Apple must clone itself to survive, analysts say

June 06, 1994|By Knight-Ridder News Service

SAN JOSE, Calif. -- Apple Computer Inc. is running out of time to mount a serious challenge to the potent Microsoft-Intel personal computer and should move as quickly as possible to create a Macintosh "clone" market, according to several analysts following the company's deepening troubles.

Although Apple's overall share of the worldwide computer market has grown slightly in each of the past three years, its gains are not coming at the expense of computers with Intel Corp. chips running Microsoft Corp.'s Windows, by far the most popular models in the market. Instead, Apple has profited from the demise of other manufacturers such as Commodore International Ltd. and captured some of the evaporating DOS market, analysts said.

Opportunities to grow without directly confronting the Windows juggernaut are rapidly dwindling, however. Even its flagship product, the Power Macintosh personal computer, hasn't changed that. After an initial rush of orders, sales have throttled back in the past month.

Apple's only real chance to meet its goal of doubling the Macintosh's market share to 20 percent, analysts said, is to adopt quickly the major strength of the Intel-Microsoft combination: Create a marketplace of Macintosh clones by licensing key technologies to other manufacturers.

Apple has considered that possibility on and off for nearly a decade, albeit with little enthusiasm until the past few months. In March, Chief Executive Michael Spindler pledged to license the Power Macintosh within a year. But analysts said the company hasn't that much time to wait before the Macintosh platform finds itself in a state of permanent contraction.

"The question is, will they become the Betamax of the PC industry?" said Kimball Brown, an analyst for Dataquest Inc.

To avoid the fate of that home video format, which like the Macintosh was considered technically superior to its rival but controlled by just one company, Apple must move quickly to answer competitive pressures. Microsoft Chairman Bill Gates promised his company will deliver the next version of Windows, known as Chicago, by year-end. The product is expected to narrow the gap between Windows and Macintosh.

Intel is also likely to drop the price of the Pentium microprocessor over the same period, cheapening high-performance Windows computers.

Analysts insist licensing the Macintosh, and soon, is the key to the company's survival, even if it means a marked drop in revenue and cutting back its work force.

Apple said it is pursuing the idea but provided few details.

"We continue to have a lot of interest in licensing and are in discussions with a lot of folks," said Apple spokeswoman Betty Taylor. "And we want to do it in a way that will increase share."

Apple's main weapon is the Power Macintosh, which jettisons the Macintosh's traditional Motorola Inc. microprocessor "brains" in favor of the PowerPC chip co-developed by Apple, IBM and Motorola.

If Apple does license the Macintosh, and in such a way that it keeps less than half the overall market, it has a good chance of growing the overall market, Mr. Brown said.

More powerful versions of the PowerPC chip are nearing the market, and their prices will be far lower than competing Pentiums.

In theory, Power Macintosh clones could be priced very attractively, offer solid performance with software tailored for the machine and steal customers from Microsoft and Intel.

But Apple faces many months of harsh trial either way.

"It's going to get a lot worse before it gets better," Mr. Brown said.

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