A Year Ago: Apple reverses plans on cloning

This story first appeared Wed, 3 Sep 1997 09:24:52 GMT

If there was doubt about Apple Computer Inc.'s licensing strategy, it was cleared up Tuesday. The strategy is this: not going to happen.

In a blow to Mac clone makers and their customers, Apple Chief Financial Officer Fred Anderson said in a press conference this afternoon that negotiations to extend agreements with current licence holders Motorola Corp., Umax Computer Corp. and IBM Corp. have failed to reach agreement.

In essence, the news means that clone customers will not be able to buy portables or machines based on the CHRP standard, the Common Hardware Reference Platform that would allow Macs to be built out of more industry standard parts, at least according to Apple's interpretation of those agreements.

Anderson said it was too early to say whether the company would consider licensing the next-generation Rhapsody operating system, due next year.

Anderson made similar proclamations at the Macworld trade show in early August, but Apple's acquisition Tuesday of Power Computing Corp., by far the largest of the clone vendors with some 200,000 users, makes it more likely that Apple can force its way with the Mac market.

"If we could have a license program that truly expanded (the customer) base and enhanced shareholder value, we would have a positive attitude toward ... licensing," Anderson said. "But we have not been able to get agreement on any program that would meet those objectives."

Instead, Anderson said, the cloners signed up almost no new Mac users, claiming that 99 per cent of clone customers were already Apple Macintosh faithful. Bottom line: The cloners took buyers from Apple, even as the Cupertino computer maker was paying expensive R&D bills that the competing computer makers didn't have to foot.

"Every time a licensee shipped a clone, we were subsidizing that clone with several hundred dollars," said Apple marketing exec Guerrino DeLuca. "That's not competing; that's subsidizing."

Anderson said, however, Apple would negotiate new licensing agreements if a cloner would commit to target markets outside of Apple's core areas, or in geographic areas where Apple does not now play a strong role, such as the Far East.

Apple will continue to honor existing licences with the three vendors, which will run for several years. Although the licenses may grant use of Apple's latest OS 8 operating system, they arguably do not include Rhapsody, CHRP technology or portables.

Representatives from the clone makers were not immediately available for comment.

"This gets them out of one problem. They are still a number of sharks in the soup they're swimming in," said analyst Chris Le Tocq, of market researcher Dataquest Corp.

Earlier in the day, Apple announced a $100 million deal to acquire core assets of leading clone manufacturer Power Computing Corp., of Round Rock, Texas. Power is expected to stop making Mac clones after Dec. 31, but could jump into the Wintel market.

In that one dramatic move, Apple Computer managed to do away with its biggest competitor, its most vocal critic and likely improve its own market share in the expectation that many Power Computing users will return to the Apple fold. "We anticipate a significant number of customers will return to Apple," Anderson said. Maybe, but the move kicked up a hornet's nest of negative reaction on Mac-related newsgroups all day.

"The news about Power makes it easy for me and thousands of other Mac fans to support other platforms that remain open," Mark Leon Lewis wrote in the comp.sys.mac.advocacy group. "I will not buy any Macintosh product now... Apple just lost my respect."