Psystar promised investors huge clone sales

But clone maker sold just 768 systems, says Apple's economist

The Mac clone maker now fighting for its life in federal court pitched an extremely aggressive business plan to potential investors last year, claiming that it would sell as many as 12 million machines in 2011.

According to a slide presentation that Psystar showed to venture capitalists in 2008, the Florida-based computer maker projected sales during 2011 of between 1.45 million and 12 million, with the first figure its "conservative" estimate and the second number representing an "aggressive" growth model.

The presentation was one of the documents Apple appended to a motion filed Monday in a San Francisco federal court that asked U.S. District Judge William Alsup to shut down Psystar's sales of Mac clones. Apple asked Alsup for a permanent injunction that would force Psystar to stop selling any computer bundled with Mac OS X, a move prompted by Alsup's ruling earlier this month that Psystar violated Apple's copyright and the Digital Millennium Copyright Act (DMCA) when it installed Apple's operating system on Intel-based computers.

Apple acquired the presentation during the discovery phase of its July 2008 lawsuit charging Psystar with copyright and software licensing violations. Psystar started selling Intel machines with Mac OS X pre-installed in April 2008.

Psystar was looking for $24 million in funding, the presentation said, to expand its operations as well as to back its own branded hardware so it could "compete directly against Apple."

Under its conservative projections, Psystar told investors it would sell 70,000 computers in 2009, 470,000 systems in 2010 and 1.45 million machines in 2011. The firm's aggressive growth model, however, put those numbers at 130,000, 1.87 million and 12 million during 2009, 2010 and 2011, respectively.

By comparison, Apple sold 10.4 million Macs during its 2009 fiscal year, the 12-month span that ended Sept. 30, 2009.

To make its numbers, Psystar realized it had to sell a laptop, which it told potential investors it would launch in the first quarter of 2009. That notebook, tentatively named "OpenBook" to identify it with the company's "Open" line of desktop and server systems, was to boast a 13.3-in. display, an Intel 2 Core Duo processor running at 2GHz, 2GB of RAM and a 250GB hard drive. The OpenBook's price was set at $699, $300 below the price of Apple's lowest-cost notebook at the time, the MacBook.

Although Psystar's CEO, Rudy Pedraza, told reporters in August 2008 that his company was working on a notebook, one never appeared. Currently, Psystar sells only desktop computers and rack-mounted servers.

Psystar's sales models also appear to have been dramatically off the mark. According to an economist hired by Apple to analyze Psystar's business records in order to make recommendations on the damages the latter should be made to pay for its copyright infringement, Psystar sold fewer than 1,000 machines from April 2008 through mid-August 2009.

"Psystar produced incomplete financial records," Dr. Matthew Lynde, who works as an economics consultant for Cornerstone Research, said in a declaration submitted to Alsup on Monday. After digging through invoices, purchase orders and other documents, Lynde was able to pinpoint only 768 sales of machines with Mac OS X pre-installed. "Psystar has not challenged my analysis of its financial records," Lynde added.

Psystar even tried to turn the Apple lawsuit to its advantage when it pitched investors. In one slide of the presentation, the company argued that the ongoing litigation would "insulate" Psystar from "other PC manufactures [sic]" who might want to leap into the OS X market but would be frightened off by Apple's suit.

"This presents us with a unique window of opportunity to gain market share and achieve brand recognition before competitors can even enter the market," the slide read.

Alsup will hear oral arguments Dec. 14 from both parties on Apple's request for an injunction. The case is slated to go to trial in January 2010.

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