Apple May Be Ready to Cease Cloning About
It almost seems unthinkable, but Apple may be poised to kill the clone market. Reports to that effect have surfaced in the last few days, feeding the Mac rumor mill to a frenzy.
But it’s more than a rumor. According to an industry source with direct knowledge of discussions between Apple and the clone makers, some members of Apple’s board are looking hard for ways to phase out Apple’s three-year flirtation with Mac-compatibles. (Apple spokesman Russell Brady would say only that “current negotiations with licensees are continuing.”)
The move may seem backward, given that the clone makers have generated many recent innovations and spurred price reductions. But Apple views a “cannibalization” 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’s current agreement with Apple allows sales of Mac OS 8.0, but anything beyond that would require future negotiation. “We 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’d be very concerned.”
“Power Computing has a long-term, multiyear license and contract with Apple,” said Mike Rosenfelt, Power Computing’s director of marketing.
“If 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,” Rosenfelt said.
Strong words. What might they be backed with? Rosenfelt declined to comment further, but my industry source predicts that “if licenses are rescinded, look for one or more clone makers to take legal action to protect their rights.”
“If Apple pulls back, they’re going to get sued all over the place,” said Pieter Hartsook, a Mac industry analyst. “A turnaround on licensing would be suicide.”
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.
Like many decisions at Apple, the victors of factional warfare will dictate the future of clones. “Unlike the engineering and product marketing people who jump when Steve [Jobs] says jump, I don’t think the lawyers do that,” Hartsook said. “And although [acting CEO] Fred Anderson may be trying to support Steve, he’ll want to protect Apple from suits, particularly since he’ll be named on them.”
Anderson and board member Edgar Woolard (rumored as Apple’s likely new chairman) support licensing, my industry source adds. But not as it stands. “A licensee that purely cannibalizes Apple’s market is not acceptable to Apple’s board.”
So if cloning continues after OS 8, say goodbye to cutthroat competition with Apple. It will have to be a team approach “in accordance with the original goal of market expansion,” the source says. “But others on Apple’s board [including Jobs, expected to be announced as a board member this week] disagree with any approach that extends licensing beyond what’s required by current contracts.”
It’s hard to argue with a licensing plan that eases Apple’s slide, rather than accelerates it. But ending clones? What can Apple be thinking of? What would the company’s 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’s 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’s 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?
And no matter how creative and dynamic, no single company can compete against an entire industry. The engine of innovation that will keep the Mac competitive has to include clone makers.
