Apple purchases Power Computing

The rumors have come true. Apple Computer (AAPL) has purchased major operations of Power Computing, the largest Mac clone maker, in a stock deal worth $100 million.

Apple said it has acquired the "key assets" of Power Computing, including employees who are experienced in direct marketing, the company's customer database, and the license to distribute the Mac OS operating system. Power Computing will not make computers for Apple, nor does Apple acquire any of Power Computing's manufacturing assets, according to a Power Computing spokesperson.

"We look forward to learning from their experience, and welcoming their customers back into the Apple family," Apple cofounder and board member Steve Jobs said in a statement.

Power Computing has been one of several Mac clone makers wrangling with Apple over licensing fees for the company's latest version of the Mac OS operating system. Two weeks ago, Joel Kocher, Power Computing's president and chief operating officer, announced his resignation, saying that he had disagreements with the company's management on the licensing issue.

The purchase puts to rest contentious discussions over whether or not Power Computing had rights to ship systems with Mac OS 8. Mac OS 8 would allow clone vendors to market systems that are even more competitive against Apple's product offerings.

Apple has become more reluctant to license its operating system for fear of losing hardware sales. Power Computing, some are suggesting, was more guilty of stealing Apple's sales than Motorola and Umax, and as a result was essentially forced out of the Mac market by Apple.

"I think that the basis of clone licensing was that they believed it was a market-expanding proposition. They [Apple] don't believe that anymore. They believe its an Apple-threatening proposition," says Chris LeTocq, analyst for market research firm Dataquest.

More bluntly, one said one major Apple reseller, who wished to remain anonymous, said "Power screwed Apple. The marketing was great, it was aggressive--Apple should copy their example....They forced Apple to be more competitive in products, and they did force a lot of change, and they capitalized on Apple's weaknesses. But what they did was make products that undercut Apple and went after their core markets. Apple did it for the right reasons."

Motorola and Umax officials could not be reached for comment.

Umax may fare best as Apple rethinks how to approach the OS licensing issue because it can make the argument that it has the ability to expand the Mac market into geographical areas and market segments that Apple can't reach. "Umax is prepared to subscribe to the market expanding philosophy. They are prepared to go to markets like China, places where Apple is not going. They have the funds to get there," LeTocq says. The future for Motorola is less certain.

Power Computing will retain its name and will sell Mac-compatible computers through the end of this year. The company will not ship the PowerPC 750-based systems that were recently announced at Macworld Boston, a Power Computing spokesperson confirmed.

The company will now focus its efforts on the hyper-competitive market for computers using the Windows operating system and Intel processors. Power Computing intends to launch new notebooks with Intel's upcoming "Tillamook" processor this month and hopes to launch Windows desktop computers sometime next year.

In spite of the rough road ahead for the company, Stephen Kahng, Power Computing's founder and CEO, offered an upbeat perspective on the day's developments.

"We believe that in our small way, we have helped to make the Macintosh stronger, and that the spirit of Power will live on," Kahng said in a statement.

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