Clone Wars

With the news Tuesday that Apple Computer was buying the "core assets" of Macintosh clone maker Power Computing Corporation, I felt it was necessary to speak out on the issue, so this week I'm dumping my previously planned column and substituting this one. Hopefully, things will return to normal next week.

For weeks, rumors have been rampant that Apple was about to pull the plug on their licensees, reversing their stated commitment to licensing the Mac OS. While Steve Jobs himself has been quoted as saying the company was honoring all their licensing agreements, it seemed evident from what he didn't say that Apple had a different agenda. Efforts to reach new agreements with the clone makers on licensing the Mac OS have gone nowhere for months, while the licensees continue to ring up brisk sales of lower-cost and often better performing systems than equivalent systems from Apple. Instead of continuing talks and letting go of their demand for higher licensing fees based on system performance, Apple decided to squeeze out Power Computing and strike fear into the others about what might happen if they don't come to terms with Apple.

In their conference call with the press yesterday, Apple claimed that they bought the assets of Power Computing because they had not expanded the Macintosh market. This is a claim that isn't supported by the numbers, as not long ago the organizations that track this information reported that Macintosh market share had actually grown. What Apple really meant is that Power Computing was cutting into one of their very profitable market niches, and they wanted to stop them. The company also claimed that their current licensing contracts were not creating competition. Well, if having Power Computing, Motorola, Umax, Tatung, APS and others designing, marketing and selling Mac clones isn't competition, then what is?

Another excuse trotted out to justify eliminating one of their competitors is that Apple has been subsidizing the clone makers on every system they shipped, to the tune of several hundred dollars. But unless they're giving them money for each one they sell, this claim isn't worth listening to. The final insult from the Apple spin doctors is the claim that the clone makers offered no technical innovation that didn't come from Apple or that Apple didn't also have in-house, and that Macintosh users should expect that Apple will have better products. While this first point may be true, it is equally true that Apple has been slow to offer state of the art systems in terms of speed and performance, and at competitive price points; the clone makers pushed them to become more competitive. As for having better products, Apple has proven that this isn't true, since they seem to be constantly plagued by various design flaws that become painfully obvious after they ship.

In the end, it all comes down to money. Apple wants licensees to capitulate to their demands for higher Mac OS fees (reportedly up to $200) for better-performing systems, supposedly to make up for lost sales to Apple and the costs of developing and maintaining the Mac OS. But why should they? it doesn't cost Apple any more money to allow a licensee to put the Mac OS on a system that runs at 60 Mhz versus one that runs at 250 Mhz. If it did, then imagine what we would all be paying every time we upgrade to the latest version of the Mac OS. Not only would we have to provide some sort of proof that our system is indeed what we claim it to be, but the price we pay for the OS would be based on that information, even though the OS would be no different from that for which someone paid $50. Microsoft doesn't even do this; they charge about $50 for each copy of Windows that is shipped on a Wintel system. And since the licensees are responsible for the burden of technical support, Apple can't rightly claim that this is a cost they must also absorb.

If Apple wants to expand the Mac market, then they are going to have to learn to play by the rules of the free market instead of trying to change them when things don't go their way. The low end, or entry-level consumer market is still available to them and the clone makers; if Apple isn't interested or hasn't been successful there, then they'll have to work with their licensees to find ways to be successful. That could mean any number of things, including a "lite" version of the Mac OS, without all the bells and whistles (QuickTime, AppleScript, QuickDraw GX, ColorSync, etc.) that many people probably don't need or want; lower-cost, expandable CHRP-based systems; better, more targeted software bundles for this market. Something has to work, since Wintel is successful here, so there's no reason that the Mac can't or shouldn't capitalize on the vast number of people who have yet to buy their first computer.

But if Apple will have to play fair, instead of behaving like Microsoft: eliminating the competition when you can't beat them on your own turf. Apple has got to start engaging in constructive negotiations over licensing fees of Mac OS and Rhapsody; that means giving up their demand for higher fees based on system performance. Unless they do, we may see the demise of a competitive Macintosh market, and the Macintosh altogether.