APPLE BAD NEWS II ????
Metrowerks, Second Wave diversify in face of Mac woes
Austin Business Journal, Friday, August 15, 1997 at 19:36
Long before the woes of Apple Computer became acute, much of
Austin's Macintosh development community saw the writing on the wall
and began to diversify into other markets.
Power Computing of Round Rock, though certainly the most
publicized, is not the only company racing to diversify its product
line in the face of Apple's uncertain future.
Metrowerks of Austin, which develops programming tools for the
Mac, already is far along with its own diversification effort. Only
one year ago, all of the company's sales were derived from its
"CodeWarrior" software compiler for the Mac operating system.
Today, that portion is down to "no more than 20 to 30 percent,"
Metrowerks executives say.
"It's pretty amazing what we've done in a year," says Jim Welch,
chief financial officer of Metrowerks.
The company develops compilers, or software tools that translate
code from human-comprehensible words into computer language.
Metrowerks has finished, or nearly finished, adapting its
CodeWarrior line for seven different embedded, or consumer
electronics, markets, including handheld electronic organizers and
Sony Playstations.
The urgency to diversify was made starkly clear in the company's
most recent financial report. Metrowerks experienced its lowest
quarterly total ever for sales of MacOS-based products in its third
quarter of fiscal 1997.
Mac programmers - Metrowerks' clients - have made a major exodus
to competing platforms over the past year or so.
Metrowerks lost $1.6 million, or 14 cents per share, during the
third quarter. Those losses were largely due to the company's
absorption of research-and-development costs related to its
diversification effort.
"Over the past year, Mac revenue was just offsetting the company's
R&D expenses," says David Kramer, an analyst with Dominion
Securities of Montreal. "Going forward, embedded products should
lead to sustainable profitability."
Kramer expects the company will report much stronger results in
its fourth-quarter report, which it will issue at the end of August.
Another local firm, Second Wave Inc., maintains a modest but
stable position within the Mac market - a factor making the company's
diversification drive less of an emergency situation, company
executives say.
The 10-year-old company develops MacOS expansion chassis
architecture, which allow computer users to add slot capacity to
their machines for sound cards, graphic cards and other uses.
Its customers are concentrated in high-end corporate markets, such
as data acquisition and industrial control - markets that tend to
react less wildly than consumers to market swings.
"Our Mac product line continues to be a profitable business for
us," says Lark Doley, vice president of marketing for Second Wave
Inc. "We're sticking with it."
Nevertheless, Doley says, Second Wave is working to adapt its
expansion bus products to the Wintel platform. He expects its first
products for that market to ship early next year.
Both Metrowerks and Second Wave are helped by the fact that their
products are highly adaptable to both platforms. Second Wave's
expansion systems are based on the PCI Intel bus architecture, which
Apple uses for its Power Macintosh computers.
And approximately 80 percent of Metrowerks' CodeWarrior product is
portable, or transferable to different platforms.
"We've been planning this {diversification} since the beginning,"
says Jean Belanger, chairman and CEO of Metrowerks.
The diversification plans of Power Computing, the big fish of the
local Mac development community, have received far more media
attention than any other Austin firm. Power, which makes Mac clones,
recently announced it will go public and plans to use most of the
proceeds to develop computers based on Windows software and Intel
microprocessors.
According to Power's prospectus, which was issued June 30, the
company plans to ship its first Wintel product during the first
fiscal quarter of 1998. The company plans to make Wintel desktops
and portables, and servers compatible with both the MacOS and
Windows NT.
Power's prospectus states: "The company believes its direct
marketing expertise, combined with its continued use of Wintel
industry-standard components, will facilitate its entry into certain
Wintel market segments where graphics and multimedia capabilities
are particularly important."
That effort took on added importance after the recent MacWorld
Expo in Boston, at which Apple declined to clarify its position on
licensing the MacOS.
Most of Austin's Mac-related community expressed pleasure at the
news of Microsoft's new relationship with Apple. At the MacWorld
Expo, it was announced Microsoft would invest $150 million in Apple
and update its Office software suite for the MacOS.
The deal also calls for Apple to promote Microsoft's Internet
Explorer browser, and for the two longtime antagonists to settle an
outstanding patent dispute.
"I think the prospects for the Mac market have never been better,"
says Metrowerks CEO Belanger.
An industry analyst says he expects the Apple-Microsoft
announcement will have no effect on Power.
"The main issue is for Power's licensing," says James Staten, an
analyst with DataQuest of Mountain View, Calif. |
