for weeks, the rumors have swirled. Apple is going out of business. Apple has no next-generation operating system. Desperate Apple seeks help from unlikely former executive.
This latest round of the Apple death-watch has focused on a little company called Be Labs, founded and run by one of the most volatile and eccentric personalities ever to grace an Apple executive office, Jean-Louis Gassie. Be has done, in less than two years, what Apple has been unable to do in nearly six: develop a new, state-of-the-art operating system kernel to run on the Motorola PowerPC processors which lie at the heart of Macintosh and Macintosh-clone computers.
Apple's operating system is old and creaky. Its "updates" have made the most meager of technical improvements. Meanwhile, Apple's arch operating system rival, Microsoft, has released three versions of its widely popular Windows system and two major upgrades to its long-term strategic OS design dubbed Windows NT.
What's really wrong with the current Macintosh OS? Critics typically focus on three problems:
- Unreliability. As it has been patched and glued together during the last five years, it has gone from a rock-solid, stable OS to a shaky platform whose users expect it to crash daily.
- Slowness. The Mac OS has grown to an unwieldy size of several million lines of program instructions.
- Legacy-burdened. Like Windows and, to some extent, Windows 95, it must continue to run programs designed for its earlier releases which were not nearly as capable as the present version.
Enter Be Labs. Its operating system, BeOS, is designed and engineered from the ground up to deal with many of the complexities of modern software development. It is blazingly fast. Even its pre-release versions crash less frequently than the five-year-old Mac OS. The fast-growing Mac clone maker, Power Computing, has already signed up to include the BeOS in their systems in early 1997 as a user-selectable alternative to the Mac OS.
It's also sexy. And those who have known and followed Gassie over the years know that that quality is more important to him than almost anything else you could say about his company's product.
Be started life as a hardware company; it was going to build and sell a super microcomputer -- the BeBox -- that gadgeteers would fall in love with. Gassie told me once, near the beginning of his Be experience, "You can make money selling new gadgets in this business; there are about 10,000 gadget freaks in this valley alone who will buy one of anything just to say they had one once."
But Be has made a smooth transition from a hardware-only company to being the proprietor of the most sought-after operating system on the planet. And Apple has been paying attention, frequently visiting Be Labs and making little secret of wanting to get its R&D mitts on the BeOS for its future operating system. What it has not been paying is enough money to get Gassie's attention. Yet.
Sources close to the negotiations that have been under way between the two companies for a couple of months say that money is the only stumbling block between them at this point. But the gap isn't tiny. Apple reportedly opened discussions with an offer in the $130 million range. Be countered with a number closer to $500 million. Not bad for a company with 40 employees which has yet to ship a commercially-sold product. Apple insiders told me in the last week that a deal in $200 to 250 million range "or perhaps a hair more" would make economic sense for them.
Some press reports have indicated that another stumbling block is Gassie's role in the event of an Apple acquisition, but normally reliable sources indicate that is not the case. Not only does Gassie not really want to return to Apple -- "He's not the kind of guy who wants to go back to anything," one of them said -- but Apple isn't seriously interested in buying Be. Instead, it wants a non-exclusive license to the core of the BeOS code, known as the "microkernel."
There is irony here. Gassie, as Apple's chief of product development, staunchly opposed the licensing of the Macintosh OS -- which he described as the company's "family jewels" -- and thereby played a major role in the slide into near oblivion the company has experienced over the past two or three years. Because the Mac OS was not available from third parties and other manufacturers, many customers were reluctant to adopt it even when it was regarded as the best operating system out there, which is no longer the case.
Does Apple need the BeOS? Some Apple sources say no, citing its own super-fast microkernel already running in Apple's R&D labs. But the R&D group is in incredible disarray. Recent top-level management shakeups severely shook the confidence of many Apple engineers and some of the best have left the company. Having a new microkernel code alone is not enough without knowledgeable engineers to finish, extend, enhance, and maintain it.
Senior Apple executives know they must come up with a meaningful OS strategy. CEO Gil Amelio and his hand-picked R&D chief Ellen Hancock have promised an announcement on Jan. 7, the day the semi-annual Macintosh user love fest known as MacWorld Expo opens in San Francisco. It hardly seems possible that they can, by that time, sort out the R&D problems inside Apple, let alone make a convincing case for a proprietary operating system they have announced, delayed, changed and shifted position on so many times that all credibility has been lost. Be is their only hope if the Jan. 7 deadline is real.
Hancock, whose methodical, almost plodding style of R&D management is a stark and sometimes welcome contrast to her predecessors' breakneck lurching and bumping about, has insisted publicly that Apple is talking to many different potential OS vendors. That may be true, but unless she's prepared to hop onto IBM's stalled OS/2 bandwagon -- highly unlikely as OS/2 has about as much commercial viability as the old Mac OS -- she will be forced to choose between Apple's own work, a complete unknown and untried system that has no public exposure, and the BeOS. (Speculation about the possibility of Apple opting to team up with Apple founder Steve Jobs' NextStep OS or Sun's Solaris system ignore the fact that neither of those products runs on the PowerPC chip at the heart of all present and future Macintosh computers. There just isn't time to wait for one of them to be ported to new silicon.)
Look for Apple and Be to announce a licensing deal -- with terms perhaps still a bit vague -- at MacWorld. Gassie will stride to the speaker's rostrum, rub his thumb and forefinger together in a circular motion and talk about the sexy feel and appeal of the deal.
And then he'll probably start planning a lucrative retirement.
If you run an all-you-can-eat restaurant, the last thing in the world you want to see is a bus load of fat people pulling into your parking lot.
-- David Rocker, president of Rocker Partners, a New York investment partnership that tracks the Internet market, referring to Internet users who go online and never get off. (From "An 'All You Can Eat' Price Is Clogging Internet Access," in Tuesday's New York Times)