Motorola pulled out of the Macintosh clone market at a cost of $95 million on Thursday after failing to come to terms with Apple?s new licensing policy, leaving some users openly criticising the strategy being put in place by Apple?s acting chief executive Steve Jobs.
Silicon Valley rumours have been rife in recent weeks that Jobs tough stance on curbing the Mac clone market would lead to the breakdown of relations between Apple and its PowerPC consortium partners, Motorola and IBM. The rumours were given added weight last week when Apple bought out its biggest clone partner, Power Computing.
At lunchtime on Thursday came confirmation from Motorola that it would cease production of its StarMax range of Mac clones with effect from the end of this year. In a statement the company openly blamed the Jobs-inspired campaign to wind down the clone market which has meant that Motorola could not license MacOS 8.0.
The Motorola statement said that negotiations had been underway with the old Apple management under ousted CEO Gil Amelio since February and that ?essential agreement? had been reached between the two companies in June. But then Amelio was removed and an interim management team under Jobs was out in place with a mission to shut out the clone makers.
Joe Giglielmi, general manager of Motorola Computer Group, said: "This announcement brings to an end out effort to reach agreement with Apple on terms that would have supported our continued MacOS investments."
The decision to pull out of the Mac market will cost Motorola. Its third quarter results, due to be released on 6 October, will carry a $95 million charge to cover the withdrawal. The company has pledged to honour all warranties to StarMax customers.
Apple, Motorola and IBM have been working partners since 1991 when they teamed up against the Wintel axis in a bid to develop a new generation of processors and operating systems. All eyes are now on IBM, which has reportedly also given up its efforts to reach agreement on licensing MacOS.
The collapse of the Motorola tie-up has left some Mac users openly questioning what Jobs strategy is? Can Apple really afford to break away from such powerful allies in favour of what many among the Mac faithful see as a deal with the devil in the shape of Apple?s recent technology agreement with Microsoft?
On Thursday the Mac bulletin boards were filled with confused and angry users. One wrote: "Jobs is killing the Mac. He doesn?t care. Don?t forget he got the boot years ago and he?s big friends with [Oracle CEO] Larry Ellison. How can you get out of licensing, PowerPCs, alliances with IBM and Motorola, go to bed with Microsoft and still think you?ll succeed.
"The bottom line is that we have all been taken for one big ride. All our investments in hardware, software and training are being flushed in the sewage because Jobs says the PC wars are over and Microsoft won long ago. It?s not about the PC wars you *****, it?s about choice!"
Another raged: "With Motorola out of the Mac clone business, this really smells like the death of Apple?Apple must be really stupid to kill off the clone business! Let?s get rid of Steve Jobs!"
Many observers have commented that Apple got into the licensing game too late. Instead of creating a clone industry in 1993, it should have got into licensing in the mid to late 1980s. Had it done so, argue some commentors, the Mac OS might be the standard today rather than Windows.
Following the announcement of the Power Computing acquisition last week, Apple executives dismissed this speculation as "hypothetical and really academic".
There can be no doubt that the cloning clampdown is being driven by Jobs. In a recent phone call to the publishers of the MacInTouch Web site, he admitted that the cloners had helped to slow down a potential migration away from the Mac by users, but argued that Apple had to clamp down on its licensing policy in order to ensure a return to profitability.
The terms of the licensing agreement were undoubtedy unfavourable to Apple. For example, a sale of a $3,000 system would yield a clone maker a gross margin of 25 per cent and only around $50 for the OS licence, but would only generate $750 for Apple in terms of gross profit.
This situation might have been tolerable had the clone market been an expansionary one, but Apple insists that 99 per cent of clone maker sales went to the exisiting Apple customer base. In practice, every time a licensee shipped a clone, Apple subsidised that clone to the tune of several hundred dollars.
Apple?s explanation for tying itself into such an economically unviable contract is that in order to attract licencees at a time when Windows had already become the dominant desktop operating system, Apple had to offer terms which it knew were not positive. Had the platform expanded as had been hoped, the terms could have been adjusted over time.
Jobs is prepared to consider some forms of licensing as long as they meet Apple?s definition of expansionary. One example that was given in the post Power takeover briefing was that of a licensee which planned to focus on a geographic region in which Apple does not have a strong position. He is not however ready to subsidise competition against Apple.
But there will be price to pay for this latest policy reversal by Jobs. Apple?s recent 10Q statement to the US Securities and Exchange Commission contains the following: "[Apple?s] ability to produce and market competitive products is dependent on the ability of IBM and Motorola?to supply?in adequate numbers microprocessors."
It goes on: "The desire of IBM and Motorola to continue producing these microprocessors may be influenced by Microsoft?s decision not to adapt Windows NT to run on the PowerPC microprocessor?The Microsoft relationship [with Apple] may have a an adverse effect on [Apple?s] relationship with other partners."
While the industry waits to see how Jobs?s gamble will pay off - he has asked for 90 days to complete all the changes he has up his sleeve - users appeared to be in a state of shock this week. "As a long time Mac and Apple fan, it?s distressing to see the way the Mac clone world and Macs themselves are crumbling," wrote one UK user. "Jobs may have invented the Macintosh, but it?s my belief that he?ll kill it too."
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