Wondering about Apple’s future in a world without Power Computing clones? Guest writer Matt Deatherage provides detailed analysis and posits that Apple is afraid to compete. Other news includes Apple plans to retain the Newton, CompuServe’s sale to WorldCom and AOL, and notes on key updates to RAM Doubler, Conflict Catcher, OneClick, and other programs for Mac OS 8 compatibility. We promise to continue our Successful Shareware series in a future issue.
TidBITS Subscription Drive — Numerous people have told us they enjoy TidBITS and redistribute it to friends or colleagues each week. Passing occasional issues along is fine, but we’d prefer regular readers join our mailing list. That way, we can have a better idea of how many people read TidBITS and better manage the hundreds of email bounces we receive (many from addresses that aren’t on our list). If you like TidBITS and want to share it with others (such as new or returning students), please tell them they can subscribe to TidBITS (for free, of course!) by sending email to <[email protected]> or by filling in the form on our home page. If they want to read an issue first, the current issue (and the last four issues) is available from our home page, and sending email to <[email protected]> always returns the current issue. Thanks for helping to spread the word about TidBITS! [ACE]
No More Newton, Inc.? The fledgling Newton, Inc. may not flutter away from the Apple nest. As we reported last Friday in TidBITS Updates, Apple now plans to retain its PDA unit, primarily because of the eMate 300. Different reports have Apple using the eMate 300 design at the core of a new series of computers for the education market or as the base for an inexpensive network computer (a system that uses the network for storage, both for applications and files). Steve Jobs has made comments about wanting to move the company in that direction, and now that Oracle CEO and network computer proponent Larry Ellison is on Apple’s board of directors, an eMate-based network computer running Java isn’t any stranger than the rest of the news coming out of Cupertino these days. [ACE]
CompuServe Split Between WorldCom and AOL — H&R Block has agreed to sell its 80 percent share in CompuServe to telecommunications giant WorldCom in a stock swap worth roughly $1.2 billion. In a separate deal, WorldCom will trade CompuServe’s consumer customers and $175 million to America Online for AOL’s ANS Communications network services division. That dollar amount is about five times the $35 million AOL paid for ANS a few years ago, as we noted back in TidBITS-254. In essence, AOL takes over CompuServe’s 2.6 million customers (AOL reportedly plans to keep the CompuServe name alive), and WorldCom adds both CompuServe’s and ANS’s networks to its existing UUNET network, creating a massive network of more than 500,000 dialup ports. AOL also signed a five-year deal making WorldCom AOL’s largest network service provider in exchange for discounts worth several hundred million dollars. An acquisition of CompuServe was inevitable and these deals appear to give each company what it wants. The effect on CompuServe customers remains to be seen. [ACE]
Aladdin Shrink-wraps ShrinkWrap 3.0 — ShrinkWrap, the popular disk image utility from shareware author Chad Magendanz (see TidBITS-339) was recently purchased by Aladdin Systems, and Aladdin has released version 3.0 as a $29.95 commercial product (upgrades cost $15). The new version operates in the background, adds native support for Apple’s DiskCopy 6.1, and improves its compression capabilities through the use of Aladdin’s StuffIt technology. Others improvements include options for RSA 40-bit encryption and binhexing, as well as the ability to perform batch operations on folders or volumes containing disk images. ShrinkWrap works on any Macintosh running System 7 or later (including Mac OS 8), though some features don’t work on the Plus. A 15-day trial version is available as a 600K download. Aladdin Systems — 408/761-6200 — 408/761-6206 (fax) — <[email protected]> [TJE]
More Successful Shareware Coming Soon — Thanks to all the news this week, we ran out of space in this issue to continue Rick Holzgrafe’s Successful Shareware article series. Don’t worry, though, it will pick up again soon. [ACE]
A number of programs have undergone recent updates in order to fix problems or tweak performance under Mac OS 8. To attempt to list every update would be madness, but in this article I list several recent updates that have caught my eye. In many cases these updates not only improve Mac OS 8 compatibility, but also add improvements of interest to System 7 users.
No Default on Default Folder Updates — St. Clair Software has been hard at work on Default Folder, a handy utility that enhances Open and Save dialog boxes with several of the features that many have come to rely on in software such as Now Utilities, which has serious problems under Mac OS 8. Any version of Default Folder starting with 2.7.4 runs under Mac OS 8, but the latest version (as of this writing) is 2.7.6. Default Folder is shareware and costs $25. English, German, and Japanese versions are available as 300K downloads.
A Bare Bones Fix — After noticing instability problems running BBEdit under Mac OS 8 on 68040-based Macintoshes with virtual memory enabled, Bare Bones Software has identified a bug in Mac OS 8. Although Bare Bones expects Apple to fix the problem in a future version of Mac OS 8, the company has released the VM 8.0 fix, an extension that corrects the problem and may improve stability for 68040-based Macs regardless of whether BBEdit is running. The download is a slim 3K in size.
Casady & Greene Catch a Conflict — Casady & Greene has released CC 4.0.3 Updater v2, which updates Conflict Catcher to version 4.0.3 and corrects a problem wherein users could accidently disable the Appearance Manager and then be unable to start their Macs. A few other minor changes don’t relate to Mac OS 8 but slightly improve the user interface. If you already ran the updater, but you downloaded it from 25-Jun-97 to 29-Jun-97, get the CC 4.0.3 Update Fixer, which corrects a few problems with that updater. CC 4.0.3 Updater v2 is about a 750K download; the Update Fixer is about 70K.
Connectix Patches RAM Doubler — Last Friday, Connectix released the RAM Doubler 2.0.2 updater. The patch solves problems relating to running RAM Doubler while mounting floppy disks on some PowerPC-based Macintoshes or while using a DOS compatibility card with Power Macintosh and Performa 61xx computers. It also makes it so the About This Computer window correctly recognizes RAM Doubler. Finally, the patch increases reliability in Netscape Navigator/Communicator and avoids a problem with an "upcoming Apple PowerBook." The patch is a 234K download.
Norton Utilities Updated — Symantec has updated four of the utilities that comprise Norton Utilities for Macintosh, each from version 3.5 to version 3.5.1. For Mac OS 8 users, the primary fix prevents Norton Disk Doctor from inaccurately reporting "incorrect Finder settings." Other fixes include Norton Disk Doctor not identifying a "b-tree records out of order" problem reported by Speed Disk, several minor Speed Disk problems, and FileSaver conflicts with "variations of PPP software." In addition, the new version of CrashGuard works better with a number of applications, especially Virtual PC and Netscape Communicator 4. Downloads are available in a number of different formats, with download sizes ranging from 500K to 1 MB.
Toasters Fly Under Mac OS — In addition to "fixing a problem where After Dark would not work with Mac OS 8," the AD 4.0.3 Updater (a 780K download) corrects problems such as the Screen Posters extension crashing on startup on some PowerPC-based Macs with 601 and 603 processors, the Password on Startup feature failing to function, the speaker volume being mistakenly cranked to the maximum setting, and freezing while rebuilding the desktop.
OneClick Clicks Up — WestCode Software’s OneClick v1.0.3 Updater updates OneClick to version 1.0.3. The new version works with the Appearance Manager and corrects problems with the OneClick menu in the menu bar under Mac OS 8 and the new zoom box on Mac OS 8 windows. The download is 176K.
The Next Best Thing to a Babble Fish — Apple has released the Language Kit Updater for Mac OS 8, software that makes eight different language kits compatible with Mac OS 8. Also, note the version of Adobe Type Manager that ships with Mac OS 8, version 4.0.2, has fixes in it for several bugs relating to Mac OS 8 and the language kits. The updater consists of two separately downloaded disk images (about 1.5 MB each); the second disk is only required for updating the Arabic Language Kit. The disk images are in Disk Copy 6.1 format.
Novell Nets New NetWare Client Software — Novell’s NetWare Client for Mac OS v5.11 fixes several problems under Mac OS 8, including not being able to log in via the Chooser when using NetWare Encryption and failure when using Open Transport and a NuBus networking card. The download is 164K and contains new versions of NetWare UAM,
NetWare File Access, MacIPX Ethernet, and NetWare Print Chooser.
Adobe Illustrates a Fix — Although I can’t identify any fixes specific to Mac OS 8, I’m including this update anyway. The Adobe Illustrator 7.0.1 Updater updates Illustrator 7.0 and fixes problems including printing Illustrator EPS images from PageMaker and QuarkXPress, opening Illustrator files saved from Illustrator 7.0 in Illustrator 6.0 format, and printing to Scitex imagesetters. The new version also adds new features including JPEG export with image mapping and a diffusion dither in the GIF export.
ObjectSupportLib — And finally, those of you who have had run-ins with ObjectSupportLib will be pleased to learn the shared library is built into the Mac OS 8 System file, so it’s safe to remove any stray copies that may be on your hard disk. I’ve heard reports of problems if Microsoft Excel attempts to use an older version that’s still on the hard disk.
I realize this article is not all-inclusive; for a more complete look at available updates, check out the Compatibility and Bugs section of MacInTouch’s Mac OS 8 Special Report.
Once again, Apple Computer has looked competition squarely in the face and, to borrow an American football metaphor, punted on third and long.
The Power of Apple’s Eye — Apple last Monday announced its acquisition of leading Mac OS clone manufacturer Power Computing’s "core assets," including the customer database, key personnel, and Power Computing’s Mac OS license. In return, the private investors who bankrolled Power Computing get $100 million in Apple common stock. That’s more than half of what Power Computing valued itself at – in late June, the company announced now-withdrawn IPO plans to sell three million shares of stock at $8 to $10 per share, out of an authorized 17,720,000 shares, giving an initial total market value of between $142 million and $177 million.
Power’s investors may think that the $100 million in Apple stock is a good deal, considering how difficult Apple was making their future business plans. Apple’s Mac OS licensing has all but ground to a halt under the xenophobic administration of Steve Jobs – and more seriously, the company has also stopped all licensing that would let clone makers design their own motherboards. Monday’s announcement is the latest sign that Apple is reliving the past, choosing any route feasible to avoid the most fundamental task of a public corporation: competition.
Chip Wars — Power Computing, although suffering some initial quality and timeliness problems, has been kicking Apple’s six-colored posterior in both performance and public opinion. Using blazingly fast state-of-the-art PowerPC chips that aren’t available in the quantities Apple needs for global manufacturing, Power Computing has built a reputation for making the fastest computers on the planet, offering 225 MHz and 250 MHz models that beat Pentium Pro speeds earlier this year. The company’s latest offerings include systems based on the new "third-generation" PowerPC 750 processor from Motorola, and preliminary results show that these systems, which start at 275 MHz, may be twice as fast as the older 250 MHz machines thanks to the incredible performance gains in the PowerPC family over the past two years, including the new chip’s advanced cache architecture.
Apple, on the other hand, has no systems ready to go using these new chips, often still referred to by the code-name Arthur. Instead, Apple’s latest systems are based on the Mach 5 PowerPC processor, the latest incarnation of the PowerPC 604e, with speeds up to 350 MHz. The Mach 5 chips are fast – faster on a per-megahertz basis in systems than the 604e chips they replace thanks to better caches – but they’re not as fast as Arthur processors, and they’re more expensive. That leaves Apple’s fastest systems, historically those with the fattest profit margins, in extreme danger of irrelevance at the hands of Apple’s own licensees.
Licensing Theory and Reality — Theoretically, Apple shouldn’t care, because licensing should be a profitable business that grows the Mac OS market and makes the platform healthier. In reality, Apple’s licensing agreements, spanning the terms of the last two CEOs (Michael Spindler and Gil Amelio), give Apple fees based only on Apple’s cost to produce and support the Mac OS, not based on the value it has to the clone makers. Apple was apparently trying to match the relatively low per-computer charges that Microsoft charges for Windows, but in the process Apple virtually guaranteed that only by expanding the Mac OS market could licensing be profitable. If a clone manufacturer went after existing Apple customers, instead of into the areas Apple couldn’t reach but felt other companies might, then the lost hardware profits would more than offset the licensing revenue.
To Apple’s ongoing annoyance, this is in large part what Power Computing was doing. In an effort to build a reputation, Power Computing focused its marketing efforts on existing Apple and Macintosh customers. Once Apple had done the relatively difficult job of selling customers on the Mac OS instead of Windows, Power Computing went for the jugular and convinced these folks to buy the Mac OS systems from them instead of Apple – especially the high-end systems, using those speedy chips Apple couldn’t get in sufficient quantities. Four months ago, Apple was selling 180 MHz machines with 512K Level 2 caches for more than Power Computing was selling 210 MHz machines with 1 MB of Level 2 cache.
With Apple losing money faster than ice melts in an Austin summer, the company had to take remedial steps. Apple’s average unit price hovers around $2,000, and the company enjoys a relatively steady 20 percent profit margin, so each sale lost to licensing cost around $400 in normal revenue (complete with all the risks, like building a bunch of machines and hoping someone buys them) and brought in around $50 of risk-free revenue (and perhaps three times that much in hardware royalties for motherboard licensing fees). It would seem obvious that licensing would never be as profitable as Apple’s own hardware sales, so the logical course of action for Apple would be to produce highly competitive machines that forced clone manufacturers scramble to keep up, while boosting licensing fees enough to at least accommodate cannibalized sales.
What About Competition? That, of course, is the logical way, not the Apple way. For a while, the two coincided under the reign of recently deposed CEO Gil Amelio. In a recent interview with MacAddict magazine, Amelio explained one reason he expressed support for Mac OS licensing was that Apple had to learn to compete. "Apple does not know how to compete. It knows how to innovate, but it doesn’t know how to compete, and they’re different. … [Apple’s] things are great, but in the final analysis, if you can’t compete, you can’t make it attractive in the marketplace, and if you can’t have people lusting after buying it, it doesn’t matter." Amelio intended that the company would learn, by fire if necessary, how business actually works.
Time and again, Apple’s products have been challenged by similar entries from competitors, and time and again Apple has either lost the battle or refused to show up for the fight. When Microsoft’s Windows brought many of the graphical Macintosh advantages to the DOS-based market for the first time, Apple focused less on improving than they did on avoiding competition by suing Microsoft, an ultimately unsuccessful strategy. When Windows 95 blurred the lines further, Apple responded with smug "Been there, done that" ads that did little to encourage any new computer purchaser to buck the Windows trend. Apple’s latest effort, Mac OS 8, includes "innovations" like pop-up windows, but those same windows were awarded patent protection for Apple four years before. A company that knows how to compete, as Amelio puts it, would not have waited so long to reap the benefits of innovation.
It’s easy to see why Amelio was asked in July to resign as Apple’s CEO and Chairman. The man makes far too much sense to survive in Apple management. In a late Monday press conference discussing the Power Computing asset purchase, Apple CFO and stand-in leader, Fred Anderson, made it clear that licensing is over as far as Apple is concerned. The company will honor existing agreements for Mac OS 7.6 (and clone manufacturers PowerTools and Umax have renegotiated licenses so they can distribute Mac OS 8) and existing motherboard designs that Apple has chosen to license. Apple has no intention of authorizing system manufacturers to use the CHRP specification to, for the first time, design their own motherboards instead of using Apple’s designs. Apple doesn’t even intend to release a version of the Mac OS capable of running on CHRP machines. The company insists that licensing was unprofitable, which is clearly the case, but rather than face the competitive market head on, they’re ending the game so they can declare themselves the winners.
Apple sees it differently. Executive vice-president of marketing Guerrino de Luca told the press conference that licensees were not expanding the Mac OS market and were not paying fees high enough to cover Apple’s entire cost of producing and marketing the Mac OS, including R&D, developer support and platform marketing. However, de Luca bristled at the suggestion that Apple is once again backing away from competition. "If you look at the economic consideration, every time a licensee shipped a clone, we were subsidizing that clone with several hundred dollars. We want to, and we will, compete fiercely in the marketplace (and in the PC marketplace as well), but we’re not planning to subsidize anybody in this competitive space. Actually, it is because we want to be able to compete that we’re taking this position."
The idea that Apple is subsidizing clone makers by charging low fees comes from looking in the mirror through rose-colored glasses. Apple is only subsidizing Mac OS licensees in that clone sales earn less for the company than Apple hardware sales, but there is no guarantee that the inability to purchase a Mac OS clone will return a customer to Apple: there are reasons why those customers left in the first place. Arrogantly, Apple is implying that Power Computing’s direct marketing and build-to-order sales system that are mainly responsible for defections from the mother ship; Apple discounts the idea that the well-received Power Computing machines had anything to do with it, and confirms as much when they say they have no plans to bring any in-progress Power Computing products to market.
Anderson says that Power Computing’s database of 200,000 Mac OS customers is a key asset in the purchase, and Apple expects to get a fair number of those purchasers back as customers. Yet Anderson also said that licensing was not expanding the Mac OS market, and that "99 percent" of clone purchasers were former Apple customers. If that’s the case, Apple already has their names, but hasn’t been building products strong enough to attract their sales dollars; purchasing updated name and address listings isn’t likely to change this situation.
The Source of the Problem — The real motive behind all this is far more suspect, and far less encouraging for Apple aficionados and Macintosh users. Henry Norr of MacWEEK magazine pointed out statements, on the record, that Apple had in June reached financial agreements on Mac OS 8 and CHRP licensing fees with Power Computing and other major clone makers, to be finalized by 28-Sep-97. These are the same agreements that Anderson and de Luca said Monday could not be achieved while still providing "shareholder value" to Apple. Norr asked what changed between June and July to make these term sheet agreements unprofitable, and Anderson confirmed most rumors on the subject: it was a "change in leadership."
Read that as "Steve Jobs." The Apple co-founder is now a "special advisor" to the board of directors, where he also has a seat, and is spending up to half his time setting directions and strategies for Apple, even though he turned down the job of Chairman and CEO. Jobs has reason to avoid the captain’s chair – with his current arrangement, he’s effectively running the show without a title and can exercise power without any responsibility… or any blame in case his vintage-1982 strategies turn sour. Jobs was always against licensing the Mac OS and was opposed even to having expansion slots in the machines.
Jobs’s product vision is a matter of fact – he foresaw the entire personal computer business; he foresaw the utility of a graphical interface; and he today foresees a day when ubiquitous high-speed Internet connections mean you don’t have to take information with you to access it. It’s his business savvy that’s a matter of fiction. Microsoft could have dominated entire continents with an operating system as advanced as Jobs’s NeXTstep and OpenStep (on which Rhapsody will be based), but Jobs couldn’t get more than a small but loyal following for the system in ten years, even after abandoning an expensive hardware business and making OpenStep run on standard Intel-based computers. He has twice sold large blocks of Apple stock at low prices; just last month, Jobs confirmed for Time Magazine that he sold 1.5 million shares he acquired as part of Apple’s purchase of NeXT at record low prices. He has changed personnel policies at Apple (at the cost of losing the company’s head of human resources) and lectures the employees about being more "entrepreneurial" when he, as the putative head of the company, has no personal investment in it whatsoever. An employee who wrote a biting satire of Jobs’s sanctimonious preaching is lucky he or she did so anonymously, because Jobs told the entire rank and file the culprit will be fired if discovered.
Now Jobs is again leading Apple’s retreat from the battles it must win to return as a major force in personal computing. Jobs’s field of dreams still whispers in his ear: "If you build it, they will come." Never mind that Apple is building some of the best computers on the planet, and the customers are not coming. Instead of building better, or competing better, Apple hopes to keep others from building. Never mind that Apple’s systems wouldn’t be as strong today as they are if competition, specifically from Power Computing, hadn’t raised the standards.
Past comments from Jobs include remarks about how Apple should "milk" the Mac OS until it’s dry and then move on to the next big thing, perhaps board member Larry Ellison’s beloved network computers based on the reabsorbed Newton technology. If this is what Jobs is doing, while telling the public exactly the opposite (not exactly a new move for him, as Apple II owners can attest), he may think that the Mac OS has less than two years of useful life left because the single-source strategy he’s now adopted for Apple won’t win new converts for the platform. Frittering away what could be a viable platform in favor of using your customer’s money for something potentially unrelated doesn’t build customer confidence.
Apple fans can continue to hope that Jobs will one day understand that bizarre repetition of failed strategies is less often recognized as a sign of genius than as evidence of dementia. Until then, the company is again pulling defeat from the jaws of victory in its struggle to become profitable, alienating the most intense Mac OS supporters. Now that customers have seen the benefits of free-market Mac OS competition, they’re unlikely to accept Apple’s word that the company’s products are the best that could exist.
Apple, which still aspires to be a champion, still hasn’t learned that winning the title belt requires staying in the ring, not fleeing when you’re behind at the end of the fourth round, or the eighth, or the fourteenth. The real question is if Apple will figure it out before receiving a knockout punch or running out of time.
[Matt Deatherage publishes the Macintosh newsletter MDJ, which is currently on hiatus.]