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RE: Cloning Revisited
Response to "The Good, the Bad, and the Ugly!"


By: Bob Moriarty


I believe that people with differing opinions should be able to express them. Bob and I, have somewhat differing opinions on the cloning issue (at least in degrees).

Bob wrote an letter about Jobs -- <http://www.MacCPU.com/maccpu/letter.html>

So in the interest of fairness, and debate -- and to explore all sides of the issue, I want Bob's side to be heard. I think it makes a good contrast to my own.~ David K. Every


In your "The Good, the bad and the ugly piece," you comment on some issues I feel strongly about and I would like to discuss a couple of them.

Under "The Good" you say -

Apple acquired Power Computing's assets for a song. For $100 million. Apple got a company that was selling probably half a $Billion per year. By my measure, that is a bargain and good for Apple (and Macs).

Other than the fact you were totally wrong and are repeating a quarter truth, I liked the piece.

Power Computing made a great deal. They sold a worthless piece of paper (the agreement between them and Apple which Steve Jobs failed to comply with) and a 200,000 name data base to Apple Computer for $100 million. Apple bought no plant and equipment, no patents of any value, no future sales, nothing. Apple didn't buy any assets, period.

Just how much is an agreement with Apple worth? Ask Motorola, they don't think very much. They have spent hundreds of millions if not billions of dollars in development of the PowerPC chips and Steve Jobs seems hell bent on the destruction of the Mac ecosystem and the very best anyone can hope for is that the vaporware up his sleeve is really nifty.

Motorola may end up with a CPU three times faster than any Intel chip and no demand, thanks to Steve Jobs.

But what about the right to hire Power Computing key individuals? If you believe that Power Computing was stealing customers that really belonged to Apple, you may well agree the right to hire people from Power Computing is worth about as much as the 200,000 name database. In that, I will agree. They are both worthless.

Employees aren't slaves. Neither are customers. Every company I have ever heard of that got tempted to think of customers as slaves soon learned otherwise. Good luck in your marketing efforts to that group, Apple. They have already voted once to leave your grasp and I have no doubt they welcome the opportunity to make their feelings clear once again. And the employees? They also have the right to say no. And I suspect more than a few key individual whose "rights" Apple acquired will make their feelings toward Apple crystal clear.

Apple paid $100 million dollars to avoid being sued by Power Computing for breech of contract. The rest was smoke and mirrors. Power Computing kept everything they need to thrive including their name and today announced a new Wintel computer. But gained more money than they could expect to make in the next four years by working. Now, that's a hell of a deal. For Power Computing.

The Bad

Customers belong to the company who does the best job of convincing them to buy the company‚s product. Period. If Apple can't convince people to buy their computers, maybe Apple needs to make some changes. At Apple.

If they convince people to buy their products, maybe they will make money. If for whatever reason they cannot, the laws of economics dictate they go out of business. Steve Jobs has done a brilliant job of convincing people that for Apple to win, everyone else, including the customer, has to lose. Bad idea Steve. This isn't a zero sum game with one clear winner and one clear loser, this is a negative sum game where everyone loses.

The Ugly

Steve Jobs has money. He has a company to fall back on. All he is at Apple is an advisor or something. Steve Jobs doesn't need Apple. And Apple doesn't need Steve Jobs.

The best quote I have heard came from a major player in the marketplace who's name I am sworn to secrecy. Hiring Steve Jobs to run Apple is like paying the babysitter who burned down your house and stole your car.

Bob Moriarty
MacCPU


My Response

Of course, no argument would be complete, without me trying to get in the last word. So here is my response to some of Bob's points.

Power Computing made a great deal. They sold a worthless piece of paper...and a 200,000 name data base to Apple Computer for $100 million. Apple bought no plant and equipment, no patents of any value, no future sales, nothing. Apple didn't buy any assets, period.

Apple bought out a competitor. They eliminated the competition. I don't like that business model, but it is somewhat valid.

If Apple only gets 25% capture rate (and some knowledge, people and other things that are valuable) then it is a good deal for Apple too. If Apple can't capture those customers back, and can't keep the employees, then it was a bad deal for Apple. We'll have to see. Apple is betting on themselves -- and that is not unreasonable.

Just how much is an agreement with Apple worth? Ask Motorola.... Steve Jobs seems hell bent on the destruction [of Apple]...

I want to get into PPCP and PowerPC chips separately. All these issues are complex -- and I am trying to keep some balance about it.

Motorola and IBM have not delivered on their promises when they first discussed the PowerPC and the CHRP / Prep platform.

  • Where is the processor twice the speed of anything Intel has at the same price? (50% faster - yes, 100% faster? depends on what you are doing -- and most achievements have been made recently).
  • Where are the IBM labeled Mac Clones?
  • Where is IBM's corporate support?
  • Where is OS/2?
  • Where is WinNT?
  • Where are the "PowerPC Inside" ads?

It seems only Apple is held accountable for changes in the terms.

Motorola may end up with a CPU three times faster than any Intel chip and no demand...

4 or 5 million/year is not exactly "no demand" (it is not exactly the best we would hope for either).

Cloners have had a couple years to grow Apple's market, and there is no proof they have done ANYTHING but pirate Apples sales, and help make Apple less financially stable. For Apple to clone, it has to be valuable to them. They don't HAVE to clone! So I understand Apple's point on that.

But what about the right to hire Power Computing key individuals?... the 200,000 name database... they are both worthless...

I disagree. I think that databases have value, and that people (or opportunities to get them) have value.

There are many people that make their livings offering either.

They don't add up to $100 Million -- but it does have value.

Apple is betting that they can make a good enough offer to keep them.

[The Customers] have already voted once to leave [Apple's] grasp and I have no doubt they welcome the opportunity to make their feelings clear once again.

And the employees? They also have the right to say no. I suspect more than a few key individual ...will make their feelings toward Apple crystal clear.

Remember, part of PCC's success is that they can do direct sales. We know that "cutting out the middleman" can reduce distribution costs (if done well). PCC did that because they could. THAT got them many customers.

So (theoretically) Apple can offer the same machines as they offer now, through direct sales, with a 10% or 15% cost reduction -- which is not that different from the savings you could get from PCC. IF all that holds true (and that is a big *IF*), then Apple stands a chance at capturing (keeping) many customers. If Apple can't, then I agree -- it was a stupid purchase. Not because of the intent, or the deal, but because Apple would be too incompetent to capitalize on the opportunity.

Basically the same goes for the employees.Many will see opportunities to do what they do well, and will go for the opportunity with Apple. Many will opt to not go! Apple bought an opportunity -- we have to wait to see if they can capitalize on it. But we shouldn't ignore the value of that opportunity.

Apple paid $100 million dollars to avoid being sued by Power Computing for breech of contract.

There certainly is an element of truth to that. So again, the deal makes sense to Apple. I don't think that was all there was to the deal -- but that is certainly a valid point.

I'm no lawyer (as I'm about to prove) -- but if PCC is selling $400 Million/Year Gross (I don't know their net), and Apple was able to prevent PCC from selling for a year or two, and was sued for breech of contract, and our state allows treble damages, and then there are the legal fees, and the PR issues of the fight -- Whew, that $100 Million certainly could be a bargain.

That isn't to say it wasn't stupid to sell a license, then buy it back for a large fortune. But if you are Apple, and you do want to stop a competitor, then it certainly could be a bargain (in the long run).

If [Apple] for whatever reason cannot [convince people to buy their product], the laws of economics dictate they go out of business.

Sure. But Apple still does not have to voluntarily clone! They can still clone and un-clone to their hearts desire. It may be stupid and annoying, but it is the law of intellectual property rights.

Steve Jobs has done a brilliant job of convincing people that for Apple to win, Everyone else, including the customer, has to lose. Bad idea Steve.

Jobs is making it hard to clone, and putting conditions on it -- But MY IMPRESSION at this time is that others can clone, with some reigns and control.

UMAX has pretty Open Cloning terms -- they just have to stay under $2000 price point. That give UMAX quite a bit of room. And Apple gets some extra revenue and a market cracked that they aren't good at (and have little interest in). Soooo, Apple wins, and not EVERYONE else had to lose.

I think Apple will continue to allow companies like Daystar to make specialty machines, and others to do the same, or in certain markets. So not everyone has to lose.

Of course PCC did lose -- and maybe Motorola. So Apple is no saint.

So we differ in degrees -- you'd call it "murdering choice," and I'd call it assaulting it.

Steve Jobs has money. He has a company to fall back on. All he is at Apple is an advisor or something. Steve Jobs doesn't need Apple. And Apple doesn't need Steve Jobs.

I can't argue with that.

Steve offers himself as a pitch man, and as a visionary. He is a very good pitch man. He is a good visionary -- the problem is that the costs of receiving those services is giving him lots of control. The costs of that control (and his other personality "quirks"), and people reactions to it (and him) could far outweigh the benefits -- but that is a separate debate, all on its own.

I am still unsure on Jobs. He has good and bad points (my opinion) -- and I am not privy to his thoughts. My concerns are that he scares me (and others) for valid reasons. His actions in the past are reasons to be scared -- his actions at present are very concerning as well (but COULD be justified -- IF he is just playing hardball, and IF all the rumors are wrong... but then again, IF the moon was made of cheese, and IF pigs could fly...). That is why he (and Apple) should explain their long term plans -- which they don't do well.

Jobs has a history with Apple -- and many of the largest mistakes in Apple's history, are because of him... but so are some of its largest successes.


I hope that Bob's response, and my response (to his response), makes you think. You may agree with one or the other of us, or neither -- but at least you have been exposed to both views.


Created: 09/10/97
Updated: 11/09/02


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