Apple’s Survival Will Depend on Radical Changes
Given Apple’s disintegrating business model, the company’s chances of surviving in its current form look slim.
To maintain even a chance of continuing as a large independent company, Apple would need to hire a charismatic, visionary CEO within weeks. That person would have to inspire the troops, move the company into the black and keep current projects--a raft of new Mac models and the Rhapsody software operating system--on track between now and next year.
This scenario and appeals to many Mac fans because it seems to preserve the hope that Apple will remain an independent counterpoint to monopolistic Microsoft.
Sorry to disappoint you, but this is not the likely resolution of the current crisis. More likely, Apple will either radically remake itself, or be purchased by Umax Data Systems or another company soon. That’s because the best CEO candidates won’t touch Apple with 10-foot pruning shears--especially with Steve Jobs holding real control and a board of directors that is the embarrassment of the industry.
(Panicky speculation notwithstanding, Jobs himself would be a horrendous CEO, even if he wanted the job. I could easily fill this column with the reasons why, starting with Jobs’ tendency for profligate spending and his habit of following his whims whether or not they make business sense. And it wouldn’t inspire confidence, if as widely suspected, it came to light that Jobs just sold nearly all his Apple stock.)
Is this terrible news for Mac users? Not necessarily. True, Larry Ellison could still buy Apple and reduce the Mac OS to an engine for Oracle’s network computer. But other plausible options could help the Mac survive and thrive:
* Get out of the hardware business.
Goodbye Apple Computer. Hello Apple Technologies Inc., which sells franchises for all its hardware--Macs, Newtons and peripherals. Franchisees would sell machines with the Apple logo, one of the world’s most widely recognized marketing symbols. (Apple would still need a clever CEO, but that person wouldn’t have to be a superhuman embodiment of business genius and technological vision.)
Apple would collect licensing fees to fund a research lab (AppleDesign) for technologies benefiting all franchisees--each of which could innovate under the Apple brand or its own. Apple would sell upgrades to the Mac OS and eventually Rhapsody, and keep Claris, its successful software house, as a semiautonomous subsidiary.
Apple could sell its hardware business outright, rather than use a franchise model, and try to survive as a software supplier. A franchise deal works better, though. It lets Apple preserve a more powerful role as a technology developer and promises users more consistency across the Mac platform. It also lets other companies exploit the Apple logo and relieves them of competing with Apple or being bound its anti-competitive licensing structure.
* Someone buys Apple, but not for the Mac itself.
Despite these trying times, Apple still has great products, a strong operating system strategy, and--unlike most big corporations in big trouble--no debt. Available for a song, it may be a more appealing acquisition than most analysts seem to think. Sony is struggling to rise in the Windows PC market. It might view the Apple brand as a way to sell Macs--and Windows computers. Other PC makers might find this model equally enticing.
Before you scoff, consider that when the Rhapsody operating system emerges next year, you’ll be able to have a Mac experience on an Intel-based PC. Why not Apple-branded Windows machines or Win-Mac hybrids?
* A clone maker buys Apple.
Umax Data Systems, a $2.7-billion Taiwanese company that’s one of the big three Mac clone makers, would like to own Apple.
“Folks have asked whether we’d be financially capable and interested [in buying Apple],” Umax spokesman Phil Pompa told me last week. “The answer to both questions is ‘Yes.’ ” Pompa added that Umax would also consider partnering with another company to buy Apple.
A source close to the companies says that both Umax and Motorola have already approached Apple about buying its hardware business, and called a joint Motorola-Umax buyout “a very real scenario.”
But it won’t happen right away. Apple’s stock jumped two points on Friday over buyout rumors. Smart shoppers will wait. Apple is expected to report more losses on Wednesday, and that, added to the almost inevitable angst of picking a new CEO, could drive its stock to new lows. But come August . . . buy low, sell high.
Charles Piller can be reached via e-mail at cpiller@aol.com
