February 2, 2000 1:45 PM PST

Freemac reinvents itself after Apple's iMac snub

How hard can it be to give away free iMac computers? Pretty hard, if Apple won't let you.

That's the bitter pill that Jonathan Strum, president of Freemac, has had to swallow. Last year, the start-up announced that it intended to give away 1 million of the popular Apple iMac computers during the next two years.

That ambition has died because Apple decided not to let Freemac buy any iMacs to give away, not even at full retail price, Strum told CNET News.com in an interview. Apple declined to comment.

"What we're telling our customers--well over a million people who signed up--is that Apple won't let you have a free computer," said Strum. As a recourse, Freemac is reinventing itself and will be relaunched later this month as "NadaPC.com" and will give away Internet access terminals instead.

"Starting this week, we're letting customers know what happened (and offering them) first crack at getting a new Internet appliance," Strum said. The terminals will be supplied by either Intel, Acer or Merinta, although details on the supplier have not been finalized, according to Strum.

Perhaps he'll get the agreement in writing this time.

Freemac was born out of the "free PC" movement that kicked off last year. Under its business plan, qualified customers would get a free iMac if they agreed to a three-year Internet service provider (ISP) contract with EarthLink and agreed to accept advertising.

Strum said he received a verbal approval from a regional sales manager at Apple, who ostensibly got an authorization from executives at the Cupertino, Calif., headquarters. On these words, Freemac, which had fewer than five employees at the time, according to the company phone system, was launched in August.

CNET TV: Jonathan Strum
CNET TV: Jonathan Strum
Jonathan Strum, president of Freemac.com, talking to CNET about his venture last year (10/9/99)
Trouble, however, soon cropped up. The day after Freemac's highly publicized launch at an investment banking conference in San Francisco, Mitch Manditch, Apple's senior vice president of worldwide sales, called to tell Strum that Apple wasn't aware of the company, Strum said. In any case, Manditch told Strum that Freemac wasn't authorized to redistribute iMacs.

Strum claims that apart from lower-level managers in distribution, he was in contact several times with Apple to see if Steve Jobs, the company's chief executive, might make an appearance at his company's launch. Steve Jobs didn't appear that day, and ultimately, neither did the iMacs.

Following the company's launch, Freemac went through a more official review process to carry Apple's products. Apple declined to let Freemac buy its computers at wholesale prices from distributor Ingram Micro.

Strum said that he then offered to limit distribution of computers to non-Apple owners to preclude any potential loss of revenue Apple might experience. That way, iMacs would only be going to first-time users or users with a PC, with the end result still being expanded market share for Apple, he said. Still, Apple didn't bite.

Strum subsequently upped the offer and said Freemac was willing to buy the computers at full retail price from retailers, which at the time was around $1,200 each. Still, Apple by December decided not to let the company go ahead with that plan, either.

See special report: PC free-for-all According to an email Strum received from Apple, which CNET News.com obtained a copy of, the company said its contract with resellers restricts sales to end users only, meaning the computers can't be redistributed by Freemac. Strum, as one might expect, thinks that argument doesn't wash because a corporate customer buying from a CompUSA redistributes products to employees.

"The notion that Apple is a heroic David to Microsoft and Intel's Goliath couldn't be further off the mark," said a perturbed Strum. "Apple has the most proprietary position in terms of distribution, bar none."

Strum said he didn't imagine that the arrangement with Apple could go awry, though no contract had been signed. He said all of his deals with other companies got signed, but that sometimes arrangements run ahead of the actual signing of documents.

Strum said the company's business model will remain essentially the same. Like its predecessor, NadaPC.com will profit from advertising and e-commerce revenue, as well as by signing on subscribers for EarthLink's Internet service. NadaPC.com is banking on building a "community" of like-minded users who hopefully will actually buy products online.

 

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