September 12, 1997 2:30 PM PDT

Mac firms shifting focus, analysts say

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Apple Computer's (AAPL) alienation of clone makers will push companies that make Macintosh products further toward the Windows market, analysts say.

The company's niches in the graphics design and education arena are expected to remain stable, but no longer are Mac vendors willing to hold all their apples in one basket.

Many have been expanding their product lines to include the Microsoft (MSFT) platform for some time, but analysts say that Motorola's (MOT) move this week to cease development of its StarMax clones will prod others to start scaling back in larger steps.

Already, makers of education and entertainment software no longer develop products for the Macintosh first. Now they look to make profits on the Windows side before coming out with the same products for the Mac, Dataquest analyst James Staten said, because "the risk factor for being a Mac company is going up."

"Before long, we see an abandonment by Mac users, then statements from developers that they will stop development. Then expect short-term licensees to start offering deep discounts on Mac systems to clear inventory," Staten said, while the technology on those machines is still current. "It is clearance time for cloners."

He explained that the landscape of the Mac industry has seen a drastic turn of events as dedicated developers such as Adobe adapt to a changing market. "The viability of the Mac market has decreased, and the revenue opportunities are no longer independently possible," Staten said.

Other manufacturers, like Macromedia, Avid Technology, Data Translations, and Quark, have all expanded their reach as Mac opportunities have shrunk.

Avid, for example, said in a recent filing with the Securities and Exchange Commission, "Apple has recently been suffering business and financial difficulties." Because Avid's products operate primarily on Apple computers, "it will be necessary to develop additional products which operate using Intel Architecture (IA)-based computers and the Windows NT operating system," the company stated.

Most Mac vendors are unlikely to make such a declaration because loyal customers may interpret it as a betrayal, Staten said.

Companies are making the silent shift, though, because they can't afford to keep all their business in the Mac marketplace. If they do, they will see their competitors take over their market share, said Chris Le Tocq, a consumer software analyst at Dataquest. "It is a very Darwinian process. It is survival of the fittest. And the fittest are adapting to the Windows/Intel platform."

Is anyone still thriving on the Macintosh platform? "Microsoft," he said.

In the Macintosh-compatible business software and consumer software arena, not including entertainment, Microsoft was the top vendor, generating 19 percent, according to Dataquest's most recent figures; Adobe came in second place with 17 percent; Claris generated 13 percent; Quark made 8 percent; and Intuit and Macromedia each generated 3 percent.

Analysts estimate that Adobe generated 44 to 49 percent of its revenue from Mac-based products; Claris generated 83 percent; and Quark generated 74 percent, according to recent figures. But Le Tocq says the numbers are deceiving. "We should see the Mac portion decline as they make transitions to the Windows platform," he said. "The question is who can survive the transition?"

Apple's problems with Mac developers may extend to the courtroom as well. One industry source expects a lawsuit from Motorola because it had invested a good deal of of money into research and development for the Macintosh platform before Apple decided to turn its back on the clone market.

Joe Guglielmi, vice president and general manager of the Motorola Computer Group, said during a conference call yesterday that his company had reached an agreement that would have given Apple "substantially higher" fees in return for "a much more open and less-controlled market on the Mac OS platform," in reference to the ability to ship CHRP (Common Reference Hardware Platform) systems.

CHRP was seen as a technology that would liberate the Macintosh clone market by allowing manufacturers such as Motorola to bring out innovative Macintosh-compatible computers without Apple's approval and certification.

But Staten said it is unlikely that Motorola would pursue a lawsuit, adding that smaller players and sublicensees would be more likely to take on Apple. "There were a lot of verbal agreements made over CHRP, and it may be worth their while because they have grounds...Just about everyone has this agreement, and all those could be viewed as binding agreements," he said.

Still, some companies say they will continue to stand by Apple. "We're very supportive of what they need to do to manage through the current transition," Adobe spokesperson Wink Grelis said. "Our Mac customers are fiercely loyal to the Macintosh, for the software--our business remains strong."

At the same time, that business has shifted. Although Adobe used to generate 98 percent of its revenue from the Mac market, analysts note, it now constitutes only about 44 percent--less than half of what it used to be.

 

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