Apple Computer halts cloning, kills its biggest competitor

If this doesn't stop Power Computing from complaining about Apple, nothing will. The companies announced today that Apple Computer was buying the core assets of Power Computing--until now the biggest Macintosh clone maker--for $100 million in stock. Power Computing was also the most vocal opponent of Apple's plan to stop cloning by denying licensing for the MacOS 8.0. Most news agencies are erroneously reporting that Apple has "purchased" Power Computing, but this isn't true. In fact, even Apple's own press release suggests that Apple has purchased the other company. It hasn't.

The deal calls for Apple to acquire Power's customer database, certain employees, and their existing license to the MacOS. In return, Power Computing will keep its name and will continue selling Mac-compatible machines through the end of the year. During the remaining time this year, the company will switch over to selling Windows-based personal computers.

"Power Computing has pioneered direct marketing and sales in the Macintosh market," Steve Jobs said in a release, forgetting to note that Apple had effectively ended that with this deal. "We look forward to learning from their experience and welcoming their customers back into the Apple family."

Apple has "no plans" to make bids for other clone companies. Additionally, the company will not release any new computers built by Power.

"Power Computing is gracefully bowing out of the Mac OS business, with some of our team going to Apple to work for them," said Mike Rosenfelt, a Power Computing spokesperson. "We thought it was a good way to allow Power Computing to still have an impact on the Mac market with our engineering expertise and direct-sales approach."

Power Computing officials say the company is almost ready to release their first Windows-based notebook computer, which is designed for "visual computing." The notebook will be aimed at graphics-intensive users who pay more attention to the application they are working on than the platform on which it runs, Power Computing said. They're going to have a rough go of it: The PC market knows little and cares less about Power Computing, who was a big fish in a small pond when they pushed Mac-compatibles. Now they will face serious competition from the likes of Dell, Gateway, Compaq, and others who can easily beat the smaller company's price point. It is doubtful that the scrappy Power Computing will succeed where electronics heavyweight Sony has already failed.

In any event, Apple Computer revealed in an afternoon press conference that Macintosh cloning was effectively ended today when negotiations to extend agreements with current license holders Motorola Corp., Umax Computer Corp. and IBM Corp. failed to reach agreement. This means that clone makers will not be able to buy portables or desktop machines based on the CHRP (once known as PREP) reference standard, which would have allowed Macs to be built from industry-standard parts. Furthermore, no Mac cloner will be receive a license to ship MacOS 8.0 with their machines.

"If we could have a license program that truly expanded user base and enhanced shareholder value, we would have a positive attitude toward licensing," Apple CFO Fred Anderson said. "But we have not been able to get an agreement on any program that would meet those objectives."

According to Anderson, the cloners have signed up almost no new Macintosh users, meaning that 99% of the people who purchased clone machines were established Macintosh users buying a new machine. In Apple's eyes, clones stole customers from Apple while Apple paid all of the R&D expenses.

"Every time a licensee shipped a clone, we were subsidizing that clone with several hundred dollars," said Apple's Guerrino DeLuca. "That's not competing; that's subsidizing."

Effective immediately, Apple will only renegotiate licensing deals if the clone maker agrees to target markets that Apple will not target. Folks, Mac licensing is over

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