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Mac clone makers strike from all sides

It's another Mac attack, but this time Apple Computer has allies.

It's another Mac attack, but this time Apple Computer (AAPL) has allies.

Mac clone makers are lining up separate strategies to fight for a common goal: beating back PC sales.

DayStar Digital is looking to capture the high end of the market with an emphasis on digital and video effects companies. Umax Computer wants to be the low-price, high-volume Compaq Computer of the Macintosh world. Motorola's new computer group is looking to benefit from its brand name while the first Mac OS licensee, Power Computing, is rolling down the road with its direct-to-customer sales strategy.

The battleground looks treacherous, given that the leader for these troops, Apple, has seen its worldwide PC market share fall to 5.4 percent from 8.7 percent in the fourth quarter. In the U.S. presence has slipped from 13.2 percent to 7.3 percent.

But in the two years since Apple opened up its OS, sales for the Mac clones have been growing. Cloners have managed to get 8.5 percent of the U.S. Macintosh market during the third quarter, according to Dataquest.

Whether they can collectively grab a larger slice of the total pie from their PC equivalents has yet to be seen.

Here's a look at the infantry:

Umax Computer, which is a subsidiary of Umax Data Systems in Taiwan, not only wants to be the high-volume leader but also looks to bolster Mac growth in countries where Microsoft-Intel systems have not made major inroads, according to Frank Huang, chairman of Umax Data Systems.

"We plan to expand the Macintosh market in Taiwan by three times and think we'll do better in the Third World...like in Southeast Asia and parts of China," Huang said.

Umax is expected to grow its worldwide unit shipments to 300,000 by the end of the year, he added.

U.S. sales, where Apple has its strongest hold, reached nearly 100,000 units in its first six months of shipment, and that's expected to increase to 150,000 this year; revenues from domestic sales are expected to reach $170 million. Umax also expects to turn its first profit since its formation last January, said Andy Chang, senior vice president of worldwide sales.

Meanwhile, Huang expects Umax to account for ten percent of the Macintosh market by the year 2000.

"This [business unit] is the fastest growing for Umax right now," he said.

Umax Computer only began shipping its SuperMac systems last June. The systems, priced between $1,299 to $5,000, run at speeds of 166 MHz and up. Earlier this week at Macworld Expo, the company announced its high-end S900 model that runs at 240 MHz on a PowerPC 604e processor--a system the company says is the most powerful Mac clone.

Motorola's computer group started rolling out Mac clones in November and has shipped 40,000 to 50,000 units in its first eight weeks.

Dennis Schneider, president of worldwide marketing for the Motorola Computer Group, said that based on anecdotal feedback the company suspects a fourth of its customers are first-time Mac buyers, while another fourth are former Mac buyers who have come back to the fold.

The company's StarMax computer line is being sold through resellers. "We initially stayed out of the retail market because we got a late start in the year, but now we don't have the capability to handle the volume we'd get from retail," Schneider said.

The StarMax family is designed to bring the best value to Mac users with its range of configurations at competitive prices in addition to bearing the Motorola trademark, which implies high-quality standards, Schneider said.

Like Umax, Motorola also expects to capture ten percent of the Mac market. The company currently serves medium to large corporate customers with its base systems ranging from $1,495 to $4,000.

As for the other Mac competitors who have entered the field, Schneider had this to say: "DayStar is competing for the Mac OS publishing market; Power Computing is going after the upgrades. My competition is the PC business buyers, particularly those people who are on the fence about whether to buy a PC or Mac."

DayStar, meanwhile, is going after wider profit margins rather than volume sales. "I don't envision us as a volume company," said Andrew Lewis, chief executive of DayStar. "We'll probably sell about a tenth of the Mac systems because we're higher priced. We may sell in excess of 5,000 units this year. That'll be up about 30 to 50 percent from what we did last year."

He added his company, nestled in the mountains of Georgia, is on the cusp of turning a profit. "We've gone after the digital and video effects market, or multimedia publishing, since day one. We have a lot of different video multiprocessing and can now do all these different applications on one platform. We think this will be the common way to go in two years, where you don't need special boxes to do video editing," Lewis said.

The company has developed software called nPOWER that allows Mac OS systems to use four processors within one box. DayStar also launched a system at Macworld Expo that groups together 16 separate machines each with four processors--in what is called a cluster--for a total of 12,000 MHz of performance.

DayStar plans to go public in the future, but Lewis said much of that decision depends on the success of Apple. Without a bullish outlook for Apple, it will be difficult to generate excitement on Wall Street for any Mac clone maker launching an IPO.

And finally, there's Power Computing. The first company to obtain a Mac OS license from Apple has shipped nearly 100,000 units in its first year and was able to turn a profit after its first full quarter, said company founder, chairman, and CEO Stephen Kahng.

The company, unlike the other Mac troops, is a direct seller of clones to the end user. Its strategy is to cut its overhead while increasing flexibility to deliver a range of systems via direct channels, Kahng said.

So be it by retail stores, resellers or telephone, the Mac clone makers are coming ashore.