerPCs. Apple's first PowerPC chips are made by IBM. As a result, Motorola, already soaring in telecommunications and the world's third-largest chip maker, will lose some Apple business. But Motorola hopes to be a major producer of PowerPCs for other computer makers and to embed the chip in devices like engine controllers. By decade's end, Ford plans to put about 6 million PowerPCs a year in its cars, replacing Intel chips.

    Knights. Figuratively invoking the old adage, "The enemy of my enemy is my friend," Apple, IBM and Motorola joined hands in 1991 to face off against Intel. The 300 designers of the new PowerPC chips aptly named their project "Somerset" after the English county where the knights of the Round Table met in King Arthur's castle, laid aside their differences and set off in pursuit of the Holy Grail.

    In pursuit of a new computer standard, the Somerset group squeezed the five chips that compose the processor in IBM's new RISC System/6000 workstation onto a single piece of silicon. IBM researchers invented the RISC architecture in the 1970s, but it was shelved and Hewlett-Packard was first to use the idea commercially in a workstation; others followed, and IBM had to play catch-up.

    All microprocessors are inordinately complicated, but RISC designs are not as complex and thus can be smaller, faster and less costly to make than chips using CISC architecture. The initial PowerPC, the 601, is somewhat faster than Intel's Pentium chip, but only about 40 percent as big, and it uses less power, so less heat must be dissipated. IBM's first desktop PowerPC machines will run so cool that they won't need noisy fans. Low power use is a bigger advantage for laptop and handheld computers because they will run longer on a battery charge.

    RISC supporters argue that their design's advantages give it a long-term edge. "It's going to be increasingly difficult for traditional architectures to keep up," says Phil Hester, IBM vice president of systems and technology for the RS/6000 division and the person who conceived the three-company PowerPC alliance. Hester likens CISC to a piston-driven airplane and RISC to a jet. "You can make the piston plane go faster," he says, "but there is an inherent advantage to the jet." For example, says Hester, RISC chips will be powerful enough to handle programs for speech recognition and multimedia without the expensive circuit boards that are typically added to PCs to help with the load.

     But Intel, the world's top chip maker, does not intend to be unhorsed by the Somerset knights. The company, in the best sense, is running scared. "Sure, we take it seriously," says Grove. "We're not sitting on our duffs. I think it's good for us. It's the same way we responded to Japan. We saw the danger coming and we mobilized. ... The biggest challenge for us is not crashing. We're going very fast."

    Price cuts. And how. Intel is slashing Pentium prices far faster than usual, and this could slightly erode its fat profit margins. It is also hurtling a barrage of new chips into the market to attack every niche. This week, it will introduce new Pentiums that run at 90 and 100 megahertz, half again as fast as current versions; and in April it will roll out 100-megahertz models of the older, less-expensive 486 chip. Intel expects that by May its customers will be offering Pentium-based computers at $2,000, down from $2,500, the cheapest today. The debut of the next hot chip, the P6 with at least double Pentium's performance, has been moved up a year and will be out in volume at the start of 1996. To handle the rush, Intel plans a 24 percent jump in capital spending.

    Besides PowerPC, Intel faces other competitors. Despite Intel's efforts to halt them in court, Advanced Micro Devices and Cyrix are marketing work-alike clones of Intel's 386 and 486 chips and are planning Pentium versions. As a measure of Intel's power, however, IBM is not abandoning its PC lines that employ Intel chips. "IBM wants to position themselves to win either way," says Linley Gwennap, editor of the Microprocessor Report. "They'd like to see PowerPC win out, but they're not ... [betting] the company." But IBM, which has been making Intel chips under license, declined rights to make Pentiums. Big Blue may buy chips in this class from clone makers.

    Other companies want a piece of Intel's action. DEC has mortgaged its future with its RISC chip, a speed demon named Alpha, for PCs, workstations and parallel-processing mainframes. If horsepower were all that mattered, Alpha would blow the doors off everything else. But unlike the PowerPC group, DEC doesn't have weighty partners to lever Alpha into the retailmarket. Still, DEC has built a $425 million plant tomake Alphas. The company will also produce 486 clones for AMD.

    This year's high-stakes chip war will help move computing to stratospheric performance levels and, perhaps, change the fortunes of the major players. Baffled consumers can relax, however. What's under the hood -- RISC or CISC -- will matter less than before. The newest computer operating systems, such as Microsoft's Windows NT and IBM's Workplace OS, will run on several platforms. Applications programs can be recompiled for different chips. And, says Intel's Paul Otellini, "competitive juices yield competitive products." For consumers, the news from the battlefront couldn't be better.

    Apple:  Apple hopes to ship 1 million PowerPC Macintosh machines over the next year in an attempt to take market share from Intel-based PCs. But a key question is how much PowerPC software will be created.

   1993 revenues                 $8.0 bil.
       change                      +12.6 pct.
  1993 net income            $86.6 mil.
       change                       -83.7 pct.

  Recent stock price        $35.63
   52-week high                 $59.13
   52-week low                  $22

  PC market share              11 pct.
  R&D as a share of sales    8.3 pct.

     IBM:  IBM will make PowerPC chips and start selling PCs with the new microprocessor later this year. But if PowerPC falters, it could hurt Big Blue's plan to use the chips in its product line_from bottom to top.

   1993 revenues             $62.7 bil.
       change                        -2.8 pct.
  1993 net income           -$8.1 bil.
       change                      -$5.0 bil.

  Recent stock price        $53
   52 week high                 $60
   52 week low                  $40.63

  PC market share             13.6 pct.
  R&D as a share of sales   8.9 pct.

     Motorola:  With partners like Apple and IBM, Motorola believes it can snare 30 percent of the $9 billion PC chip market over the next three to five years. But Motorola will now have to share its Apple microprocessor business with IBM.
 
   1993 revenues             $17 bil.
       change                    +27.5 pct.
  1993 net income            $1.0 bil.
       change                  +125.6 pct.
  
  Recent stock price          $106
   52 week high                   $107.5
   52 week low                      $58.25
 
  PC processor market share   8 pct.
  R&D as a share of sales          9 pct.

     Intel:  Intel, the most powerful PC chip maker, will compete against PowerPC with its new Pentium microprocessor. The company is also speeding development of new chips. But it is cutting prices on Pentium, which could affect its fat profit margins.

   1993 revenues             $8.8 bil.
       change                  +50.3 pct.
  1993 net income           $2.3 bil.
       change                +115.1 pct.

  Recent stock price        $66.63
   52 week high                 $74.25
   52 week low                  $42.75

  PC processor market share 74 pct.
  R&D as a share of sales        11 pct.

     Microsoft:  Microsoft's operating systems are well-entrenched in Intel-based PCs, and the software giant is making its new advanced operating system, Windows NT, available for PowerPC. No matter who wins, Microsoft wins.

   1993 revenues             $3.8 bil.
       change                     +36 pct.
  1993 net income           $953 mil.
       change                     +34.6 pct.

  Recent stock price        $82.75
   52 week high                 $98
   52 week low                  $70.38

  Market share, PC software   61 pct.
  R&D as a share of sales       12.5 pct.

     NOTE: Numbers reflect each company's fiscal year; PC market share is worldwide; IBM R&D budget includes engineering expenses. Stockprices as of March 2, 1994.

    USN&WR -- Basic Data: Dataquest, Gartner Group, company reports. Compiled by Warren Cohen.

     PUTTING POWERPC IN PERSPECTIVE
  1. SPEED. PowerPC processes fewer instructions more efficiently than current microchips so it can run faster than Intel's Pentium. But Intel is bringing more-powerful chips to market.
   2. COST. The PowerPC is a smaller chip and can be produced at a cheaper cost than many rival microprocessors. To compete, Intel has already cut Pentium processor prices.
   3. COMPATIBILITY. PowerPC computers will run all existing Macintosh and IBM compatible software. But these programs don't take advantage of PowerPC's speed.
   4. SOFTWARE SUPPORT. Apple says more than 50 PowerPC programs will be out once its computers debut. But that's a fraction of the software now on the market.
   5. CUSTOMER BASE. Apple is upgrading its computers to PowerPC and IBM will sell machines with the chip, so a hardware market is in place. But few other computer makers have thus far bought PowerPC.

    THE POWERPC POWER PLAYERS   APPLE. CEO Michael Spindler is betting big on PowerPC   IBM. PowerPC could help CEO Louis Gerstner rebuild Big Blue.

    MOTOROLA. CEO Gary Tooker hopes to produce many PowerPC chips.

    MOTOROLA. President Christopher Galvin wants market share.

    INTEL. CEO Andy Grove will fight to keep his company on top.

    MICROSOFT. Bill Gates's company will write programs for PowerPC.

    DEC. CEO Robert Palmer's Alpha chip may lose out to rivals.