There are three different business models in the PC, smartphone, and tablet industries. The most widely used model is for one company to make the operating system and license it to a host of hardware manufacturers. This has given us the Windows market where no matter how badly PC makers do, Microsoft remains profitable.
A second model has its roots in the earliest days of personal computing, where operating systems and software are open source and available at no charge. This has given us the Linux market, which is more fragmented than Windows. One area where Linux is fairly strong is the netbook market, because Microsoft limits the less costly netbook version of Windows 7 to machines with no more than 1 GB of system memory, a 10.2″ screen, a 2.0 GHz CPU, and a 250 GB hard drive or 64 GB SSD.
If you want a netbook with more memory, a bigger screen, or more storage capacity, you have to buy it with the full version of Windows 7, which costs more, or get it with Linux.
Android is kind of a kludge of the first two models. Although it is open source and free, Google controls the operating system and users generally cannot choose to install an alternative operating system.
The third model is the integrated model, where the same company makes the operating system and the hardware. This also goes back to the earliest days of personal computing, where it was used successfully by Commodore, Amiga, and Palm (among others, although Palm did eventually license its OS), and is the way Apple has almost always operated.
The Macintosh Clone Era
But it hasn’t always been that way. For a few years, Apple believed that it could grow the Mac market and its profits by licensing the Mac OS to select partners. Unfortunately, that isn’t exactly what happened.
Mac sales where growing in the early 1990s. Maybe that was part of the reason Apple decided to license the Mac OS. Here are the pre-clone sales figures:
- 1990: 1.3 million
- 1991: 2.1 million
- 1992: 2.5 million
- 1993: 3.3 million
- 1994: 3.8 million
The first thing that happened was clone makers developing Mac OS computers that ran faster than Apple’s computers while costing less – the 110 MHz Radius System 100 in March 1995 when Apple’s fastest was the 100 MHz Power Mac 8100, the 120 MHz Power Computing Power 120 a month later, the 150 MHz PowerWave in October 1995, the quad 132 MHz Daystar Genesis MP 528 (the first multiprocessor Mac) in October 1995 and quad 150 MHz MP 600 in February 1996, the 200 MHz Power Tower in April 1996, the 250 MHz Umax SuperMac S900 with a second CPU slot in August 1996, and so on.
Next came the low-end clones that undercut Apple’s entry-level Performa and Power Mac models.
In 1995, the first year for clones, Apple sold a record number of Macs – but things went downhill from there. Apple sales dropped 12% and overall Mac OS unit sales 5% from 1995 to 1996. And they took an even bigger hit in 1997, with Apple losing 30% of its unit sales while the number of clones sold increased by nearly 50% – still resulting in a 20% smaller Mac OS market for the year.
- 1995: 4.5 million – first clones
- 1996: 4.0 million – app. 275,000 clones sold, Windows 95 widespread
- 1997: 2.8 million – biggest year for clone sales, estimated at 400,000 units
- 1998: 2.7 million – last clones shipped
- 1999: 3.8 million
By acquiring Power Computing, dragging its feet on certifying new clone models, ending the Mac OS Up-to-Date program for clones, and not licensing Mac OS 8 (with the late exception of Umax, which left the clone market at the end of May 1998), Apple slowly brought the Mac clone era to an end.
Apple had shot itself in the foot, and 1998 unit sales were down 40% from a peak of 4.5 million in 1995. Apple was generally called beleaguered in those days, and its future was uncertain.
Steve Jobs Saves Apple
It was the return of Steve Jobs at the end of 1996 that started to turn things around for Apple. Jobs killed off the Newton, got Apple out of the printer business, and eviscerated the clone program while contracts were running out. He launched the project that gave us the iMac in 1998, which went on to become the best selling computer model, and he simplified Apple’s confusing variety of Macintosh, Performa, and LC models to three products – a pro desktop (Power Mac G3), a pro notebook (PowerBook G3), and a consumer desktop (the iMac), supplemented with a consumer notebook (the iBook) in 1999.
It worked. Apple was no longer losing profitable high-end sales to clones, cloners were no longer pulling Mac users in several directions, and Mac sales shot up 40% in a single year, going from 2.7 million in 1998 to 3.8 million in 1999.
Streamlining the Mac product matrix helped Apple and its users focus, and over time Apple added other models to expand beyond its original four quadrant map – such as the Power Mac G4 Cube, the Mac mini, and the MacBook Air. Mac unit sales hit 4.6 million in 2005 and have increased to four times their 1995 volume with 18 million Macs sold in the past four quarters. [This was originally written in May 2012. Annual Mac sales peaked at over 20 million units in 2015 and have settled back slightly to 19.3 million over the previous four quarters. This may be in no small part due to a dearth of new or updated models.]
After taking the focus off anything that didn’t grow Mac sales, Steve Jobs changed Apple by introducing the iPod in 2001, which lead to the birth of the iPhone in 2007 and the iPad in 2010. The iPod grew to become the dominant brand for MP3 players, the iPhone defined the smartphone, and the iPad is the best selling tablet ever.
Apple is remarkably profitable and one of the most valuable companies in the history of the world. Macs are only about 20% of Apple’s business, but it’s growing its Mac business at a far greater rate than the rest of the PC industry. And although its experiment with licensed Mac clones nearly destroyed the company, its return to the integrated model – which is also used for the iPod, iPhone, iPad, and Apple TV lines – demonstrates that you don’t have to be like Microsoft to be profitable.
- Send Out the Clones?, Dan Knight, 1997.08.23. Written less than two weeks before Apple bought out Power Computing’s license.
- Apple vs. Mac Clones, Adam Robert Guha, 2001.02.09
- Apple Squeezes Mac Clones Out of the Market, Dan Knight, 2007.08.30
- The Authorized Macintosh Clone Legacy, Low End Mac Round Table, 2011.11.04
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