CNET, on the fourth anniversary of the switch from PowerPC to Intel, interviewed an ex-IBMer who had been familiar with the IBM PowerPC-Apple relations at the time.  He/She(/Papermaster?) had some interesting insights into the situation at the time. 

The generally accepted reason for the big switch was that Intel’s Power/Watt ratio with the Core Duo crushed anything that IBM/Motorola could come up with (plus it ran Windows).  This person offers some different scenarios:

Apple wanted better pricing, according to this person. Apple was paying a premium for IBM silicon, he said, creating a Catch-22. IBM had to charge more because it didn’t have the economies of scale of Intel, but Apple didn’t want to pay more, even though it supposedly derived more from an inherently superior RISC design as manifested in the PowerPC architecture.

 For IBM, the business with Apple was a financial sinkhole because the company had to invest a lot of money in chipsets, compilers, and other supporting technologies but could only take about 5 percent of the overall PC processor market, he said. So, in the end, it was impossible to make money. 

Why 5 percent? Apple insisted on double sourcing (IBM and Motorola). So, from the start, this left IBM with about half the market it could have had. This, he said, was an enormous financial burden. Paraphrasing the ex-IBMer: Intel was a single company with the lion’s share of the market. While two companies–IBM and Motorola–had to divvy up a much smaller share of the market, while still investing, individually, tremendous amounts of money. And Apple played one against the other, according to this person.

Perhaps most interestingly, IBM planned to migrate Apple to the Cell processor, where the economics of scale could then be utilized.  The Cell platform is shared with Sony Playstation and others.  With the release of Snow Leopard, which is not PowerPC compatible, that hope is all but dead.

IBM had hoped to amortize the cost of PowerPC on Cell, the PowerPC-based chip design now used in the Sony PlayStation, some IBM severs, and IBM Roadrunner supercomputers. Big Blue was hoping to move Apple to Cell and then get the economies of scale there, according to this person.

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