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Power grapples with life after Macs

With two pages of its monthly calendar ripped out, struggling Power Computing has yet to pencil in a survival strategy for its business.

With two pages of its monthly calendar ripped out, struggling computer manufacturer Power Computing has yet to pencil in a survival strategy for its business.

Power, which until recently was the largest, fastest-growing of Macintosh clone makers, has had two months to develop a new business plan since it announced it would sell its mail-order Mac business to Apple (AAPL) in a $100 million stock deal. Under the terms of the deal, Power has to extract itself from the Mac business by the end of the year.

"We are focusing on our effort to serve our Mac customers and sell the rest of our inventory," said Steve Kahng, Power chief executive and president. "In a couple weeks, we will look at developing our business strategy."

Shortly after the Apple deal was announced in early September, Kahng said his executive team was planning to overhaul the company's business plan. But Kahng explained in an interview today that it has been difficult to focus on devising a corporate strategy while unloading the company's remaining Mac computers.

Power's inventory is virtually gone, with only a limited number of PowerCenter Pro and PowerBase systems remaining. "We have sold out of most of our models and have some components left to build a few more," he added.

He noted the company remains in "fairly good shape financially" due to strong sales and that it is largely up to date with payments to its vendors.

Power has enough funding to take it through the end of the year, but it's a tougher call to say whether it has enough funds to last through the end of 1998, Kahng said.

In addition to the $100 million in stock from the Apple deal and a $30 million revolving credit line, Power will continue to receive from Mac sales up until the end of this year. However, the scope of the outstanding bills that privately held Power is holding is not known.

The company had about 500 employees prior to the Apple announcement, but has since cut about 45 percent of its workforce. The company currently has about 275 workers, according to Kahng.

"Most people in the Mac business are gone. We did not need as many people since our model is now simpler," he explained. "Most of the places we cut were in Mac engineering and our MIS systems."

Layoffs also hit the company's notebook engineering and marketing area, as sales from Power's first Windows-based notebooks, or PowerTrip line, were sluggish. In addition, the systems were costly to build.

"We were developing our own notebooks, and now we've decided to develop them with an [original equipment manufacturer] in the Far East," Kahng said. "That is what most people are doing. The investment needed for developing our own portable was high."

Power had planned to develop some products based on the Microsoft-Intel platform even prior to the Apple announcement. It was a move the company considered an important step toward curbing its dependence on licensing agreements with Apple, according to an earlier initial public offering filing with the Securities and Exchange. Power ultimately withdrew its IPO plans following the deal with Apple.

Some industry analysts now question the viability of Power, given that its core business is going away. Some predict that the company will be forced to close up shop.

Kahng, however, takes issue with such predictions. "We have some good people here...We'll come out with some business strategy or model, and go from there."