THE LAST FOUR years of NeXT, following the demise of the IBM deal in 1992, were something of a tragicomedy. Steve tried so many different strategies that the company meandered without direction. He created a cheaper, pizza-box-shaped computer called the NeXTstation, but it never gained any traction. He and his team decided to design another model, based on a new microprocessor called the PowerPC chip—the same one that Apple’s newer Macs would be using. But eventually they decided there was no real market for the machine—not a single one was ever manufactured.
Mike Slade, who was head of marketing for a time, would occasionally think fondly of his old employer, Microsoft, “which was like the Yankees,” he remembers. “Going to work for NeXT was like being a starting pitcher on the 1998 Florida Marlins, a team that won, like, what—fifty games? In those days, Steve was kind of a forgotten guy. He was like Brian Wilson [after he had walked out on the Beach Boys], someone who had faded, a has-been. He became a pretty irrelevant guy in the high-tech world. Steve was in the wrong business now. He was put on this earth to sell to consumers, not corporate IT managers.”
Steve had great marketing instincts, but they were wasted at a company that had not created a competitive product. One day he told Slade that he wanted to “pick a fight” with Sun. So he had Slade ask two programmers to create a fairly basic database application, one using a NeXT computer armed with the company’s software, the other using a Sun workstation and Solaris, Sun’s implementation of Unix. Slade had their work videotaped. The NeXT programmer completed his task so much earlier than his counterpart on the Sun workstation that he had time to play a bunch of computer games. The video that they eventually released showed the Sun programmer muttering, as time ran out, “Um, I’ve just got a couple more things to work on.” NeXT followed up with eight spread advertisements in the Wall Street Journal, spending the company’s entire marketing budget for that year in one swoop. The result? “A shit storm of publicity, just as Steve had predicted,” Slade recalls, with a suppressed guffaw. Sun’s Scott McNealy went public, whining about NeXT’s “immature” marketing. “What people didn’t understand,” says Slade, “is that Steve could be just as brilliant when he had to think small. I came up with this elaborate marketing strategy, and he said, ‘Nope. The only thing that counts is picking a fight.’ And he was right.”
If he was brilliant at moments, he was still confounded by the ins and outs of running the company. His series of managerial miscues reached its climax when he hired a garrulous Brit named Peter van Cuylenburg to run the company’s day-to-day operations. The tale of PVC, as he was called, speaks to how unfocused Steve could be. Having impulsively decided that he really had to hire a president, Steve ran through a series of barely vetted candidates before turning to van Cuylenburg, a veteran of Xerox and Texas Instruments, who had rejected by fax a previous job offer. Steve professed adoration. “If I was about to get run over at a crosswalk,” he told the New York Times, “I would feel good about leaving [Peter] in charge of NeXT.”
Eventually it was van Cuylenburg who got run over, figuratively speaking. He had promised to give NeXT a clear strategy, but that’s not what happened. Zeroing in on details, van Cuylenburg found resistance from some employees who felt he was more interested in process than products. Worse yet, he and Steve seemed to often be at odds. Investors like Canon (that had invested $100 million in 1989) would complain that they didn’t know who was running the company—Steve or van Cuylenburg. The staff, too, got mixed signals—at least a couple of top executives believed van Cuylenburg tried to sell the company to Sun Microsystems without telling Steve. Van Cuylenburg denies this, and Sun’s CEO at the time, Scott McNealy, denies that the two companies ever came close to a deal. But there’s no doubt that the two did not make a successful management team. PVC was not at NeXT for long.
Shortly after he left, Steve, the ultimate “hardware guy,” made the painful decision to end production of the NeXT computer. The physical design of computers engaged him more than anything else, and he took great pride in the beauty and functionality of the machines he oversaw. But the sleek NeXT computers weren’t selling. Steve reluctantly shut down the hardware division, fired half the staff, and shunted the remaining hardware and factory assets off to Canon in a deal overseen by Jon Rubinstein. The Fremont factory building itself was put on the market to be leased out or sold as what it had been before—basic warehouse space. The original dream—that NeXT would create the world’s next great computer—was over. “We got lost in the technology,” Steve would later tell me.
There was no hiding NeXT’s failure, and there was no hiding the fact that NeXT’s failure was primarily Steve’s doing. This was the low point of Steve’s career. He was distraught over having failed, and, uncharacteristically, he let his disappointment show. One day, Ed Catmull read a NeXT press release about, he says, “how NeXT is really happy to be selling software to control government information servers, or data centers, or something mundane like that. I read this and thought, Oh, shoot, this has got to be killing Steve. So I called him up. We met at a Japanese restaurant in Palo Alto, and I said, ‘This isn’t you, Steve.’ And he went, ‘Ohhhhh, I know! I hate this so much. I mean, CIOs are nice guys, but God is this awful!’ ”
In public, Steve tried to portray this shift as a bold bet on the company’s software, especially its NeXTSTEP operating system, which had, he said, “no competitors.” But this time his sophistry was recognized as such by the media—and by those competitors, like Microsoft, who supposedly did not exist.
Steve did not shut down the entire company. Just as he had never given up on Pixar, he never quite gave up on NeXT. And just as he had at Pixar, he decided to play out two separate end strategies. He halfheartedly pitched the company to Sun (again), Hewlett-Packard, and even Larry Ellison’s Oracle, but nothing ever came through. At the same time, he kept pushing Avie Tevanian and his software team hard. Steve genuinely believed he had the sharpest team of operating system software engineers in the business, and he still hoped that the workstation world might embrace the NeXTSTEP operating system. So the software engineers kept beating the bugs out of it, and porting it to other microprocessor architectures, such as Intel’s Pentium family, or the PowerPC chip from IBM and Motorola. Steve worried deeply about finding a way to repay his investors, who had provided nearly $350 million in working capital. Not making them whole would have mortally wounded his credibility as an entrepreneur if he ever tried to start another computer company. So Steve waited to see where NeXTSTEP—and Avie’s crack team of engineers—would lead him.
By 1996, it began to seem as if their efforts might pay off in at least a modest way. Avie’s team had developed another software product that was drawing accolades. WebObjects was a tool for building commercial websites and other online applications out of modules of prebuilt code, called “objects,” that sped the development process and allowed the reuse of standardized components. This capability was especially helpful in building online stores, and the World Wide Web was now teeming with independent software developers and corporate coders building interactive websites with a commercial component. Business had grown so quickly that sales of WebObjects licenses now generated more revenue than NeXTSTEP. Finally, NeXT could truly say it was generating a small operating profit. Steve even lined up Merrill Lynch to back a potential IPO. Once again, a company of Steve’s had found its footing by transforming into something other than what he had intended.
AROUND THAT TIME—on April Fools’ Day 1996, to be precise—a former air force captain named Fred Anderson showed up at Apple Computer headquarters at 1 Infinite Loop in Cupertino for his first day of work as the chief financial officer. What he found there was a disaster.
“It was a house on fire,” he remembers.
Anderson, who was then fifty-two years old, had held a similar position at a computer services company called ADP, based in Roseland, New Jersey. ADP was a well-oiled machine. But its business—providing data management services to oth
er large corporations—was about as prosaic as they come in the world of high tech. Anderson had been there four years and had already fixed whatever needed his special skills and attention. He was bored. Yet he and his wife, Marilyn, had spent years renovating and expanding their traditional Tudor home in Essex Falls, New Jersey, and he was just getting settled into the suburban life of a typical East Coast corporate big shot. He wasn’t looking for a new job. But then an executive search firm for Apple Computer came calling. The Cupertino company began aggressively wooing him shortly after CEO Michael Spindler abruptly fired the company’s previous CFO in November 1995.
Apple Computer had always meant something special to Anderson and his wife. Judging from his appearance, you wouldn’t suspect that Fred Anderson was what people now would call an Apple “fanboy.” He looked the part of a wonky, corporate CFO: tall, even-tempered, well coiffed, and partial to dress slacks and crisply pressed, monogrammed shirts or, when slumming it, to khakis and a polo shirt. But both he and his wife were avid Macintosh users and had always felt a special, almost romantic affection for the company since its very founding. Fred originally hailed from Southern California, and Marilyn had graduated from Stanford University, smack-dab in the middle of Silicon Valley. They had always hankered to move back to the West Coast.
So Anderson listened to what Apple had to say. As with all things Apple at the time, his recruitment had its own drama. Company officials didn’t bother to tell Anderson that, even as they were pursuing him, the company was secretly trying to hammer out a merger with Sun Microsystems. Anderson probably should have sensed that something was not right when one of his early phone conversations with Spindler, a gruff German nicknamed “the Diesel,” came while the executive was convalescing in the hospital for a health condition brought on by extreme stress. Spindler would be fired in the weeks ahead, after which Anderson found himself being courted as the first big hire of Apple’s next CEO, Gil Amelio, a former semiconductor executive who had been a member of the Apple board of directors for less than a year.
Ultimately, it wasn’t the sales pitch from Spindler or Amelio that swayed him. It was more as if Anderson sold himself on the Apple job, using the same logic Steve Jobs had used on John Sculley when wooing him with that famous taunt, “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?” Anderson liked the idea that he might help save a great American success story from oblivion. “There was a part of me that said, ‘You know, I’d hate to see that company die,’ ” he remembers. “That’s reason number one. I knew how passionate my wife and I were about their products, and I believed that there was this loyal, passionate customer base that didn’t want Apple to die. What I hoped was that it also translated into a passionate employee base that would fight to save the company, too. But to be honest, I didn’t know that for sure. When I told my wife I’d like to take the Apple job, she looked at me and said, ‘Are you crazy?! You already have a fantastic job.’ ”
Apple’s troubles were deep indeed and had worsened over many years. John Sculley’s “market-driven” strategy failed to produce any significant technological breakthroughs. Apple’s efforts to do so were only made worse by the CEO’s desire to prove himself to be as much of an innovator as Steve. Most costly of all his misguided efforts was his attempt to carve out a brand-new category of personal computing with a handheld device called the Newton, which was met with widespread ridicule after its highly touted handwriting recognition feature turned out to be prone to absurd malapropisms. It was an expensive failure, made worse by the fact that Sculley decided to open a bunch of Apple retail stores to sell the doomed new device. Sculley’s nurturing of the Macintosh did provide some financial cover for the company. But Apple’s share of the PC market eroded as Windows steadily improved.
The Apple board grew disenchanted with Sculley’s misfires and abruptly dismissed him in 1993. They replaced him with Spindler, the German sales executive whose idea of a strategy was for Apple to ape Bill Gates and license the Macintosh operating system to other manufacturers in a belated attempt to fend off Windows. But this strategy too failed, and the availability of cheap clones tarnished Apple’s mystique as a maker of premium hardware. Spindler, who preserved Sculley’s old “market-driven” approach to product development, also allowed Apple’s product line to swell uncontrollably, as engineers experimented with different bells and whistles in order to target potential markets that they thought warranted entirely new and distinct Macintosh models.
But Apple’s biggest problem was Microsoft. Bill Gates’s company had become a juggernaut, and with the release of Microsoft’s Windows 95 it formally seized the initiative for driving PC innovation from Apple. It even outdid Apple in over-the-top marketing. Gates introduced this landmark version of his industry-standard operating system with a tightly orchestrated, worldwide rollout emceed by Jay Leno from a big white circus tent on the Microsoft campus and beamed by satellite to gatherings in forty-three cities around the world. The fanfare prompted tens of millions of PC users to line up for hours or even days in order to be among the first to be able to buy the software and install it on their machines when it went on sale at midnight on August 24. The Rolling Stones’ “Start Me Up” was the official promotional anthem.
Apple’s own attempts over the previous eight years to modernize the architecture of its computer operating system had failed again and again. Projects with code names like Pink, Gershwin, and Copland fell by the wayside, and a couple of awkward joint ventures also went nowhere, including one with IBM curiously named Patriot Partners. The problem was that there were so many things Windows 95 could do that Apple’s aging Macintosh System 7 simply couldn’t begin to match. The list included nerdy-sounding features like preemptive multitasking, which allowed several applications to operate simultaneously without interfering with one another, automatic document saving, and most important, much greater speed, stability, and reliability. Microsoft went so far as to hire the graphic designer for the original Macintosh onscreen icons to spiff up Windows’ look and feel. Windows 95 also introduced the “Start” button, which made it much easier for users to deduce how to launch programs and otherwise manage files in a PC. Overnight, Apple’s sales tanked, and inventories of unsold Apple machines and unused components began to pile up. Worse, Apple seemed to have instantly and visibly lost whatever mojo it was that had made it seem cool for nearly two decades. After Windows 95, Apple wouldn’t post consecutive years of sales growth again until 2002.
By the time Spindler was bounced in the spring of 1996 and replaced by Amelio, Apple had become an undisciplined and unmitigated mess in just about every way imaginable, with sales shriveling at a truly alarming rate. No longer a growth company, the cash-strapped outfit was beginning to hemorrhage money. It had far more manufacturing capacity, inventory, and, of course, employees than it needed or could afford. There were no promising new products in the pipeline, much less over the horizon. No wonder Spindler had been so stressed out, and no wonder he was fired. No wonder Amelio and longtime Apple director Mike Markkula immediately redoubled their efforts to find a buyer, like Sun Microsystems or the old AT&T or even IBM. No wonder they had to consider filing for bankruptcy. No wonder they needed a great CFO.
Anderson gave his notice to ADP in March, and spent a month consulting for Apple before he and his wife moved west. He knew the situation was getting desperate, but it wasn’t until he arrived at corporate headquarters that he began to get a sense of just how bad things were in Cupertino. Nothing in his career had prepared him for anything quite like this. ADP had posted thirty-five consecutive years of double-digit earnings. His employer before that, a minicomputer maker called MAI Basic Four, had been through some rough patches, but nothing comparable to Apple’s quagmire. In the previous six months, Apple had swooned from being marginally profitable to posting a loss of nearly three-quarters of a billion dollars in the first calendar quarter of 1996. The company soon would be technicall
y in default on hundreds of millions of dollars of bank loans. On his very first day at Apple, Anderson was shocked to learn that Amelio had already asked bankruptcy counsel to stand by. What Fortune 500 CFO in his right mind would want to step into this mess?
STEVE OBSERVED APPLE’S dire straits from a safe distance, fretting and muttering under his breath and off the record, like an embittered and estranged parent, that the famous company he cofounded might collapse of its own ineptitude. After ten years in exile, he still harbored a strong sense of attachment to his firstborn company and many of its employees. “He loved Apple,” says John Lasseter. “I mean, he loved Apple the whole time. It was painful for him to watch what was happening to it.” Indeed, the reason Steve had held on to one share of Apple stock for the previous decade was to be able to keep getting shareholder information materials and, if the spirit moved him, to be able to attend the annual shareholders meeting. He hadn’t cut the cord completely.
In 1995, his billionaire friend Larry Ellison had suggested the idea of making a hostile bid to buy the company outright so they could take it private and run it as they saw fit. Ellison had even offered to raise the bulk of the money, so Steve wouldn’t have to risk his own resources (Pixar hadn’t yet gone public). “Steve’s the only one who can save Apple,” he told me. “We’ve talked about it very seriously many, many times, and I’m ready to help him the minute he says the word. I could raise the money in a week.” But Steve had nixed the effort. Despite the allure of Apple, he had made a pragmatic decision. He was in the middle of Pixar’s most critical year, when it released Toy Story and went public. He was trying to salvage NeXT. And Laurene was pregnant with their second child. It had all seemed like too much.
Becoming Steve Jobs Page 21