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Apple reconsiders licensing

Apple is rethinking its licensing strategy as it brings out a new version of the Mac OS.

Apple Computer (AAPL) is rethinking its licensing strategy for clone vendors as it brings out a new version of the Macintosh operating system, which is expected to engender a more open, less proprietary Macintosh-compatible market.

Apple is openly saying it is reconsidering how it will license the Mac OS to vendors that want to make Macintosh clones, at a time when the company's licensing strategy seems to be paying off and resulting in increased overall market share for the platform. So why is the company fiddling with a formula that seems to be working?

The reasoning is based on the fact that OS 8 is going to be compliant with the PowerPC Reference Platform (CHRP), allowing clone vendors for the first time to come up with designs that don't necessarily need Apple's certification for compatibility.

Major differences in the PowerPC-compliant operating system include a new level of independence between the hardware and OS. This is achieved with adherence to an open standard for system design called the PowerPC Reference Platform. (PPCP).

With the advent of an OS that is CHRP compliant, "CHRP gives clone vendors the improved ability to differentiate systems without being tied down to Apple's hardware designs," an Apple spokeswoman said. "Our overall objective is to preserve the progress that has been made in growing the Mac market. We want to ensure that we all have a sound business proposition," she said.

According to some reports, one of the options Apple is considering is raising the fees it charges to clone vendors, as first reported by Computer Reseller News. The news brought swift response from industry observers, who say such a move would hurt the viability of the Mac platform.

"The alleged reason [for considering the fee increases] is the need to recoup hardware engineering costs," said Jean-Louis Gassée, who heads Be, a company developing an alternative operating system for PowerPC-based computers.

"Privately, Apple executives express irritation at the clones' 'cherry-picking' and claim that Apple's making all the investment in the platform [while] cloners reap all the profit. Let's hope these are false rumors or merely reflect a temporary loss of composure," added Gassée, a former Apple executive, who made the statements in an open letter to Be developers on the company's Web page.

Admittedly, Gassée's words must be taken with a grain of salt. His company was a spurned suitor in the bid to supply Apple with technology for a new operating system, which is the software that controls the basic functions of a computer. But he does raise some interesting and valid issues about the Mac clone market.

Development of a new computer involves a tremendous amount of engineering. For Apple, each new hardware design currently means that a special version of the Mac OS is created and tested that accounts for differences between various systems. Not only is time spent engineering the basic hardware design but engineering the OS as well, and this accounts for the vast majority of the expense of bringing a computer to market.

For Apple, which really can't afford to waste money these days, there could be the perception that clone makers aren't paying their fair share of development costs, according to Gassée.

If indeed Apple wants to recoup the cost of hardware engineering, analysts suggest hiking the fees for licensing the motherboard. "If the clones have the chance to just pick up designs for board, of course they'll cherry-pick. From Apple's perspective, they want these guys picking up the load," says Chris LeTocq, an analyst with market research firm Dataquest.