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Radius on the Ropes

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To almost no one's surprise, signs began appearing last week that the beleaguered video and graphics company and Macintosh clone maker Radius might be on its last legs. Radius laid off nearly half of its 320 employees last week (following the layoff of 80 employees in September), and rumors have been circulating that the company - or at least its licence to manufacture Mac clones - is for sale.

According to MacWEEK, Radius is expected to announce a loss of $20 million for the fiscal quarter ended 30-Sep-95, a figure considerably higher than what had been expected. Radius executives reportedly blame the loss on declining margins for video cards and monitors, as well as insufficient supplies of its 81/110 Macintosh clone system. Radius is also suffering from lackluster sales on many of its high-end video products, including its Telecast system.

http://www.zdnet.com/~macweek/mw_11-06-95/ radius.html

Interestingly, sources indicate that Radius has manufactured as many as 10,000 machines but has sold less than 10 percent of them. Sales of Radius clones were almost certainly hurt by Apple's recent price cuts, which resulted in Radius machines being priced higher than Apple systems of similar performance. Radius prices may also have been driven up by Radius's reliance on Apple parts.

Radius still claims to be developing PCI-based Macintosh clones for early 1996, but sources indicate Radius has laid off the group responsible for developing the clones as well as specifications for two new models. Obviously, Radius still owns the plans and designs, but without key personnel and capital, eventual production seems unlikely.

In addition to recent layoffs, Radius has been hurt by an exodus of engineers and software developers, many of whom now work at Silicon Graphics and (surprise) on Macintosh development projects for Microsoft.

If the troubles at Radius stem in part from its venture into Macintosh clones, perhaps the lesson to be learned is that targeting the high end of the Macintosh market may not be good business. The wide margins at the high end of the Macintosh line are basically a thing of the past, and they need to stay that way if the Mac is going to remain competitive with other platforms. In the Intel world, clones were successful because they strove for volume rather than margin; however, presently all Macintosh clones sell to the mid-to-high end of the Macintosh world. Admittedly, that's where the companies will find users more able to take the technological step out of Apple's shadow, but if Radius's experience is any indication, it may not be possible to build a viable business model so close to Apple's core market.

 

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