Steve was unfair to Amelio. Although he did once tell Amelio that arranging the $661 million in new financing was a good move, he gave him little credit for anything else, even though it was Amelio who signed off on the critical restructuring that Anderson was managing. And when Steve did acknowledge that there was some good work going on inside the company, he credited this to employees who had the true “Apple spirit”—the one that he and Woz had instilled years before—and not at all to Amelio.
But Steve was also right about Amelio, as I discovered when I did finally report and write a story about Apple for Fortune in early 1997. In dire need of strong leadership, Apple was in the hands of a bumbling CEO. It had almost two dozen separate marketing teams, which didn’t communicate with one another. Its product line was metastasizing. The Mac clone licensing program made no sense. And Amelio was letting the problems get out of hand.
His lack of leadership went on public display at the annual MacWorld trade show in San Francisco, on January 7, 1987. Amelio’s opening speech was a meandering disaster. Back then, Apple held four annual MacWorlds, with the others coming later in the year at Tokyo, Paris, and Boston. The keynote speeches had become Apple’s primary showcases for introducing new products, and for rallying software developers and customers. Amelio, a barrel-chested, stiffly moving introvert, tried his best to appear a little more hip by ditching his usual uniform of wingtips and a pin-striped suit for a brownish shirt with a banded collar, a sport jacket, and loafers. The highlight of his talk was supposed to be the formal announcement of the acquisition of NeXT and of Steve’s return as an adviser. Steve, who had dressed up more than usual, sporting tailored, pleated black pants, a matching Eisenhower jacket, and a white shirt buttoned tight at the collar, waited in the wings as Amelio droned on and on. Gripping the podium at an odd angle, the CEO rambled for more than an hour through a scripted pitch that made little mention of the company’s continuing financial predicament. Even though he relied on a Teleprompter, he lost his place. At one point, in a display of pseudo-casualness, he removed his jacket, and you could see large dark circles of perspiration emanating from his armpits, like the actor Albert Brooks in the famous scene from Broadcast News.
Steve was greeted with rapturous applause when Amelio finally got around to introducing him. It had been six long years since he had made a corporate strategy presentation to an audience of any meaningful size, and he seized the moment. In contrast to Amelio, he kept his remarks short, cool, and crisp. He promised to “help Gil in any way he asks me to,” and vowed to help make Apple’s products exciting again. Speaking without notes, he calmly worked the front of the stage so people could get a good look at him. He was encouraging and forceful, yet purposefully vague. He didn’t want to make any specific promises; after all, he still wasn’t sure he really wanted to have anything to do with Apple.
“Initially,” Anderson remembers of those early days, “Steve simply didn’t engage. Amelio always had these formal staff meetings, and Steve attended one shortly after MacWorld. It was kind of boring, and Steve didn’t like how it was going. So in the middle of the meeting he just got up and walked out. I know what he was thinking—this guy is a bozo.”
That’s exactly what Steve told me again a couple of weeks after MacWorld. “I know I’ve said it before, but Amelio is a total bozo,” he said. “He is the absolute wrong person to be leading Apple. I don’t know who the right person is, but it definitely is not him.”
LIKE RUBINSTEIN AND Tevanian at NeXT, Lasseter and Catmull were “keepers.” So, early in 1997, during the very months when he was studying the hapless Amelio, Steve decided he wanted to safeguard their future by renegotiating Pixar’s distribution contract with Disney CEO Michael Eisner—the only man other than Jean-Louis Gassée whom Steve ever described to me as “evil.” (This was several years later, when relations between Disney and Pixar reached an all-time low.)
Toy Story had become the undisputed blockbuster of the 1995–1996 holiday season, eventually garnering $361 million in worldwide box-office receipts. Some $45 million of that went to Pixar. That was a lot of revenue for a first movie, but meager fare when compared to what Disney pocketed for financing and distributing the film. Furthermore, Pixar had no share of the video rights, which of course would be substantial for a family film this popular.
With work well under way on Pixar’s next movie, A Bug’s Life, Steve decided to right this wrong. With $130 million of IPO cash in hand, Pixar didn’t need Disney to finance its films. And if it could pay for its own productions, why should it earn a mere 12.5 percent of box-office receipts? Steve decided he wanted to tear up the very deal that had saved the company just five years earlier.
“Nobody in Hollywood wants to take any risk,” he told me a year later. He truly was proud that he and Lawrence Levy had studied Hollywood closely, and had learned enough to understand how Pixar could cut a great deal in an industry that thrived on plundering the “dumb money” of starstruck outsiders. “You can’t go to the library and find a book titled The Business Model for Animation,” Steve explained. “The reason you can’t is because there’s only been one company [Disney] that’s ever done it well, and they were not interested in telling the world how lucrative it was.”
Steve put in a call to Eisner, and headed to Hollywood to renegotiate. “What we wanted to do with our new deal was far beyond what anybody else [other than Disney] had ever done,” he crowed. “And far more sophisticated, because in Hollywood, there are very few relationships between companies. There are relationships between companies and individuals, like between a major studio and Steven Spielberg, or a small production company like an Amblin and a studio. But there are very few relationships between peer companies. But that’s how we wanted to think about ourselves. In terms of producing animated films, we wanted to think of ourselves as a peer of Disney’s own animation business.”
On the surface, his entreaty seemed arrogant, quixotic, and ungrateful. It had barely been a year since the debut of Toy Story, a film that had been made possible only by the endorsement and support of the world’s most successful animation company. But as was true so often when Steve negotiated, the audacity of his demand was matched by his cool and accurate appraisal of the landscape. Six years earlier, when Katzenberg was running animation and Disney had held all the power, Steve had quickly agreed to their terms. But now Eisner was at war with Katzenberg, who was building up DreamWorks Animation with the intent of besting Disney Animation. His new studio had set off a talent war, leading to, among other things, a series of escalating offers to Lasseter from both Disney and DreamWorks.
Steve saw the opportunity and calmly made the most of it. The IPO and Toy Story had changed everything about the relationship: Pixar held a lot more of the power now, and there was nothing Eisner could do. Steve’s underlying threat to Eisner was simple: give Pixar a new deal now, or the company would walk after its existing three-movie deal expired. Losing Lasseter and Pixar to Katzenberg or another studio would have been disastrous for Disney. In the end, however, the negotiation wasn’t as fraught as it might have been. “For us to go in there and say we’d finance half of our films, well, they hadn’t heard that very often,” Steve told me. “Michael appreciated that, and all of a sudden we were no longer a production company, we were a co-financier.” Eisner was offended by Jobs’s temerity, but the terms of the new deal were fair, giving each side half of all profits. On February 24, 1997, a new, five-movie deal was signed. Strand by strand, Steve was wrapping up the remaining loose ends of his decade in the wilderness.
THE STORY I published in Fortune in March 1997 infuriated nearly everyone at Apple. Titled “Something’s Rotten in Cupertino,” it portrayed a company in utter disarray. It included several unflattering anecdotes about Amelio, and was equally critical of his two predecessors, Sculley and Spindler, and of the Apple board of directors. Amelio would call me a “literary ax-murderer” in his memoir, On the Firing Line: My 500 Days at Apple.
The s
tory, along with some other critical press around the same time, added to the public beating Amelio had started taking after MacWorld. Its indictment of the Apple board put more pressure on the directors. By that time, the director with the most credibility and authority was its chairman, Edgar S. Woolard Jr., who was CEO of DuPont, the chemical giant. The more Woolard learned about Apple’s woes, the more he knew that Amelio didn’t have the right stuff to save the company. “Ed started asking questions, like ‘How’s morale, Fred?’ ” Anderson remembers. “And I’d say, ‘It sucks, Ed.’ ” Anderson hid nothing from the chairman; the strategy was ill-conceived, the company was not going to hit its targets, and Anderson was planning to leave if Amelio stayed on.
Meanwhile, Steve had decided to undermine Amelio. He made that crystal clear on June 26, when, after the expiration of the six-month waiting period Amelio had insisted on, he dumped all but one of the shares he’d gotten for selling NeXT, without bothering to tell anyone at Apple. Once again, he held on to a single share so he would be eligible to attend Apple’s annual meeting. It was not an exercise in profit-taking. The value of those 1.5 million shares had dropped $13 million during those six months. But the sale was a high-decibel vote of no confidence. Amelio felt stabbed in the back, and he had been. On July Fourth, Ed Woolard called Amelio at his vacation home at Lake Tahoe to tell him he was fired. Then the chairman called Steve to see if he would be willing to come back as CEO.
Steve had cut Amelio’s legs right out from under him. He’d had no qualms about that once he’d decided that the Doctor was a bozo. (In private, he would also call him a “doperino.”) But that didn’t mean he himself was ready to take on the job of running Apple. According to his wife, Laurene, he was still torn about whether to go back. The two of them debated the matter endlessly. She felt that he was the only person who could save the company, and she knew he still loved Apple. She knew, too, that her husband was most fulfilled when he was tackling something gripping and important. But Steve wasn’t sure. The long, drawn-out experiences of salvaging NeXT and Pixar had chastened him. Pixar was on the way up. The frustrations of NeXT could now be tossed into the dustbin of history. But did he really want to try to ride to the rescue of Apple when it hardly resembled the company he had tried to build? Was he even convinced it had the people and resources to become competitive? Did he want to work that hard, now that he had a young family? Did he want to risk what was left of his reputation by tilting at windmills? These questions were all on his mind. He had to become convinced that enough of the “true” Apple remained before he would ever consider taking ultimate responsibility for it.
Steve didn’t know it at the time, but his indecisiveness was actually a kind of breakthrough. Steve was developing a more nuanced, measured approach to decision making. Steve had grown more comfortable with waiting—not always patiently—to see what developed, rather than jumping impulsively into some new venture where he thought he could once again astound the world. When he needed to—as when the opportunity arose to sell NeXT to Apple—he could strike quickly. But from now on he would act with a piquant combination of quick, committed actions and careful deliberation.
He told Woolard he did not want the job, at least for now, and he offered to help him recruit someone else. Unable to sleep that night, Steve called his friend and confidant Andy Grove at 2 a.m. Steve told Grove that he was torn about whether or not to return as Apple’s CEO, and wound his way through his tortured deliberations. As the conversation dragged on, Grove, who wanted to get back to sleep, broke in and growled, “Steve, look. I don’t give a shit about Apple. Just make up your mind.”
AFTER STEVE REJECTED Woolard’s offer, the board announced that Fred Anderson would be in charge of operations, effectively making him the acting CEO. Anderson didn’t want the permanent job, but unlike Steve he was certain that there was still much worth saving at Apple. For one thing, he’d been able to move the company out of its financial crisis. More important, in his fifteen months there he had gotten to know all the key players, including a few who felt comfortable complaining to him about Amelio. One of those was Apple’s young design chief, a Brit by the name of Jonathan “Jony” Ive, who felt that he was wasting his talent at Apple. He invited Anderson to come by the industrial design lab, which Amelio had not visited. “There was incredible stuff going on there,” remembers Anderson. “That was a big part of how I had come to worry about Amelio and his lack of leadership.” Anderson knew that he himself was not the answer. “I was really good at business and, I’d say, finance and operations, but I wasn’t a product guy. I’m not an engineer,” he says. Like Woolard, Anderson had enjoyed his crash course in Steve Jobs—even though their relationship had gotten off to a rocky start. “I started dealing with him during the period when we were acquiring NeXT,” says Anderson. “One night during the negotiation he called me at home at one a.m., irate and cussing and ranting and raving. I was in bed with my wife, and I’m thinking, This is crazy. So when he wouldn’t calm down, I said, ‘I’m sorry, Steve, it’s one o’clock in the morning, so I’m hanging up.’ And I hung up.” As was so often the case, Steve respected the pushback. He and Anderson developed such a mutual respect that the CFO would become a key member of the team that would revive Apple. “Even though Steve was not an engineer,” Anderson recalls, “he had this great aesthetic taste and he was a visionary, and he had the power of personality to rally the troops. I came to the conclusion that the only person who could truly lead Apple back to prominence was Steve. He understood the soul of Apple. We needed a spiritual leader that could bring Apple back as a great product and marketing company. And nobody else great, who had those skills, was going to take on Apple at that time. So we had to have Steve.”
When Woolard announced Anderson’s appointment, he also noted that Steve was coming on as “an adviser leading the team.” The terminology was odd, but it proved to be accurate. “Now he really rolled up his sleeves,” says Anderson. The core of the new Apple—Anderson, Tevanian, Rubinstein, Jobs, and Woolard, who led a real search for a new CEO—felt under intense pressure, in large part because MacWorld Expo in Boston was exactly just one month away, on August 6. By then the company would have to be in a position to present some kind of clear strategy to its developers, or else the feeling that Apple was forever in chaos might replace the feelings of goodwill engendered by Steve’s return. And given Steve’s history, empty promises and airy visions wouldn’t be enough. Thanks to all the hot air that had wafted out of NeXT over the years, Steve had lost much of his credibility. This time he needed to show the capacity to make smart, sensible, surgical moves quickly; if not, the market, the press, the developers, and Apple’s customers might collectively respond with a sneering sense of déjà vu.
Steve understood this. His first move was to insist that the board reprice all employee stock options to $13.81—the closing price on July 7, the day Amelio’s firing was made public. Steve’s signature, not Anderson’s, was at the bottom of the “all hands” memo from management announcing the change. It was a dramatic gesture, because most employees’ options had sunk so deeply underwater that there seemed no hope that they would ever have any value. Overnight, the prospect of someday achieving actual wealth resurfaced for many of the eight thousand Apple employees who had survived the first two rounds of layoffs. (The move did nothing financially for Steve, who had no options.)
Steve’s second big move was to convince Woolard to allow him to replace virtually the entire board of directors—the same one that had just ousted Amelio and brought Steve in to play a big role. Steve felt no gratitude. He was convinced that the group was as much to blame as Amelio for Apple’s woes. He wanted a board that would give him the backing he needed to start making some real changes at Apple. Originally he sought the resignations of everyone except Woolard, but Woolard persuaded him to also keep Gareth Chang, the CEO of Hughes Electronics. The others would be replaced by Oracle founder Larry Ellison, former IBM and Chrysler CFO Jerry York, Intuit CEO Bill C
ampbell, and Steve himself. Steve kept these changes under wraps, however. He wanted to announce the move during the MacWorld keynote speech in Boston, where he’d be able to put his own distinctive spin on the news.
While he worked with the team on new product planning and yet another round of restructuring, Steve also took on a unique project he’d been handed by Anderson: to convince Bill Gates to continue to support the Macintosh with new versions of the company’s productivity applications, like Excel and Word, which Microsoft would soon begin to bundle into a suite of productivity programs to be called Office.
Earlier in 1997, Gates had said that he couldn’t guarantee that Microsoft would build a new version of Office for the Mac. His reluctance made sense. With Macintosh sales in a tailspin following the introduction of Windows 95, it was more difficult for Gates to justify the expense of supporting the Mac. Microsoft made good money from its Macintosh software, but as Mac sales tanked, so too did Gates’s enthusiasm for supporting Apple.
“Reaching an agreement with Microsoft was absolutely critical to laying the foundation for Apple to be saved,” recalls Anderson. “But Amelio couldn’t get it done.” If Gates said no to Steve, Apple could have found itself in the same position as NeXT had been back in 1988. Without Microsoft’s applications, which had become the de facto standard tools used in most businesses, Apple, like NeXT, might cease to be relevant.
Becoming Steve Jobs Page 23