iPod Chief Switch: What it Could Mean for Apple

For those of you who don’t know, Apple is currently embroiled in a legal dispute over former IBM exec Mark Papermaster, whom they recently lured away from the IT firm. The apparent purpose of pinching Papermaster, according to news this week, is to replace iPod chief Tony Fadell. It’s a big mess that’s attracting a lot of attention. The shift raises larger questions about just how far a non-compete clause can extend, and points to major overhauls coming up in Apple’s iPod line.
First, IBM is reluctant to see Papermaster go to Apple. Understandably so, considering the former VP’s role as one of the main architects of IBM’s POWER microprocessor technology, which formed the basis for the Apple-IBM-Motorola developed PowerPC architecture. As Apple competes directly with IBM in server, PC, and microprocessor tech (owing to the recent purchase of P.A. Semi), IBM is claiming that Papermaster would be violating his non-compete clause and potentially transferring valuable IP and trade secrets to his new employer.

While it is unlikely that any ruling body would ultimately find in favor of IBM (such a precedent would seriously hamper healthy executive level staff flow in Silicon Valley), that doesn’t mean the two companies could become entangled in a protracted and expensive legal battle. So why is IBM is even threatening? They want a parting gift for the loss of Papermaster, most likely information on what he’ll be working on at Apple, although they might even try to force a limited IP share on the grounds that their proprietary knowledge is being used in the ex-VP’s work.
It’s a shrewd move, but Apple can always decide to just drop Papermaster and look elsewhere if IBM pushes too hard. Although they’re hard-pressed for time now that it’s official that engineer Tony Fadell will be stepping down next month as SVP of the iPod division.
Fadell, iPod chief since 2005, is cited as leaving for “personal reasons.” It is possible he was asked to leave by Apple, however, on the heels of the recent drop of iPod revenue to 14.2 percent of Apple’s overall earnings. While the drop is due partly to increases in computer and iPhone sales, Apple is not known for resting on its laurels, and is likely looking to shake up the iPod line, lest it become an under-performer. Replacing the top brass is a common tactic in a product-line shakeup, and Papermaker definitely has the know-how to provide a major revamp, at least in terms of the iPod’s internals.
Expect to see Papermaker’s processor experience extend to the iPhone as well, should he develop new, in-house designed low power chips for the iPod platform. The possibility is also there that we could see an Intel Atom competitor come out of Apple’s new exec, for use in an Apple-branded netbook. Steve Jobs did claim, after all, that they weren’t offering one because they didn’t know how to make something good at that price range. It might be Papermaker’s job to figure out how, with the iPod¬†chieftaincy¬†just a distraction to throw us off the trail. His official title, after all, is SVP Hardware Engineering, which in my mind allows for a pretty broad scope of duties.