Becoming Steve Jobs

by Brent Schlender

  In retrospect, deflecting Ellison’s offer was the first of a series of practical, well-considered, and mature decisions that Steve would make on the road back to Apple. Opportunism, intuition, and manipulation would all come to play a role in his return to the company he loved most. But by also employing a newfound patience and maturity, Steve would return a better businessman.

  FRED ANDERSON’S FIRST official duty was to announce that Apple had lost $750 million in the quarter that had ended the day before he arrived. He had indeed walked right into a house on fire.

  The grisly loss triggered bank agreement covenants that called on Apple to immediately pay back some debt. But if Apple did so, the company would quickly find itself in what is euphemistically called a “liquidity crisis”; in plain English, Apple would not have enough cash on hand or in the bank to make those required payments and to pay its other bills and employee salaries. So Anderson knew he would have to move quickly to persuade Apple’s banks in the United States, Japan, and Europe to forgo calling their loans for a time. Then he would have to get cracking to accomplish two things that might keep the banks at bay: work out a recapitalization plan to raise more money in the public bond markets, and set in place a restructuring plan that would drastically reduce the company’s operating expenses. The word restructuring is a euphemism, of course. The very best way to reduce expenses in a hurry is to lay off employees. Lots and lots of employees.

  Before April was out, Anderson had personally visited all of Apple’s major bank lenders to ask for leniency, and to present his intentions for restructuring and recapitalization. He also went to Apple’s lead investment bankers—Goldman Sachs, Morgan Stanley, and Deutsche Bank—to put together plans for a “commercial paper” offering designed to raise $661 million, which the company would use in part to pay its bank lenders and to help fund ongoing operations. It was basically yet another loan, this time from investors and at a somewhat higher rate of interest, but it bought Apple time to put its house in order and to trim its head count. The goal of the restructuring was to eventually eliminate fully half of its eleven thousand full-time employees, so that the company would be able to break even with sales of around $5.5 billion, or half of its annual sales in 1985. In other words, Anderson believed that half of the company would have to disappear before things would bottom out. The layoffs would come in three waves over the next two years.

  The restructuring and recapitalization plan bought CEO Gil Amelio more time and flexibility to find a way to address Apple’s other big problem—its technological stasis. He needed to go shopping for an existing advanced operating system that Apple could adapt to the Macintosh to help it keep pace with Microsoft’s new, improved Windows 95. Doing so would be an open admission of Apple’s inability to create competitive technology on its own, but at least it would offer a glimmer of hope that the company had other options than a merger or bankruptcy.

  To find a shortcut to developing a more advanced version of the Macintosh OS, Amelio looked for companies that had built a working version of Unix that ran on familiar microprocessors. Sun and several other companies, including IBM, Apollo (by now part of Digital Equipment Corporation), NeXT, and an obscure Silicon Valley startup called Be Inc., all had developed their own implementations of BSD Unix—a version developed by Sun cofounder Bill Joy—and had managed to “port” them to machines employing chips from the very same family of microprocessors that Apple used in its Lisa and Macintosh. The pure software companies were most interesting because they were cheap enough to buy outright, and small enough to absorb. NeXT was one possibility, but because it was run by Steve Jobs, a man many on the Apple board still considered to be persona non grata, that didn’t seem a likely match. But Be Inc. seemed like an intriguing possibility. That’s because Be was headed by Jean-Louis Gassée, the former head of advanced product development for Apple, who had left in late 1990 after clashing with Sculley.

  JEAN-LOUIS GASSÉE WAS the Apple sales and marketing guy who had warned John Sculley that Steve was planning to challenge his authority in the spring of 1985, prompting the CEO to cancel his trip to China and impose a corporate reorganization that all but marginalized the young cofounder. That sealed Gassée’s fate in Steve’s eye: from then on, he always thought of the Frenchman as a backstabber. Their enmity was hardly surprising. Gassée shared some of Steve’s most cagey characteristics: he was glib and charismatic and a master of hyperbole who passed himself off as a technical expert when in fact he had no more background as a software or hardware engineer than Steve did. Like Steve, he prompted strong feelings. “If there’s anyone who’s a prickly bastard in this world, if there’s one guy who actually competes in the prickly bastard game quite effectively,” says one industry veteran who worked with both men, “it’s the guy who learned at the hand of the master.”

  They had other similarities. Shortly after quitting Apple, Gassée started his own computer company in a huff, bringing along several key Apple employees. His business strategy was reminiscent of Steve’s approach at NeXT. Be Inc. set out to design an entirely new software and hardware architecture for a computer Gassée called the BeBox, which would incorporate an operating system—BeOS—that shared some key attributes of Unix. What made the BeOS and the BeBox computer unique, however, was that they were designed to also be able to use the existing Macintosh OS, and thus operate like a Mac “clone.” The intent, essentially, was to build a computer that could be two machines in one.

  Much like NeXT, however, Be hadn’t been able to build much of a market for its hardware, selling only two thousand machines before shutting down that part of its business in 1996, to focus on selling its software as an alternative operating system for Apple’s Macs and clones built by other manufacturers. Gassée felt that becoming a software-only company would position Be to other hardware manufacturers as a potentially attractive acquisition. There seemed to be several potential suitors out there among the seven companies that made Macintosh clones, including Motorola and a maker of Windows-compatible workstations called PowerHouse Systems, which was founded by Steve’s former head of hardware engineering at NeXT, Jon Rubinstein.

  When Gassée learned that Amelio had decided to go shopping for an operating system, he was shocked. It was almost as if the stars had aligned for him to sell his company to Apple, even though he would have to deal with some new faces at the company. “I was looking for an exit sign,” Gassée recalls, “and here came Amelio.” But Gassée made a serious tactical mistake by trying to milk the situation for all it was worth. Amelio offered to buy Be Inc. for about $100 million, which was a reasonable price for a company with its limited track record. But Gassée overreached, rebuffing Amelio’s offer, as well as a counteroffer of $120 million.

  I ran into Gassée one weeknight in late October 1996 at what was an unlikely haunt for him—the Buffalo Grill, a steakhouse (since closed) in a shopping mall in San Mateo, fifteen miles north of his hometown of Palo Alto. The location was out of the way, and not the kind of place where you would go to ogle Silicon Valley notables. That was precisely why Gassée had chosen the restaurant.

  My wife was with me, so I nudged her on toward our table while I hung back to say hello to Jean-Louis, whom I knew socially as well as professionally; our daughters were classmates at a school in Palo Alto. He was clearly embroiled in serious conversation; he hadn’t noticed me yet, so I slapped him on the back and asked him something like “What are you doing up this way? Don’t you have any good restaurants in Palo Alto?” Gassée recoiled as if I were a ghost. That’s when I looked around the table and recognized the others. Seated with him were Ellen Hancock, a former IBMer who was now Apple’s executive VP for R&D and chief technology officer; Douglas Solomon, Apple’s senior VP of strategic planning and corporate development; and venture capitalist David Marquardt (who also sat on the Microsoft board of directors). Marquardt, I knew, was Be’s primary adviser for financial dealings, and his firm was also Be’s biggest investor. I realized that the very last
thing this group wanted was to be seen by a business journalist. Never before had I seen the voluble Gassée at such a loss for words.

  When I rejoined Lorna at our table, I told her how awkward the encounter had seemed. My first reaction was that it was some sort of powwow about bringing Gassée back into Apple’s management team. But if that were the case, why would Ellen Hancock, who was so new to Apple, be there instead of Gil Amelio? “Well, what do you think Steve would make of it?” Lorna asked. So, when we got home, I called Steve at his home.

  It was a rather short conversation. When I asked Steve what he thought might be going on, he immediately shifted into petulant mode. “Jean-Louis Gassée is evil,” he snapped. “I don’t say that about many people, but he is evil.” Then he made some comment to the effect that whatever Apple had planned, the company should have nothing to do with Gassée or his technology. “We’ve been at this for ten years at NeXT, and the BeOS is shit. It has to be. Operating systems get better with age and the BeOS isn’t old enough or tested enough to be any good.” That didn’t really answer my question, but it sure showed I had gotten his dander up. I asked him to be sure to let me know if he heard anything interesting. Not surprisingly, he didn’t; I didn’t talk to him again until December, when I called to see if I could get some comment from him for a story about Apple’s surprise purchase of NeXT for cash and stock totaling $429 million.

  STEVE HAD SWUNG into action long before my phone call. Earlier that fall, Avie Tevanian had alerted him to the fact that Apple was looking for an operating system, and Steve immediately met with his investment bankers to determine if it made any sense to try to sell NeXT to Apple. “We felt that we were a generation ahead of everyone else, and now we might have the chance to make that work in a mass-market world,” says Tevanian. While it was public knowledge that the NeXTSTEP OS had been ported to Intel’s PC microprocessors, it wasn’t widely known that Avie and his team had also gotten it running on computers using the PowerPC chip. Avie and his team knew their way around all the major nonproprietary microprocessors, which is more than could be said for Be’s programmers. Steve had told Avie to drop the PowerPC effort a few months earlier; now Avie had his team revive it and double down to make sure the OS was ready to present to Apple.

  Steve was playing three games at once as he approached Apple. First, he really wanted to torpedo Gassée. “Steve was bitter that I chose to side with Sculley,” Gassée remembers. “He said I stabbed him in the back, and whatnot.” One evening, as Steve was leaving the Palo Alto restaurant Il Fornaio, he passed a table of software execs that included Gassée. “So I hear you’re going to save Apple, Jean-Louis,” he said, before heading out the door. Gassée had no idea that NeXT was even being considered by Apple. He thought he had the deal sewn up.

  Second, Steve wanted to protect and pay back his investors. Third, he wanted to find suitable next acts for the key people who had stuck with him at NeXT. As Susan Barnes once told me, “If you weren’t good at your job, he owed it to the rest of the team to get rid of you. But if you were good, he owed you his loyalty.” So while the price was important, so was what the acquiring company intended to do with the NeXT technology, and how they would embrace the technologists who built it. Steve knew he had to convince Amelio that the real jewels that Apple would be acquiring were NeXT’s people.

  Amelio was an easy mark, and Steve knew it. He saw him as a stuffed shirt who enjoyed the fruits of being CEO but knew little about selling personal computers. So Steve was at his flattering best as he wooed Amelio. In a crisp presentation to the CEO and Ellen Hancock on December 2, he explained that he was willing to do whatever it took to make the deal work, and that he was confident that their good judgment would lead them to NeXT. On December 10, he and Avie made what Amelio himself described as a “dazzling” presentation of the NeXT operating system, during a bake-off against Be at the Garden Court Hotel in Palo Alto.

  Just ten days later, Steve had a deal, one that was sealed in Steve’s kitchen and got him out of NeXT with more than he could ever have imagined. Avie was guaranteed a central role in the development of Apple’s system software strategy and a spot on Amelio’s senior executive staff. The price was rich, thanks largely to the recent success of WebObjects, and especially compared to what Amelio had offered Gassée: Steve and his investors would get $429 million in cash and Apple stock. “It wasn’t about the money,” says Gassée, who concedes that he asked too much for Be. “It was about bringing Steve back. He had a choice between bringing Steve back or not bringing Steve back, and he made the right choice. They could do things we couldn’t do.”

  Most of the Apple shares went to Steve, who agreed to sign on as special adviser to Amelio. The annual MacWorld trade show in San Francisco was coming up in a few weeks, so he offered to make one of his trademark stage presentations after Amelio’s keynote address to publicly underscore his “return” to the company he helped hatch.

  On a Saturday in late December, Steve invited me over to his house. He was already working on his remarks for MacWorld, and he wanted to see what lines would resonate. But he also wanted to talk about Amelio. “You wouldn’t believe what a bozo Amelio is,” he hissed. What most galled him was that Amelio, he felt, had no clue about selling to walking, breathing people. “All he knows is the chip business, where you can count your customers on one hand,” Steve groused. “They aren’t people, they’re companies, and they buy chips by the tens of thousands.”

  I reminded Steve that just a few months earlier he had told me about how he and Larry Ellison had briefly mulled the possibility of a hostile takeover of Apple. “If he’s such a bozo, why are you sticking around? Couldn’t you take your share of the money and just walk?”

  “I can’t just walk away from Avie and the others, and say ‘So long, nice knowing you!’ Plus,” he continued, “I can tell that there are still a lot of other really good people at Apple. I just don’t think Amelio is the right guy to lead them.”

  “Well then, what about you?” I said, asking the question on everyone’s mind. Steve hemmed and hawed. He seemed as unsure of himself as I’d ever seen him.

  THERE ARE SOME people who have always believed that Steve did everything he could to engineer a triumphant return to the top job at Apple, that he was executing some grand master plan all along. Gil Amelio is one of them; Bill Gates is another.

  The truth is more subtle. Over the previous decade, Steve had learned to act less impulsively. In the past, he had overreached time and again. Now he was willing to walk slowly down a path, and if following his nose led him somewhere better than where he thought he was headed, that’s where he would go. In the months after the sale of NeXT, as he studied Amelio and understood more about the current state of Apple, Steve displayed the more deliberate approach he would bring to the company when he was in charge.

  The two men whom Steve trusted the most at Apple during the period following the sale of NeXT agree that Steve did not intend to become Apple’s CEO. Avie Tevanian was now Amelio’s chief of software engineering, while Jon “Ruby” Rubinstein had been brought in at Steve’s suggestion to run the hardware division. “We didn’t think we were coming to Apple to work for Steve,” says Tevanian. “He just didn’t seem that interested.” Steve repeatedly told them he was reluctant to take on the job, much less lobby for it.

  Coming to Apple wasn’t exactly a dream come true for either Avie or Ruby. A few weeks after the NeXT deal closed and the two were settling into their new roles, Apple revealed that it had lost $120 million during the quarter ending December 31, 1996. “I asked Steve, ‘What have we gotten ourselves into here?’ ” remembers Tevanian. “Because it was clear that Apple was the company that was broken, not NeXT. You could look at the two of us as Steve wanting to get his own people in, but he did it because it was the right thing. He knew these other people. They were the reason Apple was screwed up.”

  “I don’t believe any of the Machiavellian stuff,” adds Ruby, a native New Yorker with the svelte
looks of a long-distance runner. “When I got there, I took a look around and thought, Oh my God. What did I just get myself into?”

  In the weeks after our December chat, Steve and I met a few more times over his kitchen table for a series of off-the-record discussions. Steve described what he was finding at Apple, in the hope that I would push ahead with a story about the sorry state of things in Cupertino. He spoke freely, although he insisted that I disguise any quotes I wanted to use. At one point he rhetorically asked: “Why do I feel like it’s my fiduciary responsibility to see a negative story about my own company?”

  The main answer was that the more he got to know Amelio, the more he realized that Dr. Gil—and his team—could never lead Apple back to any kind of prominence. He was dismayed by so much at the company, and he blamed the board of directors as much as Amelio. He couldn’t believe that any board could ever have envisioned the dour Michael Spindler, “the Diesel,” as an inspirational leader, just as he was dumbfounded that the board had then hired someone like Amelio. He believed that Amelio, who ascended to the CEO position after just one year on the board, had maneuvered himself into the gig by positioning himself as a turnaround expert. “But how can he be a turnaround expert,” Steve asked me, “when he eats his lunch alone in his office, with food served to him on china that looks like it came from Versailles?”

  Amelio did himself no favors. Rather than adapt to Apple, he seemed to try to get the company to take on his personality. He had surrounded himself with top executives drawn mostly from the semiconductor industry he knew so well, and he was never effective in public situations. Once, while talking to a group at a dinner party that included Larry Ellison, Amelio tried to put his company’s problems in perspective for the other guests. “Apple is a boat,” he said. “There’s a hole in the boat, and it’s taking on water. But there’s also a treasure on board. And the problem is, everyone on board is rowing in different directions, so the boat is just standing still. My job is to get everyone rowing in the same direction.” After Amelio walked away, Ellison turned to the person standing next to him and asked, “But what about the hole?” That was one story Steve never got tired of telling.