August 28th, 1997

AUGUST 28th, 1997

([email protected])

Power Talks

Mile Rosenfelt, V.P. of Marketing for Power Computing might possibly be the most quoted man in the Mac community right now. His statement "Every constituency -- Wall Street; the financial press; the trade press; developers; and, most importantly, customers -- have all said one thing: 'We value choice.'" was quoted in over 20 different publications around the world. At a time when the entire world is paying attention to the goings on in the Mac world, Webintosh wanted to find out about the man behind much of that attention.

Pulling into the former Walmart parking lot that Power took over for administrative headquarters is not a very awe inspiring experience until one sees the red and white logo adorning the top of the building: "Power Computing." I arrived at 9:18AM on Tuesday, August 19th for my 9:00AM interview with Mike Rosenfelt. Tape recorder and notebook in hand, I am invited to sit down on the comfortable couches in the modest lobby. Within 5 hours of my departure, the news of Joel Kocher's resignation was rocking the Mac world. It was about an hour after that when I found out myself. Timing is everything.

Sitting on the couch, I listened to the people who were arriving to work. I expected to see and hear worried faces and voices depressed about the licensing crisis. Instead I was treated to such hot tidbits of gossip such as "...and did you see what she was wearing?" and "I don't know? Who else is coming to the party?" Not the sound of people worried about the end of their company. Maybe they know something we don't?

At 9:30, Mike comes around the corner looking for me. I am shown into a modest meeting room (the entire impression Power Computing gives is one of modesty). Mike Rosenfelt is the Vice President of Marketing at Power Computing. He appears to be about 10 years younger than he surely is and he has the energy of someone 10 years younger than that. He speaks with the kind of energy usually found only in the truly driven. Words tumble from him in a seeming attempt to make room for those that follow.

He tells a story concerning Joel Kocher's introduction to Macintosh that ends with the conclusion "a few weeks later Joel told me that his Dell's (PCs) were out in the garage." Such anecdotes coupled with a deft introduction to Bill Goins (the Director of the Mac Classic, among other things, while at Apple), do an excellent job of making a visiting journalist feel at home.

Listening to Mike, it soon becomes clear where much of the perceived attitude from Power Computing comes from. He likes Macs and he likes his job. He also likes talking about Macs. We got along fine.

Bryan Chaffin: A lot has been happening in the last few years. For the first time in years, the Mac Yea-sayers have outnumbered the Mac nay-sayers, even in the mainstream press. How do you view the Mac world right now.

Mike Rosenfelt: There are a lot of great things happening in the Mac market today. Let's start with the news from Boston last week. The announcement of the new board of directors at Apple Computer was a phenomenal announcement. Jerry York, former CFO of Chrysler and IBM is no nonsense, incredibly respected, a very big coup. Garreth Chang, the whole board. It's a Board with experience, respected, and it's very, very credible, and that's great news.

Number 2, the deal with Microsoft. Whether you like it or not, it does a number of things that are very, very positive for Apple. The least of which is that it focuses world attention on Apple and says "Hey! We're not dead!" It says, number 2, that on the software development side that Microsoft is committed to making or keeping pace in terms of day to day release of Office which is an important application for the Mac market. It kind of brings back Apple into the world where they have not been peripheralized. In other words, they are important and people recognize that. You can get into the nuances of whether or not [the accord concerning] the Java environment [is good] and whether or not IE (Microsoft Internet Explorer) should be the default browser, but the [agreement with Microsoft] is good news.

And then more importantly, what we see, you know from logic and Boston and the actions of the last two weeks is that Apple has become much more focused. They are focused on their core key markets which include desktop publishing, graphics and prepress, and secondarily the education market, and that's great. Apple is recognizing that they can't, nor should they be, all things to all people, and that's important. Apple is getting focused in terms of the way they are dealing with sabbaticals, severance and all those issues.

So the Mac market is showing some fantastic signs of life. Mac OS 8 is selling better than expected. It's a great piece of software. It's more stable, the multi-threaded finder is cool. It's an important market and at least there's movement, and I think that's important. In other words, as opposed to the past when there's been lethargy.

So that's the bright side. New systems from Apple are stronger than ever before [like] the new 9600/350. A lot of good news. Apple has been more competitive in terms of price/performance. Apple is being more competitive in terms of bringing product to market.

The bad news right now is that there is this single crucial issue hanging over everyone's head. And that's whether or not Apple is entertaining a reversal of its licensing agreements.

BC: Talking about Mac OS 8, have you used it?

MR: Yeah, absolutely.

BC: Do you like it?

MR: Oh yeah. Yeah, Mac OS 8 is cool. It was delivered on time. It's obviously more stable. There are features about it that are very, very excellent. It's an important upgrade. For what it's worth, people should go out and buy it.

BC: You said that Apple's systems were now stronger than they had been. Do you think that Power and the other cloners deserve any of the credit for that?

MR: The 9600 series based on the Mach 5, which is the shrunken 604e, are cool systems. Apple's bringing out systems, faster, that are more competitively priced, not only against the clones but also against Wintel, than ever before. The new systems are strong, they're competitive. It's good news that now customers have lots of choice. The high end systems are strong. The notebooks, with the 3400 and now with the 2400 (the Comet) coming to market... Let's put it this way, the Mac market is at a great juncture if you're a big hardware fan. The road map to the underlying microprocessor has never been stronger. So you're going to see, hopefully, a slew of great products from multiple companies over the next 6-9 months, both in the desktop, server, and portable space that use these new PowerPC technologies. Particularly the new PowerPC 750, code named Arthur, that are absolutely fantastic. It's a great time to be a Mac fan. Again, more choice than ever before.

So the question was can Power claim some of the credit? Yeah, I think clearly. No longer can Apple afford to leave processor performance on the table saying "We'll get to it next year" because you have competition. The competition says "Hey, we're going to go out and use the latest-greatest microprocessor. Our move to the PowerPC 750 at Macworld is very analogous, for example, to Compaq's move in 1983 to the 386. There is a certain sect of customers who always want the latest-greatest products, and if Apple was unwilling or not wanting or unable to deliver that, hey, it's good for the marketplace that they can go somewhere else.

Yeah, we clearly have been one of the major reasons why Apple has become more competitive. Not just in terms of products to market but also the way they handled going to direct/non direct. That's good, competition is good. It's a fundamental truth. It's not pretty necessarily, and it forces you to get competitive or it'll kill you. Long term, if you survive, you become a better company or person for it. That works both ways. That means Apple challenging Power, Motorola challenging Power, Power challenging Motorola, but ultimately what emerges is better product, better service, better quality, better support, better price/performance. The ultimate victor is the customer. That's something that's real important.

I think over the last two years, and the deeper question you are asking, that while Power deserves some credit, licensing has been a bright spot over the last year and a half. The past two years have been tumultuous for Apple, a time when people are clearly leaving the platform, when people are writing off Apple Computer, and I think Power brought a certain spark to the market. The Fight Back For The Mac campaign, and other things over the past year and a half shows that we are important to the market. And I don't ever want anything, no matter what happens, to diminish that. We came in, we got in people's faces, we were relatively flamboyant about it. But we gave, hopefully, Mac lovers ammunition with which to stay Mac lovers. Meaning great products that met or beat comparative Wintel products, and a tonality in our voice when we said "Let's Kick Intel's Ass" to "Fight Back For The Mac" to "You can take my Mac when you pry my Mac from my cold dead fingers." We enjoyed doing that and that's important too.

BC: Those were some absolutely great campaigns. For instance the whole "Fight Back For The Mac" as you mentioned and also the "You Can Pry My Mouse From My Cold Dead Fingers." What was the inspiration for that? Were you behind it?

MR: {sheepish smirk} Yeah, I wrote them. It was probably the inspiration of too many late nights and too much Diet Coke. {laughs} They were done at a time and a place when the Mac market was at an emotional low. The reason why I think they were so successful is because they were true. They struck an emotionally resonant chord. At the time when we wrote "Let's Kick Intel's Ass!", it was me and a guy from BAM! advertising here locally, Mike Bevel. We're all Mac fans. When it's all said and done, no matter what happens with licensing, we're Mac fans. not necessarily Apple fans all the time, but the Mac OS is something good, fundamentally good. At the time, like I said earlier, it was hard to be a Mac fan. You couldn't open a paper without reading about the demise of Apple, in Business Week it was "The Fall Of An American Icon." This is the whole thing that spawned evangelists, there are good things. The press was on a pile-on mentality, and it was very negative. So "Let's Kick Intel's Ass!" which was the first one, was a "Let's call it what it is. We're in a war. Let's go fight it. Let's get vocal about it." Frank Kassik, who is the artist behind all those posters, was our former college roommate here in Austin from a long time ago. He moved to San Francisco and got very famous doing Rolling Stones stuff, Lollapalooza stuff. We saw this image. I guess he apparently had borrowed heavily from Slugo. We turned him into an anarchist and we wanted to have some fun with it. That was the first campaign.

Then at Seybold, we wanted something that was sort of patriotic, something stirring. Again it was true, "You can take my Mac when you pry my cold dead fingers from my mouse." That's how people feel about Macintosh. That's what Steve Jobs was talking about in Boston. No matter what you think about Apple Computer today, the Apple brand and the Mac brand is transcendent. It's one of the greatest consumer brands in history. It's up there with the Nikes and the Cokes. No other computer maker, be it Compaq, Dell, or IBM, they never generated that much emotional resonance. You can't have it both ways, but there is an aspect of the Mac that is a religion. That's valuable if channeled and used properly. The reason why we like those campaigns so much is that they were true. We felt it and we were living it.

BC: We were talking about the Fight Back For The Mac campaign. That has recently been replaced with Beat The Machine. What's that about?

MR: Beat The Machine is sort of the evolution of that campaign. Beat The Machine is relatively open, we want people to read whatever they want into it. It's kind of analogous to Nike's "Just Do It." For us, we are a very different kind of company. We're a company that literally just 22-24 months ago was Steve Khang and myself. We've gone to 1,500 employees. We're about beating the machine, beating the system, beating the status quo. I'm not interested in the status quo, I'm interested in the status go. I'm interested in doing things differently. There are those who are absolutely happy with the status quo. That's not who we are or who we want to talk to. We are not going to be all things to all people. Beat The Machine is about beating things that hold you back. It's about beating the system. It's about leveraging technology and tools so you can win. The sub-campaign is "If you want to win, work with winners, people who think like you, people who get it." I'm not so sure we get it all the time, it's just a different way of attacking issues. That's my interpretation, but a lot of people have others. For some people, Beat The Machine means beating Apple, for others it means beating Wintel.

BC: How will it be marketed?

MR: It will be comprehensive in terms of an integrated marketing campaign. You'll see it in print. You'll see it in the Mac books, you'll also see it in the PC books over the next 60 days. You'll see it online, both in terms of the Home Page and you'll see an online campaign break over the next 90 days.

We've also got three commercials. We cut three 30 second TV spots at MatchFrame that I think are pretty strong. They debuted on our video wall at Macworld in Boston. You'll see it there, bumper stickers, t-shirts. It's kind of a grass roots campaign.

BC: Where will the TV ads be shown?

MR: We haven't made a media buy yet, but the intent is that there are a couple of things launching over the next couple of months including ZDTV, which is a 24 hour computer network, things like MSNBC. They will be very vertical. In other words they won't be in Super Bowl proportions, but they're kind of cool spots.

BC: At the beginning of calendar 1997, Mac clone makers such as Power saw some impressive sales increases in terms of year over year sales, PC market share, and Mac market share. The numbers recently released by Dataquest for the previous quarter show that all three of these same categories saw significant decreases. Power in particular saw a 16% decrease in units shipped this quarter over last quarter. What do you attribute this to?

MR: Power doesn't report its numbers to either Dataquest or IDC, so those are estimates. For the record, Power's unit sales increased last quarter over the previous quarter. In fact, last quarter had a record number of shipments in terms of volume. So our sales have gone up in terms of units. Revenues grew last quarter, but not at the rate that you would have expected, in terms of unit shipments, only because we saw margin compression and price compression as we were moving out systems to make room for new systems. The numbers are up.

BC: How has the PowerCenter Pro performed for you?

MR: The PowerTower Pro 225 was introduced in August of '96 at Macworld Boston one year ago. It went phenomenally well. Besides winning Product Of The Year, it appeared on the cover of both Macworld and MacUser. It couldn't get better than that. It was a great product.

The PowerCenter Pro was a whole different thing. Early on, I and Bill (Goins) realized there was something very cool about this product. It was the "high end for the rest of us." Introducing $5,000 systems that are wickedly fast is cool, but it only touches a small portion at the top of the pyramid. The PowerCenter Pro is a system that a lot of people can afford to touch and the result has been phenomenal. Not just because it is a fast 604e microprocessor, it has a fast SCSI, built in 2D and 3D accelerated video. It's hard not to buy it. It's hard to buy any other system on the market, be it high end or low end. At $2,000 to $3,000, it's a great deal.

BC: Are you familiar with an editorial called Power Failure recently appearing on Apple Recon?

MR: Yes

BC: Did you read it?

MR: Yeah, and my response to it is up online already. The last couple of days, the last week, the rumor mill has been in overdrive. Again, Apple Recon is a valuable site. There are other sites that are less valuable. The great news about the Internet is that it is an incredible amplification tool. I have been a big fan of Apple Recon, the problem is that you can take enough pieces and weave them together and it becomes a compelling story. And the nature of the Web is that you don't necessarily remember where you read it, but it can build enough ground swell where you begin to see a fete accompli and assume it's the truth. And the reality is that it's not.

BC: Have you read Atlas Shrugged?

MR: Yes.

BC: What you're describing is analogous to events in that book.

MR: Yeah. {laughs}

BC: Apple has accused clone makers of not trying to grow the market, saying that they are only interested in cannibalizing it. Steve Jobs has gone as far as saying that some cloners are nothing more than leeches. What is your response to that?

MR: It's simply not the case. Let me give you the history. When we started the company, we thought from day one that our growth would come from two places. Either we would grow with incremental market share to Apple, through verticals, or all our growth would come from cannibalization. So we thought we were very clear going in that our growth would come from people who wanted to pay less and buy a comparable system. What we didn't anticipate when we signed the licensing agreement in December of '94 was that we were about to enter one of Apple's darkest periods in terms of bad news. A large share of our growth has come not from market share growth or necessarily cannibalization, but what we call market share preservation. Customers who were clearly leaving the platform both single end users and companies. They stayed on the Mac platform. So we think we did much to buffer the platform and keep those customers happy and loyal and vociferously loyal to Apple. There have been other instances where we have pushed the market in terms of verticals. We clearly have pushed the platform. I think we have helped the platform. Our goal isn't to be lecherous. Power absolutely desperately needs Apple not only to survive long term but to prosper long term. They are the mother ship. We need to build a win-win profitable relationship that makes sense and we're willing to do that.

BC: There have been so many conflicting reports regarding why Mac OS licensing agreements have not been signed by with Apple by the various cloners. Most Mac users simply do not know what to think anymore. For the record, can you tell our readers what the issues are according to Power?

MR: One simple issue: Is Apple Computer seriously entertaining reversing their policy on being committed to an open Mac OS platform and continuing the licensing of the OS. This is not an issue about money -- it's an issue about preserving customer choice, freedom and doing what's best for the Mac OS platform. Apple must be successful long term but it clearly needs partners to fight the battle with -- not against.

BC: Are the talks continuing?

MR: The talks continue. Power Computing is hopeful that we can reach an amicable and positive win-win relationship with Apple Computer.

Bryan Chaffin ([email protected])