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Licensing Deals

Repeat after me -- "What is more likely?".

By:David K. Every
©Copyright 1999

People are panicking over a rumor that Apple is canceling Mac OS Licensing (Hardware and Software).

Scott Stevenson has an excellent article titled Rumors - check it out... I just wanted to add my 2 cents on the Licensing Situation.

I say before you panic you should ask yourself the following question --

What is more likely?


In the case of Apple, what is most likely? -

A) Apple has lost their mind and is going to kill clones because Jobs is a loose cannon with more ego than brains?

B) Something much milder is happening. Apple is playing hardball with negotiating, the cloners are leaking to the press extreme (biased) versions to generate sympathy and help their positions (negotiations), and the press is exaggerating the stories because it makes good news, and sells papers, gets hits, and gets attention?

This is not saying that the rumors are not true. But how true?

Some background

Jobs does seem to be making decisions in Apple. Jobs does tend to be a "take charge" kinda guy (sort of an understatement -- some would say megalomaniac). But Jobs is also a very gutsy type that would threaten to cancel all cloning as a way to get the cloners to think long and hard about some things, like -- "WHAT IS IN LICENSING FOR APPLE?!" That is not to say that would be a bluff either, or it will not happen. But if you were having hard negotiations and couldn't make the other side see your point, getting acceptance to cancel all clones (from the board of directors) would be a great way to scare the living crap out of the cloners, would remind them of their place, and would be an excellent negotiating chip!

Would it be legal?

At first it sounds absurd. But don't fall into the "it couldn't happen" camp, without thinking about it.

Could Apple cancel PPCP and Mac OS 8 licensing? I think legally the answer is likely to be - YES! Apple licensed System 7 and some motherboard designs (Tanzania, Tsunami, Alchemy, etc.). Mac OS 8 was not the agreement, PPCP is not one of those designs, 750's are not rated processors. Apple probably can pull back, especially if they show they tried to negotiate in good faith, and the cloners did not live up to their part of the agreement (trying to expand the Mac marketplace).

I think it would be a protracted legal battle, and (as usual) only the lawyers would really win. If it goes to court, then the Mac will be hurt -- seriously. But I do think that Apple would win their desired goals -- if their goals are killing clones (or harming them seriously).

So it is "not in anyone's interests" to fight it out in court. Power Computing and Motorola are talking tough -- but what are they going to do about support in the mean time? It is not going to help their sales any! Even if they don't lose, and Apple is forced to license, Apple will probably win more on the terms of the licensing (money) -- and Apple will have caused a delay in licensing, that would give them time to finish the motherboard designs that would make them "cream of the crop", for a while. So it would still meat Apple's short term goals.

So it is possible.

So what are we left with?

There are many reasons for it to happen (as much as I hope it won't). The cloners have NOT lived up to their part of the bargain. The cloners have cherry picked Apple's markets. Jobs does have a history of having an amazingly large ego, and is absolutely ruthless to anyone who gets in his way -- the cloners may be in his way and a thorn in his ego. Apple is behind the power curve with many of their machines, and can't get the quantity of CPU's they need -- so the nimble (see small) companies can hurt them (and have been).

YET -- Despite all the evidence that Apple may be pulling clones, it still just doesn't make much sense for them to do so at this point (at least not permanently). Motorola is still their major chip supplier. It makes more sense that this is to scare -- it does make a lot of sense for Apple to negotiate hard NOW (before MacWorld and PPCP machines are released and the Genie is out of the bottle)! It also makes sense to leak big stories now to get the presses eyes on Apple. It makes sense for Motorola and Power Computing to over exaggerate their stories to generate sympathy. It makes sense for the press to exaggerate the stories for attention. But most of all, it makes sense for Apple to keep allowing clones, but to guarantee that it is profitable for them to do so!

Jobs called the cloners "leeches" -- they are. But they also give something back - Mind share (not single source, open design) and more choice for customers. Is Steve Jobs so stupid or immature that he can't see that?! Some say "yes" and that he has been that way in the past. While there is some evidence for that, I am not so sure. Even if he did, I can't imagine the remaining board members have their heads that far up their back-sides, or that the new ones will as well, that they would let this happen (long term). Maybe as a delaying tactic or negotiating ploy -- but long term?!? Then even if they do, there is a large chance that Motorola or IBM or the cloners en mass would just buy Apple and do what THEY wanted with it.


People are not always reasonable. So even when you use the "more reasonable" yard-stick, they can still surprise you. But it seems more sensible for your own sanity, to not run off on every wild theory that some reporter puts out there. Take a breath, think about what is most likely, judge accordingly, weight the likely strengths and weaknesses of each decision.

So don't get your panties in a bunch over some hype -- wait for SERIOUS conformation! Don't become a tool of the irrational, don't cave to blind (and dumb) emotion -- collect the facts and make informed decisions, and be patient. We will only need to wait until Jobs Keynote address on Wednesday.

8/2/97 dke

REMEMBER: I personally do not want Apple to stop cloning. I think it will harm Apple and MINDSHARE. I will make a stink if Apple does follow this path, and think we all should voice our opinions! (Even now). I'm just not going to panic based on extreme sounding rumors, especially with the recent history of the rumor mill (see presses accuracy) of late.

I am also not going to threaten Apple, nor become a tool for cloners negotiation tactics.

There is a time to be nice, and a time to be "not so nice". We have not reached the latter time (IMHO). If that time ever comes (time to be "not so nice"), then I think Apple will quickly realize that it needs its customer base! But wait until the time is right!

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

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