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Motorola won't take Apple out of the woods

Motorola's announcement that it's going to build Mac clones certainly came as a morale booster for Apple, but execution of the strategy could present thorny new issues for the beleaguered computer maker.

    Motorola's (MOT) announcement Tuesday that it is going to build Mac clones certainly came as a morale booster for Apple (AAPL), but execution of the strategy could also present thorny new issues for the beleaguered computer maker.

    At first blush, the strategy is solid. Motorola wants to be, in its own words, a major player in the computer systems market and expand the market for the Mac OS. To do this, the company says it is pursuing a strategy of focusing on selling the PowerPC-based platform to businesses and corporations.

    Moreover, Apple seems very pleased to add a large company like Motorola to a growing list of vendors offering Macintosh compatibles. "Our goal is to support a healthy, vibrant Mac OS licensing program. With Motorola, we have a key player in the industry with the resources and the technology to move the Mac OS platform forward," said Gilbert Amelio, Apple's chairman and CEO.

    Questions emerge, however, on whether Motorola will merely take business away from Apple in the corporate market instead of actually expanding the size of the market.

    "I think they will cannibalize [Apple] sales in the U.S. corporate market. I don't believe there is a significant incremental opportunity for the Mac OS in the United States," said Pieter Hartsook, industry analyst and editor of the Mac-watching Hartsook Letter.

    These market dynamics become particularly troublesome when Motorola's server strategy is scrutinized. "What makes a better client for an NT server? While a Mac is a fine, of course an NT workstation makes a better client for an NT server," Hartsook said, referring to Motorola's line of PowerStack II NT servers, which the company also launched yesterday and will aggressively market to corporations.

    Motorola, at best, will "stave off the defections" from the Mac to other operating systems in the corporate marketplace, Hartsook added.

    On this point, Motorola executives more or less agree. "Yes, there are problems. We're not denying this. But we'll bring stability to the market. You want to stop the panic. You don't want people leaving the Mac because they think the world is going to end," said Joe Guglielmi, corporate vice president and general manager of the Motorola Computer Group, the person heading up the Mac-compatible computer effort at Motorola.

    Inroads into a relatively limited market could also possibly happen on the consumer side when Motorola brings out, possibly in 1997, a consumer computer based on the PowerPC Reference Platform (formerly called CHRP, or Common Hardware Reference Platform).

    "Will there be some market share moved around? Sure there will," Guglielmi said.

    To counter skeptics, he notes that when the first IBM PC clones appeared in the mid 1980s, there was a market share loss for IBM, but as manufacturers innovated and dropped prices, the overall size of the market increased.

    Hartsook says Motorola could sell as many as 250,000 units in a 12-month period running roughly from the end of this year to the end of 1997, and then build on that success by introducing a line of portables based on the PowerPC platform that run the Mac and NT operating systems.

    Outside of the United States, the Mac platform is expected to fare well, particularly in Asian markets, with China being the market with probably the greatest potential, according to both Hartsook and Guglielmi. Also, in Japan, the Macintosh has been a wildly successful product.

    But possibly more important than Motorola making Motorola-labeled Mac-compatible computers for these markets may be the company's ability to license designs and ship motherboards to other manufacturers, which will then build for these foreign markets, Hartsook said. This is significant because the computer is transformed from a foreign to a domestic product, eliminating a major barrier in sales to major education and government accounts.

    Foreign markets aside, the impact of the Motorola introduction is clear. "I think this is a milestone. Motorola is the first major vendor to aggressively embrace the Mac OS. This is an integral part of Motorola's strategy, not just an afterthought," Hartsook said.