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Power Computing IPO at Apple's mercy

The largest Mac cloner prepares to hold its initial public offering and finds itself tied to its troubled licenser's wagon.

Power Computing, the largest Macintosh clone maker, is traveling the road of many privately held companies: It's looking to go public.

As a number of IPO companies have found, there can be bumps along the way. But with the recent turn of events at Apple (AAPL), which grants all Mac clone licenses, Power may find those bumps look like roadblocks.

"When you do an IPO, you don't want any uncertainty in any key aspects of the business strategy," said one institutional investor. "You don't want that because it can impact your valuation [of the shares]."

Apple's sometimes rocky relationship with its clone makers, whose rising sales are nibbling at Apple's revenues, is further threatened by Apple's declining market share and multimillion-dollar losses. Last week Apple ousted chief executive Gilbert Amelio; a new strategic plan and a CEO search are in the works.

Amelio's departure comes just weeks after Power registered its IPO plans with the Securities and Exchange Commission.

He added, however, that the recent departure of Amelio will have less effect on Power's IPO than the future direction of Apple's strategic plans and marketshare. In fact, if Apple can come out with well articulated plan, Power's fortunes could actually improve.

A spokeswoman at Power, which is in a quiet period with its IPO, declined to comment.

Industry watchers say Power Computing could feel the effects of Apple's troubles at its highest level. As Apple searches for a new CEO, some onlookers point to Power's founder and chairman Stephen Kahng as viable choice, given his ability to rapidly grow his company's Macintosh sales and snare profits with a direct sales strategy.

Even if Kahng were offered such a post, it is highly unlikely he would accept it, institutional investors say.

"That would be a disaster. If I was a buyer [of the offering] and he left the company weeks after it went public, I think investors would be all over the underwriters," said Dick Goers, chief technology strategist at Zurich Kemper Funds.

Kahng, of course, has a large financial stake in Power's success on the markets.

There is another possibility menacing Power's IPO that lies beyond Kahng's control: Apple's present or future directors may take the radical step of breaking the company into two--a software firm and hardware business.

"That would be negative to cloners if Apple split its hardware and software," said the institutional investor, who asked to remain anonymous.

He added that an Apple software company would likely sell heavily into the PC market, diminishing the value of the Macintosh clone makers, which would find it difficult to offer added value over such companies as Dell (DELL) or Gateway 2000 (GTW).

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