Back to the Future: The End of Mac Clones?

Apple%squots dilemma: Should it renew contracts with Mac-compatible makers?

Charles Piller, PC World

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But it%squots more than a rumor. According to an industry source with direct knowledge of discussions between Apple and the clone makers, some members of Apple%squots board are looking hard for ways to phase out Apple%squots three-year flirtation with Mac-compatibles. (Apple spokesman Russell Brady would say only that %dquotcurrent negotiations with licensees are continuing.%dquot)

The move may seem backward, given that the clone makers have generated many recent innovations and spurred price reductions. But Apple views a %dquotcannibalization%dquot of its market by clones--while overall Mac OS share has stalled--as a main cause of its financial woes. Steve Jobs, effective leader of Apple, has characterized the clone makers as leeches.

Phil Pompa, spokesman for Umax Computer (which with Power Computing and Motorola sells the bulk of Mac clones), says his company%squots current agreement with Apple allows sales of Mac OS 8.0, but anything beyond that would require future negotiation. %dquotWe have already reached an agreement on business terms [for future technologies], and hope to put it into a contract. Any change to that affects our business, and we%squotd be very concerned.%dquot

%dquotPower Computing has a long-term, multiyear license and contract with Apple,%dquot said Mike Rosenfelt, Power Computing%squots director of marketing. %dquotIf Apple is entertaining reversing its policy on licensing the Mac OS, it would be disastrous. Every constituency [says] one thing: We want choice. A return to the old school of a closed Mac platform could spell the death of Apple,%dquot Rosenfelt said.

Strong words. What might they be backed with? Rosenfelt declined to comment further, but my industry source predicts that %dquotif licenses are rescinded, look for one or more clone makers to take legal action to protect their rights.%dquot

%dquotIf Apple pulls back, they%squotre going to get sued all over the place,%dquot said Pieter Hartsook, a Mac industry analyst. %dquotA turnaround on licensing would be suicide.%dquot

This juncture is crucial because with OS 8 and machines based on the new common hardware reference platform (CHRP) just coming to market, clone vendors will be able to create and enhance products--including highly profitable laptops--more easily and with less reliance on Apple approval.

Fearing stronger competition, Apple has not yet approved CHRP machines or even completed the financial terms of OS 8 licenses. Power Computing, chafing at the licensing leash, has already announced it will ship machines preinstalled with OS 8 as early as this week.

As with many decisions at Apple, the victors of factional warfare will dictate the future of clones. %dquotUnlike the engineering and product marketing people who jump when Steve [Jobs] says jump, I don%squott think the lawyers do that,%dquot Hartsook said. %dquotAnd although [acting CEO] Fred Anderson may be trying to support Steve, he%squotll want to protect Apple from suits, particularly since he%squotll be named on them.%dquot

Anderson and board member Edgar Woolard (rumored as Apple%squots likely new chairman) support licensing, my industry source adds. But not as it stands. %dquotA licensee that purely cannibalizes Apple%squots market is not acceptable to Apple%squots board.%dquot

So if cloning continues after OS 8, say good-bye to cutthroat competition with Apple. It will have to be a team approach %dquotin accordance with the original goal of market expansion,%dquot the source says. %dquotBut others on Apple%squots board [including Jobs, expected to be announced as a board member this week] disagree with any approach that extends licensing beyond what%squots required by current contracts.%dquot

It%squots hard to argue with a licensing plan that eases Apple%squots slide, rather than accelerates it. But ending clones? What can Apple be thinking of? What would the company%squots new survival plan be?

The old approach--as sole builder of proprietary systems--is a dead letter. Jobs reportedly wants network computers (NCs) to extend Apple%squots presence in education and business, supported by the likely announcement this week that the main force behind NCs, Oracle CEO Larry Ellison, will be named to Apple%squots board.

But amid massive cost cutting and the crash program to create the new Rhapsody OS, how would Apple pay for NCs and still grow its market share?

Furthermore, no single company--no matter how creative and dynamic--can compete against an entire industry. The engine of innovation that will keep the Mac competitive has to include clone makers.

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