posted by Thomas Hormby on Mon 2nd Oct 2006 19:11 UTC

"Business Decision, Page 2/3"
Not Firing/Demoting Jobs Sooner

Steve Jobs was a visionary at Apple, and was able to motivate people to work feverishly towards a single goal. That said, he was a bad manager. The Macintosh/Lisa division had been working at a breakneck pace for over two years, and had a lot to show for it. The Lisa, though a bad seller, was the original graphical workstation. It was used in some applications for years after it had been rendered obsolete by other Apple products. The Macintosh was a phenomenal success in its debut year, but the Macintosh/Lisa division failed to capitalize on that success. BigMac was making little progress despite a big budget and the rest of the Macintosh Office were nonstarters as well.

Jobs management style worked with the small Macintosh team before 1984. He convinced his engineers that they were working towards a revolution in the computer industry. They put in 80 hours a week and were incredibly devoted. That kind of energy would not last long. After the Macintosh launched, many of the senior developers took extended vacations, and many of them never returned. That meant that brand new engineers had to work on important projects like the BigMac and FileServer, and unsurprisingly, they made little progress.

The fact that Jobs was actually leading the Macintosh/Lisa division was startling. For years, Jobs had taunted the Lisa developers and tried to divert its resources from to the Macintosh. Sculley was eager to make his mark on Apple, and one of his first acts as CEO was to combine the Macintosh and Lisa divisions.

On the day the teams merged, he told the assembled engineers that the Lisa team 'really fucked up', alienating almost half of the engineers he would have to manage. Unsurprisingly, the Lisa flagged. After the Lisa 2 was released in 1984 with the Macintosh, the Lisa had only one revision, the Macintosh XL, which was actually a Lisa running a Macintosh emulator.

Jobs tried to press his new staff into developing great software, fast, but he failed. The projects were either too advanced or the engineers were too fresh. The end result was that Apple had no major product in 1985, and profits tumbled. Eventually, Jobs was ousted from the Macintosh/Lisa division, and would resign from Apple on Friday, September 13, 1985, but it was too late to rescue any of the failed projects.

Licensing the Mac OS to Power Computing

Apple's goal in licensing the Mac OS to outside developers was to flood the market with low cost Macs that were more powerful and less expensive than PC's. Apple would profit from the increased Mac OS sales, the Mac OS ecosystem would benefit from greater developer interest and the cloners would make a bit of profit to boot. That's not what happened, though.

CEO Michael Spindler started talks with several PC companies, the most prominent of which was Gateway 2000. Inexplicably, Spindler cancelled discussions after Gateway 2000 demanded that Apple cut its licensing fee. As a result, one of the biggest consumer PC companies in the world would never sell Macs.

Spindler had to settle for smaller companies, like Radius, Motorola and Power Computing. None of the companies had any experience selling PC's. Worse, they lacked the sales teams that would be able to get them into big businesses, where a low cost Macintosh would be particularly attractive. Radius did not even have the facilities to build computers, it subcontracted to IBM, which produced Radius-branded clones.

Power Computing initially released low end Mac clones like Apple expected, but like Apple, Power Computing's founder, Steve Kahng, discovered that there weren't profits in the low end. Power Computing started selling souped up clones that competed directly with Apple, and came out ahead. Its machines were cheaper and faster. Power Computing's sales grew from $21.5 million in the first quarter of 1996 to $98.5 million in the fourth quarter.

Many of Apple's most demanding customers jumped ship to Power Computing, depriving the company of much needed revenues during a desperate period in Apple history (the company would have to write of $1 billion in unsold computers that year). Eventually, Steve Jobs bought Power Computing's license and effectively killed the company.

Firing John Sculley

Measured by marketshare, Apple was the largest PC company in the world in 1992. Though it would quickly lose that title to Compaq, the growth in sales should have been excellent news for John Sculley and Apple, but it wasn't.

The first five years of Sculley's tenure at Apple were dominated by his cadre of executives, first by Steve Jobs, later by Jean-Louis Gass'e and Alan Loren and finally by Michael Spindler. He had not been well served by any of them. Jobs demoralized the Macintosh/Lisa division, Jean-Louis Gass'e presided over grotesque profit margins at the expense of growth during a critical period of growth in the PC industry and Michael Spindler couldn't handle the stress of managing Apple's international operations.

But after he started running Apple himself, he enjoyed a great deal of success. Successful products like the Macintosh LC, Macintosh Classic and the PowerBooks buoyed Apple's reputation and padded financial results. In fact, the PowerBook would remain the most powerful notebook in the world from the year it was released to 1995 and the 5300 debacle.

Despite the great successes, Sculley's reputation was sullied in the eyes of the board by the tainted Newton and failed negotiations with IBM and AT&T. Unlike many at Apple, Sculley believed that Apple did not have the resources to compete with Microsoft, Intel and the clone manufacturers on its own. It needed the money and brand of a company that corporate America could trust. Sculley had nearly convinced AT&T to buy Apple in its entirety, but AT&T dropped out at the behest of its existing PC division, NCR.

Two years later, in 1992, Sculley was contacted by a headhunter looking for a successor to IBM's CEO, Jack Keuler. Unbeknownst to Sculley, he was actually very low on the list of candidates, but the contact piqued his interest. Sculley started talks with Jack Keuler about IBM buying Apple. Keuler wanted to build a relationship with Apple first, and then consider buying Apple. The relationship turned into the AIM alliance and the PowerPC, but that was still years away.

The board wanted results now, not in a few years. Their impatience and the machinations of Michael Spindler ultimately cost Sculley his job. The man who had led Apple for almost a decade was out of his job, despite the fact that Apple was enjoying record sales. Apple quickly spiraled into a dark period, and would never see its marketshare recover.

Table of contents
  1. "Business Decision, Page 1/3"
  2. "Business Decision, Page 2/3"
  3. "Business Decision, Page 3/3"
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