Cloners, Apple haggle over OS

Despite continued haggling with Apple, clone vendors will ship the latest OS because they maintain they already have the right to do so.

Despite continued haggling with Macworld sagaApple(AAPL), clone vendors will ship the latest operating system from Apple because they maintain they already have the right to do so.

Umax Computer Corporation, Power Computing, and Motorola (MOT) say they have agreements in place that give them access to Mac OS 8 as well as earlier versions of the OS.

Apple may be ready to agree with the clone vendors' interpretation, according to industry observers, although a final agreement over financial terms of the Mac OS 8 license is not yet in place. Terms for the licensing of the next-generation operating system, code-named Rhapsody, are also up in the air.

"I think Apple has come to a realization that they are giving them [clone vendors] Mac OS 8. It's just a reinterpretation of the original agreement [the companies had]," said Keith Bossey, a financial analyst with Robert M. Cohen & Co.

Apple has, however unintentionally, done much to sow discord and distrust between it and the clone manufacturers.

"Here's Macworld, and we should be ready for unity...[but] Apple sounds like a headless chicken...I look at their shipment numbers, and Apple and the clones have upward movements, so I say let's not screw this up," said Chris LeTocq, an analyst with market research firm Dataquest.

Motorola declined to comment on the status of negotiations, and officials at Umax and Power Computing could not be reached for comment. But Dr. Frank Huang, chairman and CEO of the Umax-Elite Group, thought the issue critical enough to make a visit to Apple last week.

Clone vendors have been outraged at Apple's foot-dragging over licensing Power Computing, the first Mac OS licensee. "If Apple Computer is entertaining reversing its policy on licensing the Mac OS, it would be disastrous," said Mike Rosenfelt, director of marketing for Power Computing.

But Apple says it has not changed its stance. "We are continuing to honor existing licensing agreements and are currently in negotiations to license the Mac OS," said an Apple spokesperson.

The Mac OS 8 is an important release for clone vendors. The Common Hardware Reference Platform (CHRP), supported in Mac OS 8, is a key technology that will allow Mac clone vendors to independently enhance system performance and therefore compete more effectively with Apple.

The shift in Apple's thinking is related to the company's financial position. After losing $884 million in fiscal 1997 alone, the company is under pressure from stock holders. The perception inside Apple, according to various industry observers, is that the company blames the clone vendors for lost sales and revenues.

A source at Motorola said that the company changed its position with regard to licensing after Steve Jobs became more active. "With Steve, it may be more of a philosophy against clones," he said.

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