Apple Computer
Inc. (Nasdaq-NNM: AAPL) is considering raising the licensing fees for Macintosh
clone makers, a development that some sources claim could make it prohibitively
expensive for some clone makers.
"We are
looking at it and rethinking it with our licensees," acknowledged Guerrino
DeLuca, executive vice president of marketing at Apple Computer Inc. "We
are considering the entire licensing relationship. We may raise the price
(under certain contractual provisions) and lower it in others."
Sources at Apple
said that clone licensing fees could climb significantly. Under one proposal
being floated at Apple, clone makers would pay Apple $100 to $1,100 per system
sold, according to a source inside the company. The fee would vary with the
price/performance of the computer. It is unclear how much clone makers are
currently shelling out. But the re-negotiations could constitute a huge fee
increase overall, effectively pricing some clone makers out of the market,
sources said.
One Apple employee
familiar with the licensing proposals said some changes being considered would
effectively "get us out of the licensing business in a few months ... This
will create an environment that makes it impossible to clone."
DeLuca said that a
decision on new licensing fees has not been made yet. Further, he said, any
decision will have to take a variety of factors into account, including
incremental sales and market share being driven by the clone manufacturers.
"The
licensees have gained market share for Apple. They are growing share, and that
is a good thing," he said. "The relationship we have with our
licensees has less to do with our contract and more to do with our business
relationship."
"The people
you are talking to have only seen part of the movie," he added. DeLuca
would not comment on or discuss specific licensing fees proposals.
At the center of
the licensing re-negotiations is Tempo, the version of the Macintosh operating
system to be released this summer, said company sources. Clone manufacturers
hold licenses for Apple's Macintosh System 7. They do not have licenses for
System 8.
Until now, Tempo
has not had a number designation. Today, however, Vito Salvaggio, director of
OS releases, told CRN Online that Tempo is a significant enough upgrade to be
called a System 8 release.
"Tempo will
be called OS 8," he said. "It's a pretty significant release." Salvaggio
would not comment on how the designation would affect licensees.
Ironically, the
news comes at a time when clone manufacturers recently raised Apple's market
share. San Diego-based Computer Intelligence Inc. said that Apple and the clone
makers constituted 11.2 percent of the business market for computers in
January, up from 9.5 percent in December and 7.8 percent in November.
Those sales,
though, have cannibalized some of Apple's. Apple insiders said that DeLuca once
said that clone manufacturers cost Apple $1 million a day. DeLuca said the
statement was taken out of context. The figure arose from a hypothetical
centered on gross margin considerations, said Deluca.
Some insiders fear
that Apple's licensing division will be gutted in the upcoming restructuring,
which is to be unveiled March 14.
Apple Chairman
Gilbert Amelio will unveil Apple's restructuring plan on March 14, according to
an E-mail sent to Apple's 13,000-plus employees. Amelio is expected to close
down certain divisions and projects, including Pippin and possibly Newton,
according to various analysts.
Four thousand or
more Apple employees are expected to get laid off during the restructuring,
said various sources. Layoffs will be announced a week or so after the March 14
restructuring, said one Apple source. In other CRN Online Breaking News
stories, Computer Reseller News Online is also posting Amelio's memo announcing
the layoffs to Apple employees. Following is the full text of that document CRN
has obtained:
From: Gil Amelio
To: Apple
people--everywhere
I know all of you
are wondering how the work of analyzing and restructuring the company is going,
and, more importantly, when we will have definitive information about the
future of your job.
Last month, I
outlined a schedule that said we would complete our comprehensive analysis of
the company by the end of February, and that by early March we would be in a
better position to know what areas of the business we will pursue in the future
and the personnel resources required to support these projects.
A great deal of
work has gone on since then to define a new Apple Computer. We have implemented
a new functional organization structure that consolidates the company's product
development, marketing, sales, support and operations efforts into groups
sharply focused on Apple's strategy. We have also completed the appointment of
managers to run these groups. They are now making firm decisions concerning
both the projects and activities that are key to our core business as well as
the personnel reductions that we will begin implementing this month.
With the
completion of this business plan, we will know what personnel resources are
required to support the new structure. So, on March 14 we are planning to give
more details on what we'll do and what we won't do in the future, the number of
layoffs and the charge we will make to our second- quarter earnings to fund the
reduction.
I also promised
last month that we will almost completely refresh Apple's product line in 1997,
and we've begun to deliver on that promise. On February 17th we introduced the
world's fastest laptop--the PowerBook 3400--a complete new line of Power
Macintosh computers, the eMate 300 mobile computer for K-12 education
customers, the MessagePad 2000 mobile Internet computer, and the QuickTake 200
digital camera.
The reviews of
these products have been very positive.
Congratulations to
all who helped bring them to market. We are supporting the announcement with an
aggressive advertising campaign that began last week. In the next thirty days
we will announce more products that again demonstrate that we are focused on
specific customer sets. Let's remember in the coming days that our mission is
to develop, manufacture and sell great products. Please keep up the good work
in this area.
Without great
products, there is no Apple.
I know these are
very difficult times for everyone. I continue to be amazed and appreciative of
your tireless efforts as we work to achieve a shared goal: the return of Apple
as a healthy leader of a rapidly changing industry.
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