August 30th, 1997

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License To Kill?
August 30th, 1997

by: Brad Hutchings ([email protected])

A few days ago, Dan Hughes asked me if I'd be interested in giving one developer's view of the licensing situation. As a licensee of another Apple technology, ODF, I thought it was in my best interest to just keep my mouth shut. Several of Apple's best employees went to bat for me and other developers to make that possible. Apple's management signed off on that licensing idea. Chastising Apple for its dealings in another licensing situation would have no positive effects for my business. So that's not what I'm going to do here. If you want to read a Mac developer bagging on Apple, I'd suggest heading over to DaveNet. Of course, he does Windows now, so why should you care?

Now a confession. I ordered a PowerBook 1400 today. It's a good machine, the price was right, and its new owner will spend a lot of quality time with it. That is the point of buying a computer in general, or a specific brand in particular: to use it. To the extent that the price of the machine is appropriate for its capabilities, competitive with the price of alternatives, and within your reach, you make a purchasing decision. Yeah, I know people who won't buy Coors beer for political reasons, won't buy gas from Exxon because Captain Hazelwood can't drive a boat, won't smoke Cuban cigars because they're against the law, and now, say they won't buy computers from Apple because it won't license the Mac OS. I can think of more practical reasons to avoid the first three, but not buying from Apple is suicide.

Do the math and you'll see why Apple's course of action is the only course of action in a non-expanding Mac market. Apple has $8 billion dollars in annual revenue right now. Most of that revenue is hardware. To see this, assume a great year of Mac OS sales if Apple ships no hardware: 5 million clone licenses and shrinkwrap sales combined. Let's say Apple gets about $100 revenue per copy, which is a very liberal estimate. That's $500 million, or 1/16 of current annual revenues. That's why Microsoft is a smaller company than Apple in annual revenues, although it now has its fingers in 90% of the desktop market.

Power makes a legitimate claim that some of its sales that Apple calls cannibalistic were actually saves. Motorola and IBM claim that CHRP would allow clone vendors to innovate. UMAX appears to be the only clone vendor stretching the market, geographically in the Pacific rim, and below $1250 in the US. That's all well and good, but Apple cannot transform itself into Microsoft and expect to survive. Could Microsoft, or any company for that matter, endure as many failures or changes in direction as Apple has made this decade? It's the hardware revenues that rescue Apple every other quarter.

I'll close with some suggestions:

Power and Motorola: just ship the BeOS if you've already started production of your hot new machines. If you ship 250,000 such units by Christmas. Apple could turn that into $25 million in revenues by charging the new owners $100 for a copy of Mac OS 8 that runs on them. You'll be heroes, and you'll get your licenses back.

Apple: get the cloner mentality. Mac enthusiasts want fast CPUs in flimsy cases for $2500. And let other OS vendors work with your proprietary hardware. BeOS side by side with Mac OS on a PowerBook would sell a lot of hardware today to the content creation crowd.

Cloner Lobbyists: if you feel strongly about the issue, buy a clone this weekend.

Everyone else: Try OpenDoc. Buy my product.