Steve Jobs memo regarding Mac clones

jobs.txt

Subject: Apple Acquires Power Computing
Sent: 9/2/97 7:34 AM
From: Steve Jobs, [email protected]
Reply-To: [email protected]
To: [email protected]

Today Apple is acquiring Power Computing for Apple common stock valued
at $100 million.

Let me explain why we are doing this:

The primary reason is that the license fee Apple receives from the
licensees does not begin to cover their share of the expenses to
engineer and market the Mac OS platform. This means that, in essence,
Apple is giving a several hundred dollar subsidy with each licensed copy
of the Mac OS. Our Board is convinced that if Apple continues this
practice the company will never return to profitability, no matter how
well Apple performs, and the entire Macintosh "ecosystem" will continue
to decline, eventually killing both Apple and the clone manufacturers.
This scenario has no winners - and customers end up with no Macintosh
choice.

Couldn't we raise the license fees?

We tried, and failed. As you know, Apple is honoring all of its signed
license agreements. The licensees want to expand their licenses to
include the use of the Mac OS on CHIRP and portable computers, neither
of which are permitted under the existing license agreements. Apple was
willing to expand the licenses to include these rights, but only in
exchange for raising the license fee to a level which, we believe,
reflects a fair share of the expenses to engineer and market the Mac OS
platform. Power Computing and other clone manufacturers rejected this
offer. Given Power Computing's position as the largest Mac OS clone
manufacturer, and their pioneering of direct marketing and sales in the
Macintosh market (a direction we want to move in), we decided it would
be best to acquire them.

What will happen to Power Computing?

Among the assets Apple is acquiring from Power Computing are the right
to retain some of their key employees with expertise in direct marketing
and sales, build to order manufacturing, and engineering; their customer
database; and their license to distribute the Mac OS operating system.
Power Computing will remain an independent company and will retain the
Power Computing name. For Power Computing customers, Apple will provide
Mac OS support and Power Computing will continue to provide hardware and
warranty service. We will warmly welcome Power Computing customers and
key employees into the Apple family.

What about the other clone manufacturers?

We have no plans to acquire any other clone manufacturers, or their Mac
OS clone businesses. Apple is honoring all of its signed license
agreements, but we have decided not to expand the licenses to include a
version of Mac OS for CHRP hardware.

The clones were expanding the Mac OS market - what will it mean without
them?

This widely held perception is not true. For example, less than 1% of
Power Computing's customers were new to the Mac OS. The clone
manufacturers have not expanded the market for Mac OS computers. Indeed,
during the past two years the total number of Mac OS computers sold has
declined by almost 20%. Its our job to turn that around, and one of the
first steps is to restore Apple's financial health - something which
would be very, very difficult if Apple continued its subsidy of the
clone manufacturers.

Moving forward:

This is an emotional issue for many Apple employees and customers. Our
Board of Directors did not make these decisions lightly - we saw no
other way to restore Apple's financial health and insure that our
customers have at least one Mac OS choice than the actions we are taking
today.

It is widely believed that Apple missed a golden window of opportunity
to license its Macintosh operating system software to clone
manufacturers in the 1988 -1992 time frame, and that, had Apple done so,
today the Mac OS might rival Windows as the personal computer operating
system standard. We will never know. Unfortunately, the perception that
Apple missed such a huge opportunity has haunted the company ever since,
and finally drove Apple to make the poor business decisions resulting in
the existing Mac OS licenses.

Today we are letting go of this ghost, and moving forward to invent our
future.

We expect and appreciate your support.

Steve Jobs
Apple Board of Directors
Apple Executive Team