As pacts with the devil go, this takes some beating. When Apple co-founder Steve Jobs introduced Microsoft as Apple?s ?meaningful? new partner at Mac World Boston last week, pantomime-style boos and hisses reverberated through the auditorium. Conspiracy theorists homed in on the symbolism of Microsoft CEO Bill Gates? face, magnified on a giant screen, looming over the tiny figure of Jobs on the podium.
As Silicon Valley ponders the biggest story since IBM?s takeover of Lotus, the computer industry will weigh up the good, the bad and the ugly for Apple. The most obvious advantage is that Microsoft?s investment will give Apple some fiscal breathing space as it now has $250 million to play with.
More importantly, Microsoft?s commitment to develop for the Macintosh means that, however incensed the Mac community may be now, dealers and developers have a guaranteed customer base for the next two to three years, something which despite management changes and cost-cutting exercises, they were losing.
One Silicon Valley analyst commented: ?Now, at last, the developers know Apple has a guaranteed future.? Microsoft?s commitment to hang on to its shares for at least three years underlines this. This reassurance will inevitably filter through to customers and resellers. Wall Street?s reaction demonstrates that Apple?s financial worries are, for the time being, over. Following the announcement on 6 August, Apple?s stock leapt 33 per cent.
There were also sweeping changes to the management board as old timers such as Mike Markkula made way for serious Silicon Valley heavyweights (see box below).
But analysts are quick to point out that if Microsoft has saved Apple from the jaws of destruction, sooner or later it will be payback time. Indeed Jobs said: ?If we want Microsoft Office on the Mac, we?d better start treating the company that puts it out with a little bit of gratitude?. In the words of one Silicon Valley observer: ?Apple is no longer fighting the good fight.?
More importantly, the Microsoft alliance raises doubts about the future of Rhapsody, Apple?s next-generation operating system, which analysts have warned will be at odds with NT. Microsoft?s failure to announce its commitment to the OS was conspicuous , and watchers speculate that Microsoft may use its new influence to marginalise the importance of the release. As Apple?s future operating system, Rhapsody is its last bastion of independence.
The Microsoft announcement also failed to address the issue of licensing Rhapsody to clone manufacturers. Representatives from clone manufacturers Umax and Power Computing reacted furiously to Jobs? failure to mention the issue during the keynote speech. Although Apple backed down and agreed to license OS 8 at the 11th hour, the cloners fear that Apple will withhold licensing for Rhapsody. Without the support of the cloners, Apple has less chance of developing significant market share on Rhapsody.
The Microsoft investment has serious implications for the Sun/Netscape alliance, the only real threat to the Wintel desktop monopoly for years. Jobs pointed out: ?Apple plus Microsoft equals 100 per cent of the desktop market.?
Microsoft and Apple developers will also collaborate on Java, using Microsoft?s Java extensions which are incompatible with Sun?s 100 per cent Pure Java Initiative. Thus Java, the only serious alternative to Windows in the desktop market, has been cornered by Microsoft. Apple will carry Internet Explorer as its default desktop browser.
In the short term, the move is undoubtedly good for Apple. But its future as an independent company with power in the desktop market is looking increasingly shaky. Microsoft is the clear winner in the deal.
New management sweeps aside Apple old-timers
Apple?s board of directors consists of: Bill Campbell, president and chief executive officer of Intuit; Gareth Chang, senior vice president of Hughes Electronics and president of Hughes International, retained on the board; Larry Ellison, chairman and CEO of Oracle; Steve Jobs, Apple co-founder, chairman and CEO of Pixar Animation Studios; Edgar Woolard, chairman of the board of EI DuPont de Nemours & Co; Jerry York, former CFO of IBM and Chrysler and vice chairman of Tracinda.
Leaving the board are: Mike Markkula, co-founder and director; Katherine Hudson, president and CEO, WH Brady; Bernard Goldstein, MD Broadview Associates; Delano Lewis, president and CEO, National Public Radio; Gilbert Amelio, Apple CEO.
Channel is cautiously optimistic for Apple?s future
Apple?s deal with Microsoft has prompted mixed reactions from the channel.
Kashif Merchant, sales director at Micro Anvika, said: ?It?s mixed news. The fact that the stock went up so high indicates that some confidence has come to the market. But for the hardened Apple fans, it?s hard to take. My customers have had very mixed reactions.?
Harry Thuillier, chairman at Fraser Associates, said: ?It?s a jolly sensible move on the part of both companies. By investing $250 million, Gates has guaranteed himself a slice of a $400 million market.?
David Jesner, managing director at Das Securities, said: ?For once in my life, I find myself in agreement with Bill Gates. Without the Mac OS we wouldn?t have had Windows, and Gates seems to have finally acknowledged this. Let?s hope it stops the press sniping, and lets Apple get on with it.?
Matthew Carr Gomm, managing director at Apple Bite Systems, said: ?It breathes some confidence into the consumer marketplace. It?s been much to the annoyance of several dedicated Macintosh users. From what I understand, Gates has been putting money into Apple?s back pocket for years, for the most cynical motives. But as far as the customers are concerned it?s great news.?
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