Youth
The Jobs family
Steve Jobs was born on February 24, 1955, in the city of San
Francisco. His biological mother was either an unwed graduate student
named Joanne Simpson, and his biological father was a political science
or mathematics professor, a native Syrian named Abdulfattah John
Jandali.
Being born out of wedlock in the puritan America of the 1950s, the
baby was put up for adoption. Joanne had a college education, and she
insisted that the future parents of her boy be just as well educated.
Unfortunately, the candidates, Paul and Clara Jobs, did not meet her
expectations: they were a lower-middle class couple that had settled in
the Bay Area after the war. Paul was a machinist from the Midwest who
had not even graduated from high school. In the end, Joanne agreed to
have her baby adopted by them, under the firm condition that they later
send him to college.
Paul and Clara called their son Steven Paul. While Steve was still a
toddler, the couple moved to the Santa Clara county, later to be known
as Silicon Valley. They adopted another baby, a girl called Patti, three
years later in 1958.
Childhood
Steve was quite a turbulent child. He really didn’t care about
school for some time — until he reached the 4th grade, and had Imogene
“Teddy” Hill as a teacher.
She was one of the saints of my life. She taught an advanced fourth grade class, and it
took her about a month to get hip to my situation. She bribed me into learning.
She did bribe him, with candy and $5 bills from her own money. He
quickly became hooked — so much so that he skipped the 5th grade and
went straight to middle school, namely Crittenden Middle School. It was
in a poor area. Most kids did not work much there, they were rather fond
of bullying other kids, such as the young Steve. One day he came home
and declared that if he wasn’t transferred to another school, he would
stop going to school altogether. He was 11. Paul and Clara complied, and
the Jobses moved to the cozier city of Los Altos, so that Steve could
go to Cupertino Junior High. This proved to be decisive for Steve’s
future.
The birth of Silicon Valley
The Santa Clara county, south of San Francisco, California, was a
bourgeoning place for computer engineering as early as the 1960s.
Indeed, after the Soviet Union launched Sputnik in 1957, the country
engaged in the Space Race, and billions of dollars of federal money were
poured into technology companies to advance the state of the art of
computing.
One of those firms was the Shockley Semiconductor Company, from
William Schockley, who got the Nobel Prize of Physics in 1956 for
inventing the transistor. Another dominant firm was Hewlett Packard,
founded in Palo Alto in 1939. HP was a company of engineers, selling
products to engineers. There were tons of them scattered all over this
valley of apricot orchards.
As Steve was growing up in Los Altos, he became increasingly
curious about the world of electronics that filled his neighbors’
garages. His own father introduced him to Heathkits, which fascinated
him:
These Heathkits would come with these detailed manuals about how to
put this thing together and all the parts would be laid out in a
certain way and color coded. You'd actually build this thing yourself. I
would say that this gave one several things. It gave one a
understanding of what was inside a finished product and how it worked
because it would include a theory of operation but maybe even more
importantly it gave one the sense that one could build the things that
one saw around oneself in the universe. These things were not mysteries
anymore. I mean you looked at a television set you would think that "I
haven't built one of those but I could. There's one of those in the
Heathkit catalog and I've built two other Heathkits so I could build
that." Things became much more clear that they were the results of human
creation not these magical things that just appeared in one's
environment that one had no knowledge of their interiors.
It gave a tremendous level of self-confidence, that through
exploration and learning one could understand seemingly very complex
things in one's environment. My childhood was very fortunate in that
way.
Computerworld/Smithsonian Interview, 20 Apr 1995
Homestead High
Mr. McCollum’s Electronics 1 class. Steve is well recognizable in the middle.
When Steve arrived in Homestead High School, he enrolled in a popular
electronics class. McCollum later recalled of one time when his pupil
Steve called up Bill Hewlett himself, co-founder of HP, to get spare
parts for his homework, and even a summer job at HP’s factory. Steve’s
entrepreneurial skills showed up early in his life indeed.
At Homestead, Steve befriended Bill Fernandez, a neighbor who
shared his interests in electronics. It was Bill who first introduced
him to another computer whiz kid, an older guy named Stephen Wozniak, or
— as everybody used to call him — Woz. Steve and Woz met in 1969, when
they were respectively 14 and 19. At the time, Woz was building a little
computer board with Bill Fernandez that they called
“the Cream Soda Computer”. Woz showed it to Steve, who seemed quite interested.
Typically, it was really hard for me to explain to people the
kind of design stuff I worked on, but Steve got it right away. And I
liked him. He was kind of skinny and wiry and full of energy. […] Steve
and I got close right away, even though he was still in high school […].
We talked electronics, we talked about music we liked, and we traded
stories about pranks we’d pulled.
Steve Wozniak in iWoz
Woz and Steve later engaged in several pranks together, including
putting a huge middle finger on one of the high school’s building.
It was also at Homestead that Steve met Chris-Ann Brennan, his first steady girlfriend, with whom he stayed for several years.
A couple of years later, Woz and Steve started their first
entrepreneurial venture. It was 1972, and on US campuses, there was a
lot of talk about
“phone phreaks.” They were early computer hackers that managed to build
“blue boxes” — little devices that fooled AT&T’s long-distance switching equipment, and allowed you to make phone calls for free.
Woz read about them in an article which he showed to Steve. They
both tried to build one, and to their surprise, it worked! It was Steve
who came up with the idea of selling them; he and Woz would go from room
to room in Berkeley’s dorms, where Woz was a student, and sell them to
interested students. However, this business was illegal and the two of
them stopped after they almost got caught by the police.
Reed College
The following year, Steve finished high school and reached college
age. He decided to go to the fancy Reed College, a private liberal arts
college up in Oregon. However, the tuition for Reed was so expensive
that Paul and Clara could hardly afford it. Yet they were bound by the
promise they’d make to their son’s biological mother, so they spent
almost their entire life’s savings on their son’s higher education.
Steve only officially stayed for a couple of months at Reed. He
dropped out before Christmas. However, that allowed him to “drop in” on
classes he was not supposed to attend.
After six months, I couldn't see the value in it. I had no idea
what I wanted to do with my life and no idea how college was going to
help me figure it out. And here I was spending all of the money my
parents had saved their entire life. So I decided to drop out and trust
that it would all work out OK. It was pretty scary at the time, but
looking back it was one of the best decisions I ever made. The minute I
dropped out I could stop taking the required classes that didn't
interest me, and begin dropping in on the ones that looked interesting.
It wasn't all romantic. I didn't have a dorm room, so I slept on
the floor in friends' rooms, I returned coke bottles for the 5¢ deposits
to buy food with, and I would walk the 7 miles across town every Sunday
night to get one good meal a week at the Hare Krishna temple. I loved
it.
Stanford Commencement Address, 12 Jun 2005
It was at Reed that Steve started experimenting with Eastern
mysticism. He delved into weird books and came to believe that if he ate
only fruits, for example, he would eliminate all mucus and not need to
shower anymore. He also started his habit of fasting for long periods of
time (he would still do so ten years later, when he was a
multi-millionaire). He occasionally used LSD, and became something of a
laggard hippie. One of his best friends at Reed was Dan Kottke, who
shared his interests in such philosophies.
The following year, in 1974, Steve desperately needed money, so he
got a job at Atari. Atari was arguably the first video game company: it
was created by Nolan Bushnell in 1972, and one of its first employees
was Al Acorn, the inventor of Pong. Steve was hired although he would
often call his co-workers names and smell pretty bad. That’s why he was
soon moved to the night shift.
Young Steve Jobs looked up to Atari's founder Nolan Bushnell. He
was impressed by this iconoclastic man who made a lot of money by
building pinball machines. He was clearly an inspiration for him to
start Apple.
India
While he was at Atari, Steve asked his boss to fund a trip to
India for him. Atari did pay his trip up to Germany, where he had to
work on fixing some Atari machines. Then Steve was joined by his hippie
friend from Reed, Dan Kottke, and they went to India in search for
enlightenment. They came back pretty disappointed, especially after they
met a famous guru, Kairolie Baba, who, unlike what they expected, was a
con man.
We weren’t going to find a place where we could go for a month to
be enlightened. It was one of the first times that I started to realize
that maybe Thomas Edison did a lot more to improve the world than Karl
Marx and Neem Kairolie Baba put together.
quoted in Michael Moritz's The Little Kingdom
When Steve came back, he resumed his job at Atari. One of his
pastimes back then included primal scream therapy sessions at the Los
Altos Zen Center, where he befriended Governor Jerry Brown and his guru
Kobun Chino. He also spent several weeks with his girlfriend Chris-Ann
and Dan Kottke in a hippie commune in Oregon, the All-One Farm. Here
they would cultivate apples and for some time, Steve would eat only that
— when he wasn’t fasting, that is.
The Apple I
Homebrew
While Steve had been away in India or Oregon, his geek friend Woz had
been hired by Hewlett-Packard. To him, it was a dream job: a company
full of passionate engineers just like him, where he could work on
products for other engineers. However, in his spare time, he had
cultivated his interest in designing computer circuits, and had joined a
computer hobbyists association called the Homebrew Computer Club.
The emergence of personal computing
Computers existed for a long time before Apple was started. For
example, arguably one of the first full-blown US computers ever built
was ENIAC, in 1946. By the 1970s, the majority of large corporations
were already equipped with computers. But those were usually huge
mainframes in giant computer rooms, built and maintained by industry
behemoth IBM.
Personal computing was based on a radically different approach. It
claimed that computers could be used by mere mortals, private
individuals instead of institutions. It was a revolutionary idea, and
it’s no surprise it emerged in the Bay Area in the 1970s, after the
hippie revolution and at the heartland of the electronics industry.
It all started in 1974, when Mountain View-based Intel introduced the
world’s first microprocessor, the 8080. All sorts of hobbyists started
to get interested in how to use this powerful yet relatively cheap new
piece of technology. A huge leap forward was made when a man named Ed
Roberts launched the Altair, out of Albuberque, New Mexico. It was a
computer kit based on the 8080, which people could assemble by
themselves, a lot like the Heathkits Steve Jobs worked on in his
childhood.
The Altair was basically a box that could flash lights on and off. It
didn’t do much until Bill Gates and Paul Allen, who had just founded a
new company called Microsoft, wrote a BASIC interpreter for it in 1975.
The word spread around all over the country in those personal computing
circles (which mostly consisted of engineers, radio amateurs and other
types of nerds). The Homebrew Computer Club, which operated from
Stanford’s Linear Accelerator Center auditorium, was one of those
groups. Hobbysits would go there to show off their latest machine or
program they had worked on.
The Homebrew
Computer Club
Woz was impressed by the Altair (and by Microsoft’s BASIC
interpreter), but he knew from his almost life-long experience in
circuit design that he could do a much better job. So he started work on
his own computer — which he decided to base on another microprocessor,
MOS’s Technology 502. This was his new goal in life. While keeping his
job at HP, he worked very hard at this computer board, and came up with
an impressive result; a powerful computer (for the time) which worked
with a keyboard and screen, not one that flashed lights — and all with
amazingly few chips.
Woz showed his computer design to his friend Steve Jobs. Steve was
impressed. He did not know much about engineering, but he could see
there was a demand for having a computer to write software for, a
computer for software hobbyists. He was especially excited to see that a
lot of the qualified engineers at Homebrew were talking about Woz’s
computer with admiration. So he suggested to sell it to them. He and Woz
would assemble the computers themselves and sell the whole board at
Homebrew meetings.
“Our own company”
Steve had a good argument. We were in his car and he said — and I can remember him saying this like it was yesterday:
“Well, even if we lose money, we’ll have a company. For once in our lives, we’ll have a company.” That convinced me. And I was excited to think about us like that. To be two best friends starting a company.
Steve Wozniak in iWoz
To get the necessary $1,000 to start building the first boards, Steve
sold his Volkswagen van, and Woz his HP 65 calculator. They thought
about how to call the new company, and couldn’t come up with a good
name, until one day, Steve said that they would call it Apple if they
didn’t find anything better. And they didn’t — so Apple Computer was
born.
The two friends sought help, and they got it from one of Steve’s
colleagues from Atari, Ron Wayne. Wayne basically wrote the necessary
paperwork to start a corporation and drew the company’s first logo. As a
result, he got 10% of the company’s shares, while Steve and Woz split
the rest (45% each).
Another problem was that Woz was still working for HP, and under the
terms of his contract, all his work belonged to the corporation. The
Apple computer was technically HP property. But Woz showed it to his
bosses and they simply didn’t care about it. Woz was disappointed as his
goal was to work for HP his whole life. He would have been delighted if
HP had done a personal computer based on his design. It wasn’t Steve
Jobs’ intention though.
Apple Computer’s first order was from a Homebrew member called Paul
Terrel. He was starting a new computer store called the Byte Shop, in
Mountain View, and understood just like Steve that there was a demand
for such fully-built computers. He ordered 50 of them, at $500 a piece.
That was $25,000! It was a huge starting point for the young company,
and got Steve and Woz very excited. They started putting together the
parts in the Jobses’s garage, with help from Steve’s sister Patti and
his friend from Reed, Dan Kottke. They paid them $1 a board. The parts
for the Apple cost $220, while the computer was sold to Terrel for $500,
who would usually put it in wooden boxes.
Steve and Woz also started selling the computer on their own. They
agreed on the retail price of $666.66 (note that his price was based on a
simple calculation — a 33% margin — and had nothing to do with the
Satanic number of course). They showed it to the Homebrew folks in March
1976, but the response wasn’t that enthusiastic. So they went
elsewhere, going from store to store and trying to sell them. They sold a
couple hundreds this way.
This was the start of Apple Computer. Steve and Woz had bought the
other co-founder Ron Wayne out for $800, and incorporated the company on
April 1, 1976.
An Apple I computer inside a wooden box
Apple's early days
The day he finished work on his first computer, Woz started working
on an improved design, the future Apple II. The Apple II was based on
the Apple I’s design, but in many ways it was a huge breakthrough.
Dan Kotkke and Steve at the Personal Computing Festival
First, it ran a lot faster with half as many chips. It also was the
first computer that could produce color, with any color TV you would
plug it into. It could handle high-resolution graphics and sound, and
had a BASIC interpreter built-in. In short, it was the first computer
that anybody who knew the BASIC programming language could use: it had
what it took to launch the personal computing revolution.
The prototype for the Apple II was almost ready when Steve and Woz
partook in the Personal Computer Festival, held in Atlantic City in the
summer of 1976. But it was not ready enough to be shown to the public.
Steve and his friend Dan Kottke were trying to sell the Apple I from
their Apple Computer booth, while Woz was working on finishing the Apple
II. The visitors were not impressed by the Apple I, a board sold by
these two amateur bearded young men, while MITS, which sold the Altair,
had a huge booth with music, dancers and business suits. Steve learned a
lot that day.
After the Apple II was finished, Steve went looking for investors. He
talked to several venture capitalists, who were already legions in the
Valley. The first to show up was Don Valentine. He turned Steve and Woz
down, but he did give them a hand by passing them the name of another
potential investor, Mike Markkula. Mike was a former Intel employee who
had made millions and retired early. He was 34 when he met with Woz and
Steve, and he bought into their vision. He was also quite aware of the
potential returns on his investment:
We’re going to be a Fortune 500 company in two years. This is the start of an industry. It happens once a decade.
Mike Markkula to Steve and Woz, quoted in iWoz
Steve and Mike Markkula in front of Apple's new logo
Mike drew up a business plan. He wanted to put in $250,000 to build
1,000 machines. This was a huge number by the young men’s standards.
Woz was also told that for this to happen, he had to leave HP. At first
he refused, since he was a huge admirer of HP and planned to work there
his whole life. But Steve lobbied him hard into it, and in the end Woz
relented.
Mike Markkula also insisted that Apple advertise for its new
computer. He called up one of his friends, Regis McKenna, who was one of
the most renowned advertisers in the Valley. While they worked with
Steve Jobs on Apple’s first ads, an art director called Rob Janoff
designed a new logo for the company. The only thing Steve asked him was:
“Don’t make it cute.” He was the one who came up with the
bitten apple (so that it wouldn’t look like a tomato), as well as the
striped colors — to emphasize the Apple II’s ability to display color.
Rod Holt, a friend of Steve Jobs’, was hired to build a switching
power supply and design a mold for the Apple II’s plastic case. Mike
Markkula later also hired a fourth guy, Mike Scott, to run the startup,
whose first offices were moved to Stevens Creek Boulevard in Cupertino.
The West Coast Computer Faire
The new company got ready to show off their product at the West Coast
Computer Faire, a conference held in San Francisco in April 1977. It
was only a prototype, but the plastic case definitely made the Apple II
look like a professional product. Steve negotiated a prime spot for
Apple’s booth, and took precious advice from both Mike Markkula and
Regis McKenna. That’s why he bought his first suit for the occasion.
My recollection is we stole the show.
Steve Jobs in Triumph of the Nerds
Apple Computer received 300 orders for the Apple II on the show
alone, twice as much as the total number of Apple I’s ever sold! But
this was just the beginning.
Success and failures
The personal computing revolution
In many ways, the Apple II was both the start and the symbol of the
personal computer revolution of the early 1980s. Although there were
many competing personal computers on the market — such as the Commodore
PET or Radio Shack’s TRS-80 — the Apple II clearly set itself apart very
early on, and soon embodied the personal computer in the public
consciousness. It was all over the media, and its sales skyrocketed
throughout 1978, 1979 and 1980.
It was not only about the Apple II’s appealing design, its integrated
keyboard, or its ability to plug into any TV to display color graphics
or play sounds. Its built-in BASIC interpreter was also critical to its
success, as it made the writing of compatible software very easy. Woz
used it himself to write the first program to ever run on the machine, a
game called Breakout. The eight expansion slots in Apple II made a
difference, too. Woz decided to implement them against Steve Jobs’ will,
and this proved a wise move, as they allowed for all kinds of new
features and software to be added to the machine. One of those features
was Disk II, a floppy disk drive Apple started shipping in early 1978.
It made the sharing and installing of new software very easy — soon the
supply of Apple II software was thriving.
But probably the most important push toward the Apple II’s success
was not from Apple. It was a piece of software called VisiCalc — the
first spreadsheet ever brought to market. VisiCalc worked only on the
Apple II, and it was a revolution in itself. Millions of accountants,
small businesses, or even private individuals that cared about their
money, could now do in minutes calculations that would have taken them
weeks to perform by hand. They rushed out to computer stores and bought
Apple IIs en masse, making Apple one of the most profitable companies of
its day. Only four years after it was started in a garage, the company
was well on its way to fulfill Mike Markkula’s vision of belonging to
the Fortune 500 elite of corporate America.
Preparing for the future
Apple Computer was growing at an incredibly fast rate. The numbers
were mind-blowing: from 2,500 Apple IIs sold in 1977, 8,000 were sold in
1978, and up to 35,000 in 1979. Remember there was no market for
personal computers before! The company earned $47 million in revenues in
fiscal year 1979, making Steve Jobs a millionaire on paper (he owned $7
million worth of private stock). The company’s board of directors,
including its new members such as Arthur Rock and Don Valentine, began
to discuss taking Apple public.
Meanwhile, the engineers in Cupertino started working on Apple’s
future. Several projects came into being in those early years. First, in
late 1978, there was the Apple III, which was supposed to build on
Apple II’s legacy. Woz did not partake in the project and was critical
of it early on. There was also an obscure project called Macintosh,
headed by computer scientist Jef Raskin. He started to assemble a small
team to work on a computer
“as easy to use as a toaster”, that he named after his favorite apple.
Steve Jobs was not involved in any of those projects. He had another
one in mind, called Lisa. And he hadn’t picked that name without a
reason... Indeed, in 1978, while he was dating an employee of McKenna’s
PR agency, Steve’s ex-girlfriend from high school Chris-Ann Brennan
reappeared claiming she was bearing his baby. Steve denied the
fatherhood, although everybody in his entourage knew he was the father.
The baby girl was named Lisa... there was a lot of perplexity around
Steve’s behavior, especially since he had suffered greatly from having
been abandoned himself. He was going to do the same to his own daughter!
Yet, at the very same time, he used the girl’s name for a project code
name.
Project Lisa took a dramatic turn in late 1979, after Steve’s visit to Xerox PARC.
What is Xerox PARC?
The Xerox Palo Alto Research Center, often dubbed Xerox PARC, was
started in the early 1970s by the Xerox corporation. Based on the East
Coast, the manufacturer of copy machines felt that its core business was
threatened by the emerging computer revolution, with its promise of a
paperless office. In a very smart move, they set up a research center in
Stanford Research Park, and hired talented computer scientists, many
from the leading university, to invent the office of tomorrow.
In 1979, when Steve Jobs toured PARC, the researchers had already
pioneered several technologies that would revolutionize computing
forever. They had a network of computer working together using Ethernet.
They had developed object-oriented programming, a new way to write
software much more effectively. They were working on the laser printer.
But most of all, they had built the world’s first computer to use a
graphical user interface (GUI), the Alto. The Xerox Alto had a strange
device called a mouse, that you could use to move a cursor around the
screen. You could open files and folders, copy and paste content inside
them. It was simply a breakthrough.
The Xerox PARC did not keep its technology hidden from outsiders.
Informed circles knew about the center’s advances, especially at
Stanford and in the Valley as a whole. Everybody pretty much sensed that
this technology would have a huge impact on the industry — everybody
but Xerox themselves. The conservative management on the East Coast
never grasped the extent of what their researchers in California had
come up with. They simply dismissed it as futile.
The Lisa team was briefed about Xerox PARC’s technologies by
insiders, including Jef Raskin, the manager of the Macintosh project.
Steve negotiated a deal with Xerox to be given a complete tour of the
facilities. Here’s how he described his experience later:
Within ten minutes, it was obvious to me that all computers would work like this someday.
Steve Jobs in Triumph of the Nerds
Several researchers and engineers were lured away from PARC by Apple,
such as Larry Tesler and Bruce Horn, to develop a GUI for Lisa. The
biggest challenge was to design an actual product, not a fancy prototype
too expensive to build. After all, one of the reasons Xerox dismissed
the Alto was its astronomical price tag: $20,000! That was twenty times
as much as the Apple II.
The biggest IPO since Ford
In 1980, Apple Computer was preparing to go public. This move had
several major implications for Steve Jobs, both professionally and
personally.
First, the board was concerned about the potential bad publicity
around Steve’s handling of his daughter Lisa. They insisted that he
settled the case with Chris-Ann before the end of the year, as the IPO
was scheduled for December 1980. Reluctantly, he agreed to reimburse the
country’s welfare the money they had spent on the mother of his
daughter, i.e. $20,000.
There was also a large re-organization at the top of the company. The
Apple III, which came out in the spring of 1980, had turned out a
disaster on the marketplace. It was flawed and thousands of early models
had to be returned to the company, whose only revenues still came from
sales of Apple II. The next project, Lisa, became even more critical to
the company’s future. As a result, Apple Computer was re-organized into
three new departments: Accessories, Professional Office Systems (which
included Lisa), and Personal Computer Systems (Apple II and Apple III).
Steve expected to head the POS division, but the board chose the milder
and more experienced John Couch. Steve was named chairman of the board
instead.
This choice was mostly a public relations scheme in anticipation of
the IPO. The company started advertising in the mass media, notably the
Wall Street Journal,
spreading the legend of the technical genius Steve Wozniak, and his
friend marketing genius and visionary Steve Jobs starting a revolution
from their garage. There were full-page advertisements with pictures of
Steve Jobs and the Apple II, in which he was quoted as saying that the
personal computer was a new kind of bicycle — a bicycle for the mind.
Steve’s personality was transformed during that period. He was
increasingly recognized as a national icon, a symbol for the country’s
new entrepreneurial wave. He was starting to realize his dream of
changing the world. His hippie days seemed long gone: he gave up the
beard and the mustache, stopped going to the Los Altos Zen Center, and
occasionally wore suits.
Finally, on December 12 1980, Apple went public. Even though the
country was in the middle of a recession, the operation was a huge
success beyond anyone’s expectations. It was the biggest public offering
in American history since the Ford Motor Company in 1956! After the
IPO, Steve Jobs was worth $217.5 million, $210 million more than the day
before.
The bozo explosion
However, Steve was still the same inside. He was a tough manager, and
a lot of engineers refused to work with him. Apple’s executives were
well aware of the problem, and it’s one of the reasons they named John
Couch to run the Lisa project, not Steve.
In particular, Steve had very tense relations with Apple’s CEO Mike
Scott. Remember Scott was hired by Mike Markkula in 1977 to run the
company. But as you will soon see, Scott was perhaps as temperamental as
Jobs, if not more.
Steve Jobs and Jef Raskin in 1979
Indeed, there was a shared concern in Cupertino about the quality of
the company’s recent hires. The organization had been growing so fast
that many people in its workforce obviously did not qualify for their
jobs. In a very Steve Jobs fashion, the phenomenon was commonly referred
to as
“the bozo explosion.” Mike Scott, nicknamed Scotty,
decided it was time to take action. On February 25 1981, a day that
would go down in Apple’s history as “Black Wednesday”, he fired half of
the Apple II team, without even consulting the board — this was not a
way to manage a publicly traded company! The board gathered and decided
it was time for Apple to get rid of Scotty. Mike Markkula took his job
while the company started looking for a new CEO.
The departure of Scotty, one of Steve Jobs’ strongest opponents, gave
him more freedom at Apple. It wasn’t long after that that the young
chairman of the board took over the smallest project in the POS
division, Jef Raskin’s Macintosh. Remember Jef was an older Apple
engineer, a very bright, soft-spoken character, who never had much
sympathy for Jobs. He had even written a note to Mike Scott to explain
why he could not possibly work with Steve (read it in Steve at work).
But the board was willing to sacrifice him to have Steve Jobs let the
Lisa project in peace — so they let him go, and installed Steve as new
head of the Mac team.
The reasons Lisa was such a strategic product for Apple came from the
new face of the PC market. Indeed, in August 1981, the whole industry
was shaken by the introduction of the IBM PC. Big Blue was the leader in
computing, and had been for several decades — but its only products
were mainframes. As they watched the growing success of Apple Computer
and the new market, IBM decided it was time to get personal. The IBM PC
was inferior to the Apple II in many ways, but the fact it was from IBM
was critical in itself. It made it OK for corporate America to start
using PCs: after all, every information systems manager knew
“you couldn’t be fired for buying an IBM.”
Apple’s position as the market leader was clearly threatened — and its
only viable product was still the four year-old Apple II. After the
failure of Apple III, Lisa looked like the only possible salvation for
the fruit company.
Macintosh
Better be a pirate than join the Navy
The Mac team’s pirate flag. Steve is sitting by the piano.
Steve Jobs quickly left his mark on the Macintosh team. Part of his
motivations were: 1. to have his own successful computer, unlike the
Apple II which was Woz’s brainchild; 2. to take revenge on Apple’s
management for forcing him out of the Lisa project. When he took over,
the Mac team only consisted of a small number of engineers: Brian
Howard, Burrell Smith and Bud Tribble, as well as a woman in marketing,
Joanna Hoffman. He soon hired several other members that would later
form the core of the team, such as Andy Hertzfeld, Chris Espinosa,
George Crow, Steve Capps and Mike Boich. Other key players would follow
later, like the brilliant software designer Bill Atkinson from the Lisa
team, Mike Murray in marketing, or Susan Kare, who designed the icons
and several fonts for the system. For the box design, he hired Harmut
Esslinger’s frogdesign, who pioneered the so-called “Snow White” design
language, that would dictate computer design for the next decade.
To Steve, the Macintosh project was going to save Apple from the
bloated Lisa project and the bureaucracy of the company. He tried to
insufflate the team with entrepreneurial values, calling them rebels and
artists, while the other Apple employees were bozos. The team was even
in a separate building on Bandley Drive, where Steve hung a pirate flag:
“better be a pirate than join the Navy,” he said — meaning the Navy was the rest of Apple.
By early 1982, the Macintosh was beginning to be
acknowledged as a significant project within Apple, instead of a quirky
research effort, but it still remained somewhat controversial. Since the
Mac was sort of like a Lisa that was priced like an Apple II, it was
seen as potential competition from both groups. Also, our leader Steve
Jobs had a habit of constantly boasting about the superiority of the Mac
team, which tended to alienate everybody else.
Mac programmer Andy Hertzfeld in Folklore.org
The Updated Book of Jobs
It was during that pivotal year of 1982 that a crucial event
happened that shaped Steve’s relationship with the media. In February,
at age 27, he appeared on the cover of Time Magazine (Microsoft chairman
Bill Gates was supposedly infuriated Steve got there first — he would
only appear on Time’s cover two years later). He was depicted as a
symbol of America’s young entrepreneurs.
Steve was pleased and agreed to give the Time reporter, Mike
Moritz, carte blanche for writing a book about the history of Apple in
general and Macintosh in particular.
By the end of the year, there were serious talks about naming Steve
Jobs Man of the Year 1982. Mike Moritz, who had been appointed Time’s
San Francisco Bureau Chief, started conducting lengthy interviews in
anticipation of the story. But to everyone’s surprise, Time decided to
go with
“the personal computer as machine of the year 1982.” There was no Man of the Year! Instead, Moritz wrote a piece called
“The Updated Book of Jobs,” (see
the Articles section in Links) in which Jef Raskin said that Steve
“would have made an excellent King of France.” Steve was furious. He called up Jef Raskin and Dan Kottke, his friend from Reed, who (anonymously) said to Moritz that
“something
is happening to Steve that's sad and not pretty, something related to
money and power and loneliness. He's less sensitive to people's
feelings. He runs over them, snowballs them.” It is rumored Steve never talked to Dan again.
Steve would be a lot more suspicious of the media from then on. He
would also be even more protective of his privacy — as the Time article
brought up the situation with his illegitimate daughter Lisa.
John Sculley
In January 1983, Steve traveled to the East Coast for the launch of
Lisa. It was sort of an awkward situation, given that the chairman’s
heart clearly belonged to Macintosh. And he couldn’t prevent himself
from saying so — he would always point out that a few months later, a
better GUI computer was going to come out, with superior software yet at
a fraction of Lisa’s price. Moreover, the Lisa software would not run
on Macintosh. This attitude only worsened a critical response that was
already negative, given the machine’s whopping $10,000 price tag.
While Steve was in New York City, he met with PepsiCo executive
John Sculley. Remember Apple was still looking for a CEO, since the
departure of Mike Scott. The board would not let 28-year-old Steve Jobs
run the company as he was way too inexperienced. Steve seduced Sculley
into moving to California to become Apple’s CEO and groom him into a
full-blown manager. The words he used are now legend in corporate
history:
Do you want to sell sugared water for the rest of your life or do you want to come with me and change the world?
quoted in Triumph of the Nerds
In Sculley’s first months at Apple, his relationship with Steve
Jobs seemed almost like a honeymoon. They would both go at lengths in
the media about how they got along so well that they could finish each
other’s sentences. Steve really thought of Sculley as a friend, taking
him in his typical long walks on Stanford hills.
More importantly, Sculley agreed with Steve’s vision of making
Macintosh the #1 priority at Apple. Throughout 1983, Lisa turned out to
be a bomb in the marketplace, like Apple III before it. Apple was still
relying only on its six-year-old Apple II computer — whose market share
kept shrinking because of the IBM PC. Macintosh had to succeed, or else
the company would be out of business very quickly.
Why 1984 won’t be like “1984”
After Lisa came out in January 1983, the whole Lisa group joined
Steve and his team to get Macintosh ready for market. The team quickly
grew into several dozens of people — the renegade days seemed long gone.
Everything didn’t go smoothly: all the teams were late, and the
management eventually had to decide on a date for the introduction of
the product. They picked Apple’s 1984 shareholders meeting, on January
24. There was also tremendous pressure to make software available to the
new platform for the launch. Several software developers signed up,
including market leader Lotus and Bill Gates’ Microsoft, whose main
business at the time was the IBM PC’s operating system, DOS. But one of
the hottest issues was Steve Jobs’ antagonizing attitude. He would keep
on berating the other divisions: he famously called the Apple II
engineers (who were the only ones bringing cash in)
“the dull and boring product division.” After Lisa was launched, he also said in front of the whole development team, including people who were about to get fired:
“I only see B and C players here. All the A players are with me on the Mac team.”
As far as marketing was concerned, Steve went to Chiat/Day with Mike
Murray, and they worked together with Lee Clow on a breakthrough
Macintosh commercial,
1984. They hired a young director, Ridley
Scott, to shoot an ad that depicted Apple’s computer as a blond,
athletic Californian girl throwing a hammer at IBM-Big Brother’s face on
a huge screen. The ad concluded that 1984 wouldn’t be like George
Orwell’s
“1984.” The ad was so audacious it was almost
canceled, but in the end the board went for it. It is now widely
acknowledged as one of the best TV commercials ever created. It was
aired during Super Bowl XVIII, on January 22 1984, and started an
enormous media hype around Macintosh’s introduction two days later.
When the day finally came, Steve proved once again his talent as
master showman. He introduced Macintosh as a revolution to a cheering
crowd at Cupertino’s Flint Center auditorium. As he came off stage, he
said:
It’s the proudest, happiest moment of my life
quoted in Triumph of the Nerds
After what Apple had been through for the past three years, every
hope turned to Steve’s Macintosh to salvage the company. It was a
perilous bet...
Disappointments
At first, the Mac did seem to be a huge hit. In the couple of months
that followed its introduction, Steve Jobs and the development team
posed for countless photos, gave more than two hundred interviews, and
ended up on several magazine covers.
There was also a significant success on US campuses. Before the
introduction, a team of Apple salespeople led by Dan’l Lewin had
convinced twenty-four Ivy League institutions to sign up for the
so-called
Apple University Consortium program: they would
become Apple dealers, buying Macintoshes wholesale and selling them at a
discount retail price to students. Throughout 1984, Macintosh became
the first cult machine of American college students.
But after this encouraging wave of early adopters, Mac sales started
to plummet. There were several concerns about Apple’s computer: first,
it was painfully slow, as its processing power had difficulty handling
the complex Graphical User Interface. It was also a bit pricey, selling
for $2,500, a thousand more than the IBM PC it was supposed to compete
with. But the biggest drawback was software: Macintosh being a brand new
platform, almost no program could run on it when it was launched,
whereas a ton of applications were already available on the IBM PC
platform. Everyone agreed that Macintosh was a lot friendlier and
easier-to-use, that its technology was far superior to that of the IBM
PC; but it was useless. Mike Murray’s marketing team was criticized for
not advertising the machine appropriately: businesses felt it was a cute
machine for yuppies and their kids, not a computer that would improve
their productivity.
Steve leaves Apple
Tensions
Steve could not deal with the market failure of his baby. He
continued to behave as if he had saved Apple, treating non-Mac employees
with deference in Cupertino. People felt he spoiled the Mac team,
buying them a BMW motorcycle and a Bosendorfer grand piano with his
personal money, while the company was still alive thanks only to Apple
II sales (the truth was that Macintosh engineers were paid the same or
even less than their counterparts).
There was increasing resentment building up against Steve Jobs at
Apple. The honeymoon with CEO John Sculley was over: the two men
increasingly criticized one another in their inner circles. Even Woz,
who felt insulted by the treatment the Apple II team received, left the
company in February 1985. He openly criticized the management in
Cupertino: this was a PR disaster for the firm.
In April 1985, the board discussed re-organization plans for the
company. Everyone agreed there should be a new manager for the Mac team,
namely Apple France executive Jean-Louis Gassée. Jobs even accepted the
idea for a while, thinking of running a new R&D department instead.
But he was outraged when Gassée asked for a written guarantee of his
promotion.
To him, it became a personal war with Sculley. While the CEO was away
on a business trip, on May 23 1985, Steve gathered some of his top
aides, telling them Sculley wanted him out of his own company. The next
day, Sculley heard of the scheme and canceled his trip. He confronted
Steve in front of the other Apple executives. After hours of intense
discussions, they simply couldn’t find a solution to the conflict
between the two men. Steve said he would take a vacation until they were
done with the re-organization, and left. It was only a few days later,
on May 28, that Sculley informed him that the board had decided on a new
org chart, which did not include him at any managerial position.
Steve’s conviction the board would support him had proved wrong: he had
lost the final battle.
At 30 I was out. And very publicly out. What had
been the focus of my entire adult life was gone, and it was devastating.
I really didn't know what to do for a few months. I felt that I had let
the previous generation of entrepreneurs down — that I had dropped the
baton as it was being passed to me. I met with David Packard and Bob
Noyce and tried to apologize for screwing up so badly. I was a very
public failure, and I even thought about running away from the Valley.
Stanford Commencement Address, 12 Jun 2005
Experimentations
During those four months, from May to September 1985, Steve was still
chairman of the board — he was not fired from Apple, contrary to
popular belief. But he had a lot of times on his hands, and tried hard
to find what he was going to do next.
He traveled to Europe, advocating Macintosh to French universities,
biking around Tuscany, and thinking of settling in the south of France.
He went to the Soviet Union to preach the benefits of personal computing
and asked NASA if he could ride the Space Shuttle. He even thought of
running for the office of governor of California, seeking advice from
his friend Jerry Brown. But none of these endeavors could really absorb
his energy and his continuing passion for computing.
He also looked for places to invest in. One of his very good friends
from Xerox PARC, computer pioneer Alan Kay, told him about an
iconoclastic group of computer graphics developers north of the Bay
Area, whose parent company, Lucasfilms’ Industrial Light & Magic,
was trying to get rid of.
The genesis of Pixar
The founding fathers of Pixar were researchers Ed Catmull and Alvy
Ray Smith, who, as early as the 1970s, shared a dream of making animated
movies with computers. Yet they knew it would take at least a decade
before their vision could materialize, given the necessary computing
power to handle such complex operations. So they just got together and
waited for the technology to evolve.
Catmull and Smith slowly put together a core team of computer graphic
pioneers that also believed in computer-animated films. Among the first
members were computer scientists Ralph Guggenheim and Bill Reeves. John
Lasseter, a brilliant animator from Disney, joined them in 1984. The
group moved from one benefactor to the next since its creation; in 1985,
they belonged to George Lucas’ Industrial Light & Magic (ILM).
Yet the Star Wars filmmaker was trying to sell the division. He
needed money after his divorce, and, more importantly, he did not share
the team’s vision. He just wanted to use 3-D animation for special
effects in movies.
In addition, at the time, Pixar was working on a graphical
workstation, a very powerful computer dedicated only to processing
visual data. They had also started developing their own 3-D computer
language, RenderMan. The department was clearly evolving outside of
Lucasfilm’s realm, and that’s why they were looking for a new patron.
Steve toured the ILM lab and was mightily impressed. He compared this
experience with his revelation at Xerox PARC six years earlier, when he
was first shown the graphical user interface. Yet the price tag was too
high: $30 million. He turned Lucas down, but asked to be given a call
if the offer got cheaper.
A new venture
As the story goes, Steve Jobs was still looking for new directions in
life when he met with a friend of his, Nobel Prize Paul Berg, from
Stanford University. Berg told him of his work on DNA, and asked him
whether the molecules could be simulated on computers. The answer was
no, not yet anyway... this gave Steve the idea of starting a new
company. He would build a high-end computer aimed solely at the higher
education and research markets. He asked around and found out the
general consensus was a need for a so-called 3M machine — a computer
that could hold one megabyte of memory, perform one million instructions
per second, and display one million pixels on a screen.
Since he was still at Apple, he decided to inform the board of his
decision. On September 13 1985, he described his plan. The board seemed
enthusiastic at first, even willing to invest in the chairman’s new
venture. But when Steve announced who would join him in his new company,
called Next, they turned bitter: he would go away with Bud Tribble, the
first Mac programmer; George Crow, a key Mac hardware engineer; Rich
Page, who had supervised almost all of Lisa’s development; Dan’l Lewin,
who had made the Apple University Consortium possible; and Susan Barnes,
a Wharton alumnus with a MBA in finance. These were not
“low-level”
people, as Steve had presented them! Apple felt threatened, especially
since they were themselves working on a 3M machine code-named
“Big Mac”.
This was the coup de grâce for Steve. On September 17, he announced
his resignation from Apple to an assembly of stunned journalists
gathered at his mansion in Woodside.
NeXT Inc.
Next did not start easily. The minute it was created, the six
co-founders found themselves sued by their former employer, Apple. The
fruit company was accusing them of stealing their technology.
As a result, for its first year or so of existence, the new company
could not work on any product in particular, since there was a chance
they would lose the trial and give all the technologies they had worked
on back to Apple.
In the meantime, Steve Jobs set up to build the perfect company.
The Next co-founders outside Steve’s mansion in Woodside.
From left to right: Steve Jobs, George Crow, Rich Page,
Susan Barnes, Bud Tribble and Dan’l Lewin.
The perfect company
He started by doing one of the things he was best at doing:
recruiting. He hired only extremely bright and competent people. At one
point Next bragged that even their receptionist was a Ph.D.! There was
incredible hype around Steve’s new venture. It seemed like the whole
Valley wanted to work at Next — even though it was considered “a leap of
faith” (since nobody knew what they would have to work on eventually).
Among its first employees was Avie Tevanian, a software genius who was
still a student at Carnegie Mellon University when Steve met him. He was
working on a UNIX kernel called Mach; Steve told him that if he joined
Next, his invention would run on millions of computers in a few years
time.
You basically had to meet everyone in the entire
company and they all had to give you the thumbs-up. It really felt like a
fraternity. Everyone had to love you. So the feeling you got was that
anyone who got through had to be ‘the best of the best’
an early NeXT employee quoted in Alan Deutschman's The Second Coming of Steve Jobs
Next treated its employees in a pretty unique fashion in Silicon
Valley. First, there were only two levels in salary for a long time:
senior staff earned $75,000 a year, and the rest earned $50,000. It gave
the place sort of a communal feel, a community of super-bright people,
not a tech start-up driven by greed. Other perks included health club
memberships, counseling services, emergency loans, and free fresh juice.
Keep in mind the company still had no revenues to speak of during those
early years — it was still operating with Steve’s pocket money.
Steve also went and looked for a logo and a corporate identity for
his new venture. He found both after he asked who was the best logo
designer on the planet, and was introduced to Yale art professor Paul
Rand. Rand designed a logo for no less than $100,000, and came up with
the name NeXT, with a conspicuous lowercase “e”, that was supposed to
stand for:
“education, excellence, expertise, exceptional, excitement, e=mc2...” (see
this video about it).
Finally, Steve proved not too parsimonious either when it came to
NeXT’s headquarters. One of the company’s first ten employees was
actually Tom Carlisle, a full-time interior designer. They settled in
one of the most expensive areas of the Valley, the Stanford Industrial
Park, not far from Xerox PARC. Carlisle furnished the place with glass
walls and beautiful Ansel Adams prints, and set up a common area with
hardwood floors that included a kitchen with granite counter tops and a
lounge with U-shape sofas that sat 12.
Money matters
After his departure from Apple, Steve had sold almost all of his
stock out of disgust. So by early 1986, he was sitting on more than $100
million, waiting for opportunities to invest. He got a call from
Lucasfilm: they weren’t able to find any suitable buyer for the computer
graphics team, so they dropped the price by two thirds. Steve agreed to
pay the $10 million, and on January 30, Pixar was incorporated. It
would turn out to be a money sink of his for years to come.
Steve Jobs with investor Ross Perot
But Pixar didn’t matter much — it was Steve’s
“hobby”, as
his heart was at NeXT. He let Catmull and Smith run their small team
north of the Bay Area, while he spent his days in Palo Alto. Apple had
just dropped its lawsuit against the startup, so they could finally
start working on their computer for higher education.
Interestingly enough, Steve’s habits as an investor were quite the
opposite of his affections for his companies. While he did not care
about Pixar nearly as much as he cared about NeXT, he opened the company
a line of credit that he would pay with his own money for several
years. Pixar was always begging for Steve’s money as they barely had any
revenues. On the other hand, he refused to fund NeXT solely with his
own money. He started to look for outside investors early on.
A critical change occurred when, in November 1986, CBS aired a documentary called
The Entrepreneurs
which featured Jobs during NeXT company retreats. A watcher was
millionaire Ross Perot, who was still immensely rich from selling his
company Electronic Data Systems to General Motors. He was seduced and
phoned Steve:
“if you ever need an investor, call me.”
It was good news as NeXT was burning money at an incredibly fast
rate. So the deal was quickly signed: in February 1987, they announced
Perot invested $20 million in exchange for 16% of NeXT, while Steve kept
63% for himself. The company had no product but a t-shirt back then,
yet it was already valued over $125 million! This is how powerful Steve
Jobs’ name was in the mid-1980s. Ross Perot joined the board of
directors together with Carnegie Mellon administrator Pat Crecine, a
good friend of Steve’s. Not a very balanced board of directors indeed...
Personal life
Steve and Lisa circa 1989
There were crucial evolutions in Steve’s personal life as well.
First, after years of research, he had finally found his biological
family. His biological mother Joanne was still alive, and she had
actually married his father a couple of years after Steve was born. They
had given birth to a daughter, Steve’s biological sister, called Mona.
Mona Simpson was a young yet accomplished writer who had just published a
novel that earned her several literary prizes,
Anywhere But Here.
Steve was thrilled his sister was an artist: there was indeed art in
his genes! He filled a bookshelf at NeXT with free copies of Mona’s
book.
He also started to fully accept his 9-year-old daughter Lisa as
family. She increasingly spent time at his home in Woodside, and he even
took her to NeXT’s offices from time to time. He started to get deeply
involved in her education.
Finally, he became more stable in his relationships and was thinking of marrying his girlfriend Tina Redse.
This whole period of Steve’s life is well documented in
A Regular Guy, a novel by Mona Simpson which barely disguises Steve Jobs and Lisa as its main characters.
The NeXT Cube
No detail was too small
There is probably no product in Steve’s career that was hurt more by
his perfectionism than the NeXT Cube. No detail seemed too trivial to be
overlooked; everything NeXT did had to be perfect.
First with software. When Steve started asking around to know what
was the state of the art in computer operating system, he was told the
most stable, modern software was called UNIX. It was a very complex but
very powerful OS used in universities and by large companies in their
mainframes. The most advanced UNIX technology was being developed at
Carnegie-Mellon, where Steve hired some of his best programmers, such as
Avie Tevanian. He was also told about object-oriented programming, a
breakthrough from Xerox PARC which made software development very fast
and efficient. This was the easiest and most efficient way to build
software, another breakthrough invented at Xerox PARC. So Steve knew his
priorities for the NeXT operating system: it would be a UNIX
object-oriented system — on top of which would be added a graphical user
interface, to make it user-friendly. These were the very ambitious
foundations of NeXTSTEP, so ambitious that it would take several years
before they would give birth to a stable operating system
Second, of course, was hardware. Steve had been thrilled by the
factory that was used to produce Macintosh — he wanted to do even better
this time with NeXT. He set up to build the most advanced automated
factory in the world, in Fremont, not too far from the Mac factory
itself. The NeXT computers would be built untouched by human hands,
using robots operated by other NeXT computers. The factory was designed
to mass produce NeXT Cubes and bring the costs down with volume... a
disastrous choice for the future.
And finally, the design of the machine, of course, had to be a
stunner as well. Steve hired frogdesign again, the same firm that had
designed Macintosh, and they came up with a perfect black cube built out
of magnesium. Although the Cube clearly deserved its place at the SF
MOMA, many of its features made it a pain to build: from the perfect
right angles to its materials to its color, it was extremely complicated
— and expensive — to put together. In addition, Steve had made a point
on also designing a “beautiful” board for the Cube. All the electronic
components, which are usually on several different pieces of plastic,
were melded on a single square board that the chairman considered as
beautiful as the case itself. However it was a strenuous problem for
engineers to solve.
There was also the problem of the computer storage system: Steve
hated floppy disks, so when he learned about a new technology developed
by Canon called magneto-optical drives, he jumped on the occasion. This
was a brand new way to store data, but it had not been brought to market
yet and its price was still astronomical. Steve bet on it and made it
standard on the NeXT computer.
The introduction
Because of all its breakthroughs, in both hardware and software, the
date of the NeXT computer’s introduction was constantly being put off.
Originally, it was supposed to be out in spring 1987, since most
universities shop for the next academic year during springtime. But the
computer was nowhere near ready at that time! It was rescheduled for
fall 1987, then spring 1988, and finally to fall 1988 — on October 12 to
be precise.
I think I speak for everybody at NeXT, saying it’s
great to be back. [...] I think together we’re going to experience one
of those times that occur once or twice in a decade of computing, a time
when a new architecture is rolled out that is really going to change
the future of computing. And we’ve worked on this for three years. It’s
turned out in-cre-di-bly great...
quoted in Randal E. Stross' Steve Jobs and the NeXT Big Thing
The hype was of tremendous proportions. Steve stayed on the stage of
San Francisco’s Davies Symphony Hall for three hours, ending his
presentation with a duet between a violinist and the NeXT Cube to
demonstrate the computer’s breakthrough sound abilities.
The audience was so captivated that barely anyone realized that Steve
had dropped two bombs in his speech. First, NeXTSTEP, the computer’s
operating system, still wasn’t ready after more than two years of
development. It was still in beta version and would not come out before
another six months. Second, the Cube’s price was astonishingly high! It
cost $6,500, more than twice the $3,000 universities had agreed to pay
for a 3M machine. And that was without the $2,000 laser printer or the
$3,000 for the hard disk that would prove necessary since the
magneto-optical drive was so painfully slow... The Cube was certainly a
bargain for everything it came with: the Canon drive alone cost $6,000
on the market, not to mention NeXT’s revolutionary software — but no one
had the money to invest in such an advanced machine.
RenderMan & the Pixar Image Computer
The Pixar Image Computer II
In the meantime, Steve’s so-called “hobby”, Pixar, was also making
progress. Remember it had been packaged by Lucas as a graphics computer
maker. In 1986, shortly after being incorporated, the company had
brought to market a graphics workstation: the Pixar Image Computer, or
PIC. But even for the professional markets it was aiming at, its price
tag of $125,000, the additional workstation it required to work, and its
total lack of software made it a very exclusive solution. It
essentially appealed to major universities and advanced labs in niche
industries. Sales were so disappointing that two years later, in 1988,
the company came up with a cheaper system, the PIC II, which sold for
$29,500, while the price for PIC was lowered to $49,000.
They also released a breakthrough graphical computer language called
RenderMan. The idea behind RenderMan was to do for 3D graphics what
PostScript had done for fonts and 2D graphics in general: write a
universal language that any machine could use to render 3D graphics
(more on PostScript below). Yet the concept was too complicated and way
ahead of its time. RenderMan was almost only used in Pixar’s own
rendering software, PhotoRealistic RenderMan.
Getting real
Hopes at NeXT
There were a couple of events that led NeXT executives to falsely
believe that they were on the right track, instead of realizing they
were heading to the wall.
First was a major deal with IBM that was signed in September
1988, just one month before the Cube’s introduction. As we explained
before, NeXT’s operating system, NeXTSTEP, was a revolution in software.
It was the first UNIX ever to sport a graphical user interface, making
an arcane piece of software accessible to mere mortals. We also said
that UNIX was used on several computer mainframes, the vast majority of
which were still IBM-made. That’s why Big Blue showed a substantial
interest in the NeXT operating system: its intention was to buy a right
to license NeXTSTEP on its mainframe systems, in order to add GUIs to
its UNIX computers. Moreover, IBM was trying to find a way out of its
morass with software developer Microsoft.
The personal computer industry in 1988
When Steve Jobs launched the NeXT Computer in 1988, the
industry landscape was radically different from its situation in 1985,
the year he left Apple.
The success of Macintosh
First, Macintosh, the sales of which were disastrous in its first
two years, was now thriving on the marketplace. It all came down to one
word: PostScript.
PostScript was a computer language developed by two researchers
from Xerox PARC (again), John Warnock and Charles Geschke. Before it
came out, printing text from a computer was a painful thing to
accomplish. There was no standard, so every program had to know about
every printer, and vice versa. PostScript became the standard: every
text editor started speaking PostScript, and every printer as well, so
they all started to understand each other seamlessly.
Warnock and Geschke started Adobe Systems in 1982 to build
high-end laser printers (another one of their inventions from PARC) that
were supposed to be the only machines to use PostScript. It was Steve
Jobs who convinced them to make it a standard computer language: he cut a
deal with Adobe to use their software and had Apple purchase 20% of the
new company.
His vision proved right: the year after he left, Macintosh sales
skyrocketed thanks to the desktop publishing revolution. Desktop
publishing is the technical word for being able to designing beautiful
texts and illustrations on a computer and then print them exactly as
they appear on the screen (with so-called WYSIWYG software for
What You See Is What You Get). This technology only worked on Macs for years, making Apple richer than ever...
The birth of a titan
Yet the biggest change on the personal computing scene was not
from Apple but from one of its early partners, Redmond-based Microsoft.
In 1981, Microsoft signed a deal with IBM to be the exclusive
provider of the operating system that would run on their PC, a piece of
software called DOS. The deal also included the right for Microsoft to
sell the system to other computer manufacturers. IBM agreed, as at the
time, the prevalent belief in the computer business was that no money
could be made from software, only hardware.
Big mistake from Big Blue! Shortly after the IBM PC came out, the
market was flooded with so-called PC clones: cheaper computers from
other companies that would run IBM PC-compatible software. One of the
most popular was Compaq, which started in 1982 with the first “portable”
PC.
So throughout the 1980s, IBM saw its share of the PC market
shrink drastically, while Microsoft was becoming a software behemoth,
selling DOS to basically every computer user that was not using Apple
products. The firm from Redmond was turning increasingly independent
from IBM and impossible to deal with. The solution? Big Blue intended to
launch a new standard for its future products, that would have nothing
to do with Microsoft, thus putting them out of business.
NeXT had the opportunity to become the next Microsoft: if
the deal with IBM succeeded, their breakthrough software would run on
every IBM-compatible PC in the future.
In addition, in June 1989, NeXT signed a deal with Canon, the
Japanese maker of the Cube’s magneto-optical drive. In exchange for the
exclusive right to distribute NeXT computers in Asia, they agreed to
invest $100 million for 15.67% of the company — valuing it at a whopping
$600 million!
The NeXT Station
Despite those signs of optimism, the NeXT Cube was a blatant failure
on the marketplace. It simply did not sell: universities and students
found it way too expensive. Firstly, by 1988, it was common for students
to have a Macintosh in their dorm rooms. The days when you had to go to
the computer lab to use a workstation like the Cube were long gone.
There was also the problem of donations — universities were used to be
given, not sold, computers, in the hope that students would use the same
computers in their future corporate careers. Finally, the Cube was not
as modern as it would have been had it come out the year before: it was
monochrome at a time where color started to appear, its magneto-optical
drive was a pain to use, and above all, it had very limited software.
The NeXT factory, which had the ability to turn out 10,000 Cubes a
month, manufactured an average of 400 a month in 1989! At such rates,
the competitive advantage of having an automated factory was turning
into a disadvantage — it was a lot more expensive to operate and,
lacking the necessary volume, it did not drive the costs down at all.
Steve Jobs tried to adjust by substantially changing NeXT’s strategy:
Our smallest competitor is $1.75 billion these
days. [...] We have to get up to a certain level if we want to play in
the sandbox.
The Entrepreneur of the Decade, Inc., April 1989
The company stopped selling exclusively to the education market, and
tried to make its way into corporate America. NeXTSTEP’s object-oriented
development environment was a key advantage in that market: it would
allow for companies to write custom software in record time. In order to
do so, in March 1989, NeXT partnered with Businessland, the nation’s
largest computer retailer at the time, to distribute Cubes in all of its
stores — with a $9,995 price tag. Of course this hardly worked.
In parallel, work started on a new, cheaper computer. The NeXT
Station or “slab” (because of its pizza-box shape) was eventually
introduced in September 1990, along with cheaper Cubes with color and
breakthrough video capabilities. The cheapest Station sold for $5,000,
still a high price but half of that of the Cube. On stage also came
Lotus software, which announced that the revolutionary next release of
their spreadsheet called Lotus Improv would run only on the NeXT
platform, and would be bundled with every NeXT computer. The goal was to
make it NeXT’s killer app (an app that alone justifies buying the
machine).
Tough times for Pixar
As for Pixar, it was in a really painful situation by the early 1990s.
First of all, the computer animation department, headed by John
Lasseter, had to fight regularly for its survival. Steve Jobs almost
shut it down several times throughout 1987 and 1988, until the team had
the idea of making animation for TV commercials. That way they could
survive and keep all the talents they had spent years to gather, while
making some money. For all that, work on “artistic” movies did not stop:
the team’s
Tin Toy got an Academy Award for Best Animated
Short Film in 1988, and the following year, Lasseter earned critical
acclaim for his short
Luxo Jr. at the SIGGRAPH convention.
Steve allowed for the animation department to continue such work because
the prestige could be used for selling more PICs — although,
ironically, Pixar only made one short movie on their computer in their
entire history:
Red’s Dream (in 1987).
However, sales of Pixar Image Computers were still extremely
disappointing. On April 30 1990, Steve Jobs announced he was shutting
down all of the company’s hardware operations, while the staff moved
away from Lucasfilm’s premises to new offices in Point Richmond — not
far from a Chevron oil refinery. From then on, they would have to focus
only on their boss’s new vision: Steve thought that RenderMan was going
to become the next PostScript, an open standard adopted by the masses to
make 3D renderings at home, just like PostScript had made desktop
publishing possible. He was denying the reality of how hard it was to
master three-dimensional animation.
If costs were indeed cut a little by this move, it didn’t make Pixar
more profitable. The startup was still relying on Steve Jobs’ line of
credit, and in 1990 alone, its net operating loss was over $8 million.
In March 1991, Steve went further in his drastic moves to make Pixar
survive. He declared he would continue to keep funding it only if he
were given back all of the employees’ stock shares. The scheme involved
shutting the company down on paper, and creating a “new Pixar” where he
was the sole owner. He also fired almost half the staff, keeping only
the software programmers as well as Lasseter’s animation department —
which was, by then, the only part of the company to bring cash in,
thanks to its works in TV advertisement.
Pixar failed nine times over by normal standards,
but Steve didn’t want to fail so he kept writing the checks. He would
have sold us to anybody in a moment, and he tried really hard, but he
wanted to cover his loss of $50 million.
Wilderness years
Marriage
The years of 1991 to 1994 were the worst in Steve’s career.
Paradoxically, they were some of the happiest years in his private life.
In 1990, at age 35, after his girlfriend Tina Redse had turned down his
proposal, he started dating a young Stanford MBA student called Laurene
Powell. Laurene was a leggy blonde in the mold of Steve’s taste in
women, but she was also very smart and independent — in addition to
being a militant vegan. According to Steve, it was love at first sight:
he canceled a business meeting to have lunch with her, and the following
year, on March 18 1991, they got married in Yosemite. Steve only
brought along a couple of guests in the lodge’s chapel, and the
no-frills ceremony was conducted by his long-time Zen guru Kobun Chino. A
few months later, Laurene gave birth to Steve’s second child, a baby
boy named Reed Paul, after Steve’s alma mater (Reed College) and his
father (Paul Jobs).
Troubles at NeXT
Throughout 1990 and 1991, it became obvious to NeXT’s management that
something was wrong with their computers. They believed it was a
strategic error; that they should position themselves as makers of an
emerging kind of computers, personal workstations, i.e. computers as
powerful as workstations yet as easy to use as personal computers. Their
competitors were not Apple or other PC brands anymore, but Sun, the
dominant player in the workstation business.
The re-positioning came too late, and it did nothing to improve the
disastrous state of the company’s financials. They were still spending
money like crazy, as exemplified by their
new offices
facing a marina in Redwood City and its free-standing staircase
designed by I.M. Pei’s architectural firm. But they were hardly selling:
their revenues for 1990 were as low as $28 million (in comparison, Sun
made $2.5 billion that same year). In addition, NeXT’s deal with IBM was
canceled, as it proved difficult for two such radically different
companies to cooperate. Steve was still suspicious of Big Blue:
I’m not stupid enough to give you everything I have, when you have 27,000 salespeople.
quoted in Randall E. Stross’ Steve Jobs and the NeXT Big Thing
He was reflecting a common feeling in the company that giving away
NeXT’s software to IBM was like committing suicide, as it was the
company’s most valuable asset. Moreover, IBM asked for Steve Jobs to
give up hardware if he were to work with IBM, which was out of the
question for him at that time. This decision led to the departure of Bud
Tribble, the brilliant developer who was heading software and had
co-founded NeXT with Steve in 1985. All the other co-founders but George
Crow eventually left in those pivotal years of the early 1990s.
The company’s other main partnership, the distribution deal with
Businessland, also collapsed as the chain went bankrupt in 1991. NeXT,
which had just expanded to the European market, had to turn to
independent dealers worldwide, an even costlier solution. Profitability
seemed like an impossible goal, and investors started to get angry: Ross
Perot left by the end of 1991, after sales for the third quarter had
proven abysmal. The company now relied solely on Steve and Canon, who
kept pouring money in so that they wouldn’t lose all of their initial
$100 million investment (and lose face at the same time). As a
counterpart, the Japanese demanded that Steve hire an outside executive
to help him run the company. The choice fell upon an experienced
manager, Peter Van Cuylenburg, who was named COO in early 1992
A computer-animated feature film
Disney executive Jeffrey Katzenberg
While Steve was fighting to make NeXT a viable business, a crucial
event happened at his other company, “his hobby”, Pixar. Remember the
animation department had been struggling for survival for years, making
TV commercials to make a little money. But it was also awarded several
prizes for its short movies, mostly at the renowned SIGGRAPH animation
conventions, but also an Academy Award for
Tin Toy in 1989. John Lasseter was increasingly recognized as one of the industry’s most talented animator.
Starting in 1989, Disney’s new management (CEO Michael Eisner, but
mostly his top aide Jeffrey Katzenberg) tried to hire Lasseter back to
the Magic Kingdom. Yet despite Pixar’s precarious situation, he
continually declined the offer: he realized that in no other place on
earth he would find so many talented people who shared his vision of the
future of computer animation.
So Disney agreed to sign a contract with Pixar for a full feature
film, made entirely with computers. This had been Pixar’s dream for
years, back in the late 1970s with Ed Catmull and Alvy Ray Smith (who
had since left the company because he could not stand working with Steve
Jobs). The story line John Lasseter proposed was some sort of buddy
movie involving toys. Jeffrey Katzenberg agreed and in May 1991, the
contract was signed. Steve negotiated for Pixar to make three movies and
keep 12.5% of the revenues from ticket sales. It was a very cheap price
for a film, but Steve and the rest of Pixar didn’t know better: it was a
huge amount of money for their struggling studio! Steve Jobs’
investment finally seemed it was going to pay off.
Nadir
Everything seemed to collapse professionally for Steve in 1993, the year he turned 38.
It started with NeXT. In January 1992, he had already made the huge
compromise of accepting to license the company’s advanced operating
system, NeXTSTEP. It would no longer be restricted to NeXT’s black
boxes, but would also run on Intel’s 486 IBM-compatible family of
processors. To many experts he should have done this from the beginning,
but to Steve, this was the first sign of his failure, as he always felt
personally attached to hardware: he had always been a hardware freak,
fanatical about his machines’ design, spending hours in NeXT’s factory
watching robots put together his beautiful computers.
But it turned out even worse the following year. COO Van Cuylenburg,
who was hired to please Canon, betrayed Steve, in a cruel reminiscence
of what had happened at Apple some seven years earlier. He called up
NeXT’s competitor Sun, and asked its CEO Scott McNealy to buy NeXT and
install him as manager of the new entity. Fortunately, McNealy had some
sense of honor and told Steve about the outrage. Van Cuylenburg left,
but Steve was devastated, especially since all the company’s co-founders
but George Crow had abandoned him.
A couple of months later, the coup de grâce came as NeXT had to face
reality and give up its hardware operations altogether. The decision was
taken on February 11, a tragic day when 300 of NeXT’s 530 employees
lost their job. The automated factory was transferred to investor Canon,
which sold all its furniture in a memorable auction in September of
that year. The dream of a multi-billion-dollar business had given birth
to a small software company, NeXT Software Inc., specialized in
application development and server technology for the UNIX and Windows
platforms.
As if destiny was working against him, Steve also had to face trouble
with Pixar in that same awful year of 1993. While the work on the
animated feature with Disney seemed to stall for a while, Disney’s
Katzenberg abruptly put an end to it in November 1993. Together with the
majority of Disney’s creative staff, he declared that the characters
were unappealing jerks and the dialogues inappropriately cynical for a
children’s movie (while he was the one who pushed for such
characteristics early in development). Pixar was back to making TV
commercials just so it could survive — but it was obvious it would
disappear if the work did not start again.
Steve had reached the bottom of his career. To use his words, he was in
“ankle deep shit.” He didn’t even go to work regularly anymore and spent most of his days at home, playing with his two-year-old son.
In this rare photograph, you can see how Steve Jobs looked at the lowest point of his career.
It was taken for Andy Hertzfeld’s birthday in April 1993.
From left to right: Mac programmer Andy Hertzfeld, Lisa and Mac programmer Bill Atkinson,
Mac programmer and NeXT co-founder Bud Tribble, and Steve.
Saved by toys
Toy Story
Fortunately enough,
“it’s over” didn’t have the same meaning
in Hollywood as it did in Silicon Valley. John Lasseter and other Pixar
employees worked very hard at the script, and in February 1994, they
turned out a new, improved version that won Jeffrey Katzenberg’s
approval: production could resume. Steve was not overwhelmed, as he kept
trying to sell Pixar to outside investors until late fall 1994. At the
time he came very close to selling the animation studios to... Apple’s
arch-rival Microsoft.
But he progressively started to sense Pixar was going to be a lot
more important to his career than he ever expected. According to many,
the revelation came in January 1995, when he was invited to a Disney
event in New York. In the middle of Central Park, the movie studio had
set up a gigantic tent with a movie screen showing previews of the two
upcoming Disney films,
Pocahontas, to be released in the summer, and
Toy Story, for Thanksgiving 1995.
That was the moment Steve realized the Disney deal
would materialize into something much bigger than he had ever imagined,
and that Pixar was the way out of his morass with NeXT.
Pixar’s Ralph Guggenheim quoted in Alan Deutschman's The Second Coming of Steve Jobs
Steve started to get increasingly involved in Pixar’s affairs,
stripping Ed Catmull of his title of President and naming himself
President & CEO of the company in February 1995. He also hired an
outside CFO, Lawrence Levy, to give Pixar a respectable image to Wall
Street in anticipation of a possible IPO.
When Toy Story finally came out on November 22, it exceeded all the
hopes that Pixar and Disney had put into it. It made $28 million in the
Thanksgiving 3-day weekend alone, and eventually reached $160 million in
US box-office receipts — a great number for a $27 million production.
Billionaire
But it wasn’t just about the movie.
When Steve started envisioning the possible success of
Toy Story,
he talked about taking Pixar public. Wall Street analysts and experts
laughed at his face, since Pixar still hadn’t made a single profit
during its nine-year existence. But, in August 1995, a small startup
that had existed for only a year and was also unprofitable had made a
huge hit by going public: it was Netscape, the software developer of the
eponymous Web browser. Suddenly Steve’s idea was not that ridiculous
anymore.
However, there was a legal concern because of profit-sharing
agreements with some of the company’s most senior people: John Lasseter,
Ed Catmull, and two other early employees, Ralph Guggenheim and Bill
Reeves. Their contracts stipulated they were entitled to some of their
movie’s revenues, a situation that was contradictory to being public.
Steve Jobs arranged the deal by giving away large blocks of stock to the
four of them, in addition to the newly-brought-in CFO Lawrence Levy.
But he managed to keep 80% of the company for himself, translating into
30 million shares.
There were tensions in Point Richmond after this settlement was
revealed. After the IPO, Steve Jobs would become fabulously rich, five
senior people very rich, and the others would be left out. Many of them
threatened to leave the company, shocked especially by Levy’s treatment,
since he had just joined the staff and had made almost no contribution
to Pixar...
Yet, on November 29, exactly one week after
Toy Story had
come out, Steve’s vision proved right. The IPO benefited tremendously
from the movie’s media coverage, and on opening day, the stock’s price
jumped from $22 to $49. It became the biggest IPO of the year, beating
even Netscape’s numbers. Steve Jobs had made it: he was now a
billionaire, worth almost $1.5 billion. It was ten times the money he
had ever made at Apple in the early 1980s. He was finally vindicated,
and enjoyed being back on magazine’s covers.
As for Pixar the company, it made $123 million in the IPO, going from
$47 million in the red to $76 million in the black. Steve felt strong
enough to go back to Disney and re-negotiate a deal that he considered a
master-and-slave relationship.
Back to Burbank
This time, Steve decided, Pixar would not get ripped off by Disney.
He came with very high demands for the new agreement: a 50/50
partnership, with split production costs and split revenues; total
creative control for Pixar over its movies; and equal billing, i.e. the
obligation for Disney to show Pixar’s logo on the screen and on any
marketing artifacts as big or for the same amount of time as its own.
That’s why you’re used to see Pixar’s
Luxo Jr. animation at the
beginning of every movie from the studio. Here again we can sense
Steve’s flair for marketing: he had a vision for Pixar to become as
powerful a brand in animation as Apple was in computing. He wanted it to
become no less than the next Disney.
Steve Jobs and Disney’s CEO Michael Eisner
The amazing thing is that Jobs achieved to impose these new terms —
and what’s more, to Michael Eisner, one of Hollywood’s toughest
negotiators! Disney never treated its contractors the way it agreed to
treat Pixar. All of Hollywood was stunned.
Steve had used a killer argument: he threatened to go to other movie
distributors as soon as the three-picture deal would be over. Eisner
understood Pixar was going to turn into a golden goose and was smart
enough not to let it go.
The return to Apple
Apple in 1996
To understand how Steve Jobs came back to the company he founded, it
is necessary to have a look at Apple’s situation in the mid-1990s.
As we said before, Apple made healthy profits from 1986 to 1995,
mainly thanks to its monopoly on both the GUI and the desktop publishing
revolution. Everyone who wanted a user-friendly computer bought a
Macintosh for approximately $2,000, half of which were pure profits to
Cupertino.
But, starting in 1992, Apple felt threatened by an emerging
super-power in the computer business: Microsoft. So far Microsoft was
mostly known for providing MS-DOS to the IBM PC and its clones, which
accounted for something like 80% of the PC market — the remaining 20%
being Apple. But the Redmond-based company was also an application
developer, and it had actually worked on the Macintosh with Steve Jobs
in the early 1980s to provide Mac software such as Multiplan.
When Bill Gates saw the GUI of the Macintosh in 1982, he also
understood that this was the way of the future, a future which
threatened his DOS franchise. So he started working on a Microsoft GUI
that could be added on top of MS-DOS: Windows.
For years, Windows was so terrible that nobody in the industry took
it seriously. But Apple started feeling threatened when it became better
and more Mac-like, especially after the release of Windows 3.0 in 1990.
As early as 1988, Apple sued Microsoft for stealing
“the look and feel”
of its Mac operating system. The case ended at the Supreme Court in
1994, and Apple lost (one of the main arguments was it had itself stolen
the GUI from Xerox some fifteen years earlier).
The following year, in 1995, Microsoft launched Windows 95, which was
the most successful GUI release in the history of personal computing.
Almost every PC user upgraded and started using GUI en masse, while
Apple lost its monopoly. Macintosh sales started going down
dramatically, not only because of the Wintel domination, but also
because of the bad move to license the Mac OS to Mac clone makers —
manufacturers of cheaper computers that could use Apple’s system. The
company was losing market share, and getting rid of its successive CEOs
didn’t seem to help. After John Sculley left in 1993, he was replaced by
Michael Spindler for two years, and then by Gil Amelio starting in
February 1996. The company was going downhill, failing to deliver new
products on time and lagging behind in software development.
Steve Jobs and Larry Ellison posing on the cover of BusinessWeek in 1996
Taking over?
The first talks of Steve Jobs going back to Apple started in 1995,
even before Gil Amelio was named CEO. In December of that year, Steve’s
friend Larry Ellison, the founder and CEO of Oracle and one of the
world’s richest men, talked about making a hostile takeover bid for
Apple in the media and on his website. All the arrangements were made
for Oracle and other investors to purchase the company for about $3
billion and install Steve as its new boss. Steve later explained that he
was the one who decided against it at the last minute:
I decided I'm not a hostile-takeover kind of guy. If they had [asked] me to come back, it might have been different.
Steve Jobs on the takeover bid, quoted in a Time article from December 1996
A new foundation for the Mac OS
Jean-Louis Gassée during his Be years
It was one year later that Steve’s return to Apple was set into
motion. In November 1996, the company was looking for a new operating
system for its future Macs. The Mac OS was bloated with old
technologies, slow, and unadapted to modern computers. Apple had been
working for some time on an internal project called Copland, yet it was
constantly being delayed and it soon became obvious it would not fit the
bill. So CEO Gil Amelio started shopping around for a modern OS to buy,
and after a while, a consensus started to emerge on Jean-Louis Gassée’s
BeOS. Gassée was the former Apple France executive who was supposed to
replace Steve Jobs as the head of the Macintosh division in 1985. He had
since left Apple and started his own company, Be Inc., whose software
had everything Apple needed, including the good taste of running
natively on Apple’s products.
However some NeXT employees called up Apple and told them about their
own system, the very advanced NeXTSTEP, that had always been regarded
as one of the best software platforms on the planet. Steve Jobs learned
about it later and he was stunned. But in December 1996, he showed up at
Apple for the first time in eleven years and not only convinced the
board of using his technology, but also to buy his company. Apple agreed
to pay more than $400 million for NeXT, whereas Be was only asking for
$200 million.
Joining Apple fulfills the spiritual reasons for starting NeXT.
Steve Jobs said, envisioning the finally wide-spread use of NeXTSTEP,
a dream he had struggled ten years to realize. As part of the deal,
Steve got 1.5 million Apple shares that he could not sell for a year,
and was appointed “informal adviser” to CEO Gil Amelio...
Steve and Gil Amelio at Macworld 1997
Palace coup
Steve also agreed to take the stage at Macworld Expo in January 1997.
The show painfully showed how disastrous the company’s management had
become under Amelio. The CEO kept rambling, unable to make sense as he
got lost in his notes. And then he dropped the bomb: Apple had had one
its most terrible quarters ever in Q4 1996, with sales that fell 30%
below their 1995 level.
The situation did not improve as in Q1 1997, the company lost $700
million, making the total losses under Amelio amount to over $1 billion.
Steve sold his stock the minute he was allowed to do so, sending it
further into the bottom:
Yes, I sold the shares. I pretty much had given up hope that the
Apple board was going to do anything. I didn't think the stock was going
up.
Time interview
It was too much. In July, the board of directors, led by Steve’s ally
Ed Woolard Jr., ousted Amelio after 500 days on the job, and asked
Steve Jobs to become the company’s new chairman and CEO. He declined,
accepting only to become a mere member of the board and an interim CEO,
to supposedly help the company get back on track before leaving the
position to somebody else. He was concerned about being CEO of two
public companies at the same time — Pixar and Apple. After he seized
power, he reformed the board to install his friends: of course Ed
Woolard, chairman of DuPont, stayed, as well as Gareth Chang, president
of Hughes International. The new members were all supporters of Steve,
starting with his friend Larry Ellison, CEO of Oracle; Jerry York,
former CFO of Chrysler and IBM, also joined, together with Bill
Campbell, the CEO of software developer Intuit.
The interim CEO
Macworld Boston 1997
One of Steve’s first decisions was to make a deal with market leader
Microsoft. This was a hot issue as to many Apple customers, Microsoft
was something of a personal enemy, the embodiment of evil in the
computer industry. Yet Steve Jobs came to his old acquaintance Bill
Gates and proposed him to solve the several disputes between their
respective companies. The deal included the end of all patent lawsuits, a
promise to keep releasing Mac versions of Microsoft Office for five
years in exchange of making Internet Explorer the default Web browser on
the Mac, and a $150 million investment in Apple from Microsoft, in the
form of non-voting shares.
When Steve Jobs unveiled the deal in August at Macworld Boston 1997,
the Apple fans in the room welcomed the announcements with screams of
reprehension. They were especially startled when Bill Gates’ face
appeared on the huge screen of the room, curiously reminiscent of the
1984 ad against IBM. After all, Steve himself had often called Microsoft
“the IBM of the 1990s.”
Bill Gates at Macworld Boston 1997.
Big Brother in the 1984 commercial
It was during that same keynote that Steve Jobs hinted at the new
marketing strategy for Apple. He would leverage the incredible power of
the Apple brand, focusing only on the company’s culture of rebellion and
artistic creativity. This was the germ of the
Think Different
campaign. Steve had come back to Lee Clow at TBWA Chiat/Day, the ad
agency that was responsible for the original Macintosh’s advertising
(especially the
1984 commercial), to help him restore the
company’s image in the public. The result was as Jobsian as it gets:
huge black and white photographs, similar to the ones he had at home,
portraying great iconic people who were celebrated for having changed
the world.
The ads are for people who don't care what the
computer does, but care about what they can do with the computer. The
premise is that people who use Apple computers are different, and that
we make computers for those creative people who believe that one person
can change the world.
Allen Olivo, Apple’s senior director for worldwide marketing communications, in the NYT
It is not surprising that the agency suggested Steve Jobs as one of
the persons to be displayed in the ads, although he turned it down.
New strategy
Steve started working like crazy in that second half of 1997 to put Apple back on track.
He surveyed every single product team in the company, calling them in
one by one in Apple’s conference room. Everybody had to convince him
that their product was essential to the company’s strategy. There was no
sentimentality: if the product was not making a profit, it usually had
to go, however strategic it might seem to the engineers working on it.
He soaked up a tremendous amount of information about all aspects of the
business before taking action.
To be fair to his predecessor, Gil Amelio had already started the
turnaround work by cutting the number of Apple projects from 350 to
around 50. Steve finished the job by cutting it down to ten:
What I found when I got here was a zillion and one
products. [...] It was amazing. And I started to ask people, why would I
recommend a 3400 over a 4400? Or when should somebody jump up to a
6500, but not a 7300? And after three weeks, I couldn’t figure this out!
And I figured if I can’t figure it out working inside Apple with all
these experts telling me into it, how are our customers going to figure
this out?
Steve Jobs at WWDC 1998
Steve had brought a number of NeXT executives that had remained
faithful to him at Apple. Most notably, he installed Avie Tevanian as
head of software, Jon Rubinstein as head of hardware, Mitch Mandich for
sales, and Phil Schiller at worldwide marketing. He personally handled
operations until he hired Tim Cook away from Compaq in March 1998,
naming him COO. He also left his mark on the daily life at Apple campus,
enforcing new rules such as the interdiction to smoke or to bring pets
to work. One of the most appreciated change was the new cafeteria, which
Steve had run by Palo Alto’s famous Italian caterer, Il Fornaio. It is
still considered one of the finest cafeterias in the Valley.
Some of Steve’s first decisions included the killing of the Mac clone
business, which deeply hurt Apple’s hardware sales while not increasing
the Mac OS market share; and the launch of Apple’s online store, one of
the first of its kind. It would soon become a model to several other
tech companies. Steve also brought with him the culture of secrecy he
had developed at NeXT. Apple was a rumor mill at the time; every product
was rumored months in advance in the specialized press... well this
would end under Steve Jobs. He hung a World War II poster in his office
that stated:
Loose Lips Might Sink Ships. The new policy was clear: leaking information about future products to journalists or analysts would get you fired real quick.
As far as the new product strategy was concerned, it was pretty
straightforward. On the software side, all the developers started
working on porting NeXTSTEP to the Mac platform, headed by NeXT’s Avie
Tevanian. This would end some four years later, with the introduction of
Mac OS X. Regarding hardware, Steve decided to start from scratch and
base the whole strategy on a simple matrix. Apple would drop its 20+
product lines and make just four great products: a consumer desktop, a
consumer notebook, a pro desktop and a pro notebook.
Insanely great products
The first product lines to be renovated by Steve Jobs were the pro
products, Power Mac and PowerBook, which he unveiled in November 1997,
only eleven months after he came back. They were the first Macs to run
the new Power PC G3 family of processors, from Motorola. They were
relatively fast machines designed for creative professionals, which
outperformed their Pentium-based competitors in many respects.
The new pro Macs sold quite well, proving to Steve that he was right
about Apple’s customer base. He knew that a lot of Mac users had
refrained from buying new computers throughout 1995 and 1996, not
because they wanted to switch to Windows, but because they were afraid
that Apple would disappear. It was a widespread feeling within the Apple
community while Cupertino kept releasing bad products and accumulating
losses. When Steve Jobs came back and insufflated the company with
confidence in the future, sales started rising again. So much so that at
Macworld 1998, on January 8, he announced on stage that Apple was back
to profitability. For the first time since 1996, it had made a $45
million profit in the last quarter of 1997.
But Apple’s biggest hit was yet to come. When Steve came back at
Apple, a team was working on a so-called NC machine, for “network
computer.” It was commonly thought at the time that personal computers
were living their last days before their complete replacement by
so-called “network appliances”, stripped-down terminals that would get
all their content from the Internet. Steve kept the project internally
but made it evolve into a new consumer desktop computer, the iMac (the i
stood for Internet). For the looks of the box, he turned to one of
Apple’s in-house designer, a soft-spoken Englishman named Jonathan Ive.
Ive had joined the company before Steve came back, but it was the
interim CEO who made him head of the industrial design team.
Steve unveiled the iMac on May 6 1998, at the Flint Center auditorium
in Cupertino, in the same room where he had unveiled Macintosh some
fourteen years earlier. The choice was highly symbolic, just like the
first words that showed up on the computer’s screen:
“hello (again)”, a reference to Macintosh’s original
“hello”. Steve Jobs had put Apple back at the forefront of the consumer desktop scene, a market the company had invented.
Steve Jobs posing with the two computers with which he saved Apple:
the Macintosh in 1984 and the iMac in 1998
Apple made bold choices in developing iMac. It was the first
mainstream computer to offer USB connectivity, a technology developed by
Intel that was almost inexistent in the PC space. Apple dropped all of
its older I/O for USB, and today, the iMac is recognized as the one
machine that helped popularize this now-ubiquitous standard. The iMac
was also the first personal computer not to include a floppy disk drive.
Steve hated floppies, as we have seen in the chapter about NeXT. He
only put a CD-ROM drive in iMac, deciding that users who needed floppies
purchase separate Zip drives. The decision proved right, as floppies
disappeared some two years later.
Head of Design Jony Ive and head of Hardware Jon Rubistein with the lifesavers iMacs
But perhaps the most striking feature of iMac was its radically
different design, developed by Jonathan Ive and his team. It was a
translucent, blue/green, round machine in a boring world of beige boxes.
iMac influenced a whole generation of designers, and its mark can be
felt in a myriad of different products from the time, which ubiquitously
sported translucent, colored plastic.
The extraordinary enthusiasm unleashed by iMac not only boosted
sales, but it reinforced confidence in the company’s future. A
significant sign was the increasing number of software developers who
announced they would come back to the Mac platform after iMac was
introduced. This was crucial, as many critics pointed out that the
amount of software available on the Mac OS was ridicule compared to its
Windows counterpart.
The iMac proved one of Apple’s biggest hits, selling two million
units in its first two years. But of course Steve Jobs didn’t stop
there.
Only seven months later, in January 1999, he made two product
announcements at Macworld San Francisco. First was a brand new Power Mac
G3 tower that was not only faster, but also featured a new, appealing
design inspired by the original iMac. And second was that the iMac would
now come in several colors, hence its internal code name
“lifesavers”... this was another breakthrough in computer design at the
time.
However it would take another six months for Apple to fill its
product matrix, until in July 1999, Steve unveiled the iBook at Macworld
New York. The company’s consumer notebook was introduced with the
tag-line:
“iMac to go”, as its design clearly evoked that of its desktop counterpart. It was a sensation again to many industry observers.
During that same show, Apple also unveiled its first Wi-Fi product,
the AirPort base station. Wireless connectivity was typical of an Apple
innovation. The company being and wishing to remain small, it usually
developed new technologies two or three at a time, not more, so that it
could keep its focus and put A teams on every project. By doing so,
Apple could pioneer several technologies with a brilliance unmatched in
hi-tech: AirPort clearly set the standard for the future of WiFi.
After two years as interim CEO, Steve Jobs completely turned Apple
around. He restored the company’s public image, implemented a successful
and focused new strategy, attracted software developers, and launched
highly innovative and awe-inspiring products on the marketplace. The
confused product lines had turned into a simple yet powerful product
matrix, filled with breakthrough computers:
A true visionary
Apple’s CEO, at last
Macworld 2000
Steve Jobs’ keynote address at Macworld on January 5 2000 was a milestone for two reasons.
First, after a little over three years of managing Apple, he declared
he had accepted his de facto situation and become the company’s
full-time CEO. Remember that he was only interim CEO up to this point,
not wanting to upset either Pixar’s or Apple’s shareholders by being
simultaneously CEO of two public companies. Time had proven this wasn’t a
problem: Pixar was well managed by Ed Catmull and John Lasseter, and
had released two successful movies since
Toy Story,
A Bug’s Life and
Toy Story 2.
His main role at Pixar was negotiating with Disney, which left him
plenty of time to run Apple. He had turned the Cupertino firm into a
leader in computer innovation again, steadily refreshing its product
line and pioneering new technologies.
When the crowd heard the news, everybody stood up and cheered at their beloved leader (see it in the
Movie Theater). It was obvious the Apple community was grateful to Steve for saving their favorite company.
Mac OS X
But the biggest news was probably the unveiling of Apple’s new operating system, Mac OS X.
Mac OS X was the result of three years of hard work by all of Apple’s
software engineers to port NeXTSTEP to the Mac platform. The new system
felt like an evolved version of the Mac OS, but people familiar with
NeXTSTEP felt home too. You can verify this on
this video from our website.
Let’s have a look at the system’s architecture to see what we mean.
The system’s UNIX kernel was called Darwin, and it was based on Mach,
the modern kernel technology developed by Avie Tevanian at Carnegie
Mellon and the foundation of NeXTSTEP. Darwin was why Mac OS X had
protected memory and pre-emptive multi-tasking, which allowed for
multiple applications to run at the same time without ever bringing the
system down. It also provided very advanced networking, unlike the old
Mac OS.
2D graphics were based on PostScript, just like NeXTSTEP, which
allowed for nice font anti-aliasing and on the-fly PDF rendering. 3D
graphics however, unlike NeXTSTEP, were based on the most widespread
standard, OpenGL, not on Pixar’s RenderMan. And the media core was
Apple’s QuickTime, an old Mac technology ported to the new system.
Object-oriented application development, which was the raison d’être
of NeXTSTEP and its true competitive advantage, was of course possible
in OS X, but it required entirely rewriting an application. So Apple
provided an environment to which old Mac apps were easy to port, called
Carbon — and OS X even supported those apps natively in a third
environment, called Classic. Although Classic could not support any of
OS X’s benefits, it was necessary to ease the radical transition from
the old Mac OS to the brand new OS X.
All these advanced technologies (most of which had been available on
NeXTSTEP for over a decade) were essential, but what users noticed the
most was Mac OS X’s brand new user interface, called Aqua. In fact, it
is Aqua that Steve Jobs introduced at Macworld 2000, since OS X’s
technologies had been known to developers for over two years, and the
actual system wouldn’t ship for another year.
Aqua was a revolutionary new user interface that visually took the
Mac OS and even NeXTSTEP to a whole new level. It used translucent
colors instead of solid grays, circles instead of angles, and shadows
and transparency aplenty. In fact the reason it was called Aqua is that
“you wanted to lick it”.
Mac OS X shipped on March 24, 2001, and became the core of Apple’s
resurgence and current success. What an incredible twist of fate: to
make a long history short, Apple was eventually saved by NeXT, a company
that was created to defeat it by an angry Steve Jobs.
The Digital Hub strategy
Apple’s so-called Digital Hub strategy also emerged in 2000,
although it was only disclosed a year later at Macworld San Francisco
2001 (see it in the
Movie Theater).
The Digital Hub strategy was a take on the future of personal
computing that went against a common belief that had developed toward
the end of the 1990s. Many analysts were so enthusiastic about the
success of the Internet that they were convinced the personal computer
was soon to disappear. It would evolve into a mere terminal whose only
purpose would be to access all kinds of content on the Web. The
consensus was that the current state of the PC was a dull, boring box,
and that any innovation had stopped in the industry.
Steve Jobs and Apple thought differently. They were among the very
few that professed quite the opposite: the PC had a very exciting
future. As they put it, it had evolved throughout the years from the age
of productivity, in the 1980s, where people used it for spreadsheets
and databases; to the age of networking, in the 1990s, where it
connected to the Internet; and it was now, in the early 2000s, entering
its third age: that of the digital lifestyle. Consumers were
increasingly starting to use all kinds of digital devices: digital
cameras, camcorders, music players, PDAs... But these devices didn’t
make sense without a computer. The personal computer was going to become
the center or digital hub of this new digital lifestyle, making all its
pieces — music, photos, movies, contacts, data — come together.
It’s worth stopping and looking back at this for a minute. See,
it’s such decisions that have made Steve Jobs worthy of his reputation
of hi-tech visionary. He certainly isn’t always right: he never believed
in Pixar’s success in making animated movies, for example, until the
very last months before
Toy Story was released. He thought NeXT
would become a new standard in personal computing, and Pixar’s
RenderMan would allow mere mortals to draw 3D objects just as easily as
they laid out and printed newsletters. He also released computers that
flopped badly, from the NeXT Cube to the G4 Cube, released in July 2000
and discontinued just one year later. But he really did see the future
at several points in his career: first, of course, with the personal
computer, which led him to start Apple. Then with graphical user
interfaces, and later with desktop publishing, on the original
Macintosh. We can now say without doubt that the digital hub strategy
was another one of those great visions, one that has turned Apple from a
niche computer company to the computer/music/consumer electronics
powerhouse it is today.
Looking back at this success, Steve summed it all up in this particularly telling phrase:
The great thing is that Apple's DNA hasn't
changed. The place where Apple has been standing for the last two
decades is exactly where computer technology and the consumer
electronics markets are converging. So it's not like we're having to
cross the river to go somewhere else; the other side of the river is
coming to us.
Steve Jobs in How Big Can Apple Get?, Fortune, February 2005
Indeed, if you look back at what had always inspired Steve Jobs, it
was simplicity, ease of use, using computers to do creative work, and
making your life easier. He always looked up to Sony, to which he was
thankful for creating the consumer electronics business... in a way, he
always dreamed of what Apple is doing today, and prepared the company
for it, even unconsciously.
It started with iMovie, a digital movie editing application that
Apple introduced in 1999. As opposed to the digital hub strategy, one
can think of iMovie as one of Steve’s erroneous visions. He thought that
“desktop movies”, i.e. the ability to shoot movies with digital
camcorders and edit them on your computer, was going to be the next big
thing in personal computing, yet another “next desktop publishing
revolution.” It was one of his main points when he introduced the iMac
DVs in late 1999.
But quickly enough, he realized he was wrong. Users didn’t embrace
desktop movies as fast as he hoped, and certainly PC users didn’t switch
to the Mac to use iMovie. However, they did go online to download music
over Napster, as digital piracy really started to emerge by the turn of
the century.
It was the starting point of the digital hub strategy. Apple’s
software developers began work on a couple of new digital lifestyle
applications, namely iDVD, to burn your movies on DVDs, and especially
iTunes, the digital music jukebox. iTunes was actually written in less
than five months, which exemplifies the panic of Steve when he realized
Apple was late catching up with the digital music revolution. The
company actually didn’t start from scratch, as they brought in an
outside developer who was working on a similar piece of software to save
some time.
However, Cupertino didn’t always plan to develop all its digital
lifestyle applications in-house. After all, they had enough work on
their hands with bringing their new operating system to market. That’s
why they went to one of their main software partners, Adobe, maker of
Photoshop, and asked them to develop a consumer version of their photo
editing software for the Mac. To their surprise, Adobe refused, as the
company didn’t believe in the digital hub strategy and was already
having a hard time porting their existing apps to the new OS X platform.
That’s why Apple started releasing the so-called iApps one after the
other.
The iApps were a digital suite of applications that eventually evolved into iLife, which Apple branded as
“Microsoft Office for the rest of your life.”
They all had the same purpose of making our emerging digital lives
easier. In addition to iMovie, iDVD and iTunes, iPhoto was released in
2002, followed by iCal later that year, GarageBand (for recording and
editing music) in 2004, and iWeb (for making websites) in 2006. The
reason Apple was able to develop such breakthrough software so rapidly
was mainly Mac OS X, with its object-oriented environment inherited from
NeXTSTEP.
Although the iApps were really the foundation for Apple’s future
lead in the consumer electronics business, that’s not what they were
envisioned for. They were intended as killer apps, i.e. apps that would
compel consumers to buy a Mac just so that they could use them. More
precisely, they were supposed to entice Windows users to switch to the
Mac, as there was no similar complete digital-life solution on their
platform.
“5 down, 95 to go”
The digital hub strategy itself was just one part of Steve’s
greater plan to finally gain market share in the PC market. Since he had
returned to Apple, the Cupertino company was stuck at around 5% of the
overall PC market, even though most industry analysts acknowledged the
superiority of its operating system, and the innovations in its
hardware.
One other plan was an aggressive TV campaign called “Switchers”.
Its ads showed several former PC users who had switched to the Mac and
were describing how it had made their life so much easier. The purpose
of the campaign was to encourage people who were thinking of switching
but were a little afraid to do so, by showing them someone who had made
the change and was happy with it.
Yet the riskiest strategic move Apple did to seduce Windows users was to get into the retailing business.
Steve Jobs behind the Genius Bar at New York’s SoHo Apple Retail Store in 2002.
Notice the huge black and white photographs, so typical of him.
It was far from an obvious choice. Once again, there was a consensus
in the industry that brick-and-mortar computer retailing had had its
day. The new model was Dell, which only shipped computers directly to
customers after they were purchased on its website. The one company that
had their own computer boutiques, Gateway, was actually closing them
because they were huge money sinks.
But Steve’s vision was different. He understood that Windows users
wouldn’t even consider Apple unless they would actually see how Macs
worked and could help them run their digital lives effortlessly. He
envisioned “lifestyle stores” that would showcase Apple’s products
working with digital devices, that people could pick up and test drive
on the spot. The stores would be in very expensive locations, in popular
malls or in the center of shopping districts.
To help get into retailing, Steve had former Gap executive Mickey
Drexler join the Apple board as early as 1999, then hired Ron Johnson
away from Target in late 2000. After months of experimentation, Apple
inaugurated their first Retail Store in May 2001, in the midst of the
industry’s post-Internet bubble crisis. Almost every expert agreed they
would turn out an expensive mistake...
The iPod revolution
1,000 songs in your pocket
Although Mac OS X, the digital hub strategy, the breakthrough
hardware and the retail stores all played a role in Apple’s renaissance,
they were not the essential key that made it all come together. As you
probably know, that key was a little shiny white device the size of a
pack of cigarettes called the iPod.
The iPod was of course an integral part of Apple’s vision of the
digital lifestyle. When they looked at the big picture, they realized
that, unlike the digital camera and camcorder markets, the digital music
player market did not yet offer compelling products to work with your
Mac. That’s how the idea of making such a device in-house arose, in
early 2001, after iTunes was introduced and the company started focusing
on the digital music revolution.
Just like iTunes, Steve Jobs wanted to get a product out to market
quickly, to catch up with the rest of the industry. That’s why he turned
to an outside engineer, PortalPlayer founder Tony Fadell, who had
notoriously tried to sell his prototype of a little MP3 player to
several consumer electronics company. Fadell joined Apple in February
2001, and the iPod shipped only nine months later, in late October 2001,
just in time for the holiday season.
The original iPod distinguished itself from its competition for
several reasons. Apart from its gorgeous look, its click wheel and user
interface made browsing through one’s music collection very easy and
fast; it had a hard drive which could store up to 5GB, or
“a thousand songs in your pocket”,
which was Apple’s tag-line for the new product; it connected to your
Mac via FireWire, which was 30 times faster than your typical USB MP3
player; and it synced with iTunes seamlessly: you just had to plug it
in, and the software took care of the rest.
There was simply no other MP3 player that matched any one of those
breakthrough features. iPod quickly became a very, very hot product for
music lovers... and digital pirates. It was quickly acknowledged as
“the walkman of the digital age”, as even Windows users either hacked it or moved to the Mac just so that they could use it.
Apple was confused about how to react to this unexpected success.
They could decide to continue limiting iPod to Macs, so that it would
entice PC users to switch; or they could make it Windows-compatible,
which would broaden their target and show users unfamiliar with Apple
how good their products could get. At Macworld New York in July 2002,
Steve announced they had opted for the second solution.
The iTunes Music Store
Steve Jobs introducing the iTunes Store on Apr. 28, 2003
Once Apple had step foot in the music business with iPod, they
started looking at content. At the time, most people either ripped their
CDs on their Macs or downloaded music illegally on peer-to-peer
networks. Recognizing they were in a unique position to do so, Apple
decided to try and come up with a legal solution by building an online
music store. They had enough experience to do so thanks to their own
popular online store on apple.com, as well as their QuickTime movie
trailers, which had taught them how to handle massive downloads on their
servers.
Moreover, they were able to negotiate with the music companies
because they were still a niche player. The majors were trying hard to
fight Napster, but they were reluctant to launch online stores, afraid
that it would destroy their current business model. But iTunes could
only run on Macs, which were still a fraction of the PC market — so they
viewed Apple’s proposal as an opportunity to try a new model with
limited risks.
Steve Jobs used his negotiation skills to have the labels agree on a
unique price: $0.99 for each track, and $9.99 for whole albums. Although
Apple would not get much from the iTunes Store, they expected it to
drive iPod sales, as purchased music could only be played on their
player.
So, on April 28 2003, Steve unveiled the iTunes Music Store at a
special Music event. The results quickly exceeded the company’s best
hopes. Five million songs were sold in just eight weeks, and another
eight million in the following fifteen weeks, bringing iTunes’ share of
legal music downloads to 70% — yet it was still only Mac-compatible!
Unexpected success
It was the first viable business model for selling music online.
Everybody was happy: the labels, who finally saw a way to defeat
Napster; Apple, whose sales of iPod were boosted; and of course the
customers, who were finally offered a seamless and legal way to acquire
music. As a result, the labels agreed to let Apple extend its business,
and on October 16 2003, Steve Jobs introduced the company’s second app
for Windows (the first was its QuickTime Player): iTunes,
“the best Windows app ever written”.
Windows iPod users would finally be able to sync their device on
Apple’s software, and, more importantly, every PC user could now
purchase music on the iTunes Store.
It was the start of a revolution. iPod was already a success, but it
was now becoming a cult object, a music player so successful that it
embodied the digital music era all by itself — the same way Sony’s
Walkman had come to symbolize the portable music era some twenty years
earlier. Steve was thrilled: his products were finally recognized for
their value, they were finally adopted by the masses. Unlike the Mac’s
5% market share, as of January 2004, iPod was enjoying a 30% market
share (by units sold), making it the leader of the portable music
players market.
As Steve often pointed out, only Apple could make the iPod. The
reason was, there was simply no other company out there that still knew
how to make both great hardware and great software. In the computer
business, there were PC manufacturers on one side, and software
developers on the other. As for the consumer electronics business, they
could never come up with advanced software such as iTunes, which made
the iPod experience so effortless. What had always been designated as
Apple’s greatest flaw turned out to be their greatest strength in the
emerging digital consumer electronics market. Steve saw that unique
opportunity — and he grabbed it.
“Apple is strong”
Revolution in Cupertino
Steve Jobs didn’t let Apple rest on its laurels.
The iPod was a hot product, but it belonged to a niche market: the
high-end hard-drive MP3 players. There were still zillions of little
Flash players that were a lot cheaper and got sold for that. Apple went
after them as well: at Macworld in January 2004, Steve unveiled the iPod
mini, a smaller version of the iPod which came in colors and soon
became the best selling MP3 player in the world. Exactly one year later,
he introduced the iPod shuffle, a cheap, Flash version of the iPod, to
go after the rest of the competition. It worked: as of early 2006,
Apple’s market share in the music player space was around 70% — it still
is today. The company improved its product line every year, introducing
the iPod nano in September 2005, and the iPod video the following
month. Every year after that, the iPod line was refreshed every
September.
In the music distribution business, the iTunes Store was gradually
expanded to foreign markets: a European Store was announced in June
2004, and was followed by a Japanese Store a year later. iTunes’ market
share kept growing, reaching 85% of legal music downloads as of January
2006 — at the expense of other music download websites, but also the
traditional distribution channels.
The exponential growth of iPod sales, the new iTunes business, the
ever-expanding retail operations (Apple had more than 100 stores open in
2005 throughout the US and a couple abroad, all of which were
profitable) — all contributed to Apple’s phenomenal expansion from 2004
on. This was a change in scale that was unprecedented in the company’s
history. As Steve Jobs put it:
We’re in uncharted territory. We’ve never sold this many of anything before.
Steve Jobs, CNBC interview, September 2006
The company hired engineers at an incredibly fast rate, and they
couldn’t even fit in the firm’s campus in Cupertino. Steve actually
announced to the city council that they were planning the construction
of a second campus in April 2006.
The day hell froze over
The Mac business was starting to rise — finally. The risky Trojan
horse concept — iPod would seduce Windows users into switching to the
Mac — seemed to be working, together with the unexpected success of the
Apple Retail Stores.
The company expanded and adjusted its product line, careful to the
market’s reaction. The days of the simple four-product matrix were long
gone. First was the Power Mac G4 Cube, that we already talked about,
halfway between the consumer and pro desktop lines. It was discontinued
in 2001. Then came the eMac, a cheaper version of the iMac G4 with a CRT
display, introduced especially for the education market in 2002, and
discontinued in 2005. Finally, in January 2005, they released the Mac
mini, a stripped-down Mac designed to appeal to switchers, the cheapest
Mac ever at $499.
On the pro side, in 2002, the company entered the high-end server
market with the XServe. They also fought hard to catch up with the speed
performances of the Wintel platform, and in June 2003, they unveiled
the G5, a new chip they had developed with IBM that they claimed was the
fastest in the world.
But the biggest move was announced in June 2005, at Apple’s annual
developers conference, WWDC. The company had just finished its complete
transition to OS X after the release of Mac OS X 10.4 Tiger, which was
adopted by a very large majority of Mac users. That day, Steve Jobs came
on stage and announced to a stunned audience that Apple was going to
switch away from IBM to using Intel processors in their Macs.
This was close to a cultural shock to many developers and avid Mac
followers. For years, the company had been making fun of Intel, the main
provider of chips used in Windows computers. Intel was always depicted
as a slow, almost retard company, whose chips didn’t even compare to the
ones Apple used.
Steve Jobs announces Apple's switch to Intel at WWDC 2005
But something changed in 2004. After one year of using IBM’s new
chip, the G5, in their professional workstations, Apple still didn’t
manage to put the chip into their pro notebooks. IBM also failed to
deliver on their promise of making a 3GHz processor within a year. The
situation really became embarrassing when, in September 2004, Apple
unveiled iMacs that ran on G5s while its PowerBooks were still using
their previous-generation processors, the G4. The problem with the G5
was its power consumption: it just required too much energy to fit
inside a laptop.
That’s why Apple started talking to Intel, planning to use their much
more power-efficient chips in future Macs. This change would have been
impossible had Apple still been using the old Mac OS. But as you recall,
Mac OS X was a different story. Its parent system, NeXTSTEP, had
already been ported to Intel in 1993. The OS was platform-independent:
it could run on any kind of computer. That’s why Apple developed Intel
versions of its OS since version 10.0, in case they would have to use it
someday — and that day came in June 2005.
Apart from the ability to make powerful notebooks, there was a
strategic reason to switch to Intel. For years, Apple had suffered from
unjustified critics from the PC world, claiming their computers were
slower. From then on, Mac would be using the same hardware components as
any Windows PC. Moreover, the Macs would now be able to run Windows
natively! This was a very powerful message to potential switchers who
were afraid some of their favorite software would not run on the Mac.
They could turn their Mac into a Windows PC by simply rebooting, using
an Apple software called Boot Camp. There simply was no compelling
argument not to switch to the Mac anymore, other than price.
The move to Intel was decisive in Apple’s fight against the Windows
supremacy. Given his company’s growing momentum, Steve appropriately
concluded his WWDC keynote address with the words:
“Apple is strong”.
Steve and the Magic Kingdom
Tensions
Let’s go back a couple of years earlier and look at the changes at
Steve’s other company, Pixar. The animation studios released success
after success: following
A Bug’s Life (1998) and
Toy Story 2 (1999), their fourth movie,
Monsters Inc.,
released in 2001, had generated more than $520 million in gross revenue
worldwide. The company had expanded and was prepared to release a new
movie every two years. Because it had so many more employees, it moved
to a brand new, expansive
campus in Emeryville, a small industrial town outside of Berkeley, in late 2000.
Michael Eisner, Steve Jobs and Roy Disney
at the premiere of Monsters Inc.
However, the relationship with Disney was turning bitter. The Walt
Disney Company’s CEO, Michael Eisner, had never gotten along with Steve
Jobs. It was obvious to any observer that there was a huge personality
clash between the two of them.
The first problems emerged after the release of
Toy Story 2. Eisner asked Pixar to work on yet another sequel,
Toy Story 3,
and even convinced Lasseter to do so. The problem was that such a
sequel would not count as an “original movie” as stipulated in the
five-picture deal signed by both companies in 1997. If such a sequel was
released, Disney would get seven Pixar films for the price of five, so
to speak. It was out of the question for Steve Jobs.
Tensions between the two bosses reached their climax when, in 2002,
while Eisner was speaking about digital piracy in front of a Senate
Committee, he told them that computer companies actually benefited from
such illegal actions. The example he took was Apple and its advertising
campaign for iTunes, whose slogan was:
“Rip. Mix. Burn.” —
making a confusion between “rip” and “rip off”. It was obviously a
personal revenge on Steve Jobs, who was quick to react. He called up Roy
Disney, Walt’s nephew, and confided to him that Pixar would not make a
new deal with Disney as long as Eisner was still in charge.
In the spring of 2003, Steve Jobs came to Disney to negotiate the
next deal between the two companies. His demands were so unacceptably
high that it was obvious he had crafted them just so they would be
refused. He asked for 100% ownership of Pixar’s films — Disney would
only get a 7.5% distribution fee. Moreover, their distribution
exclusivity would be limited to five years. Disney’s only privilege was
the right to use Pixar’s characters in its theme parks. Of course,
Eisner refused, and Steve left, officially announcing he was looking for
a new distributor.
Divorce
In early 2004, Steve faced Pixar’s shareholders at the company’s
earnings conference call. It was the first time since the company’s IPO
that its future was not tied to its contract with Disney. However, Steve
was pretty confident, especially after the success of the studios’
latest release,
Finding Nemo, which eventually became the highest-grossing animated movie in history and an Academy Award winner.
Steve mentioned an email that Michael Eisner sent to Disney’s board of directors before
Finding Nemo was released, in which he said the new movie was
“nowhere near as good as their previous movies.” “As you know, things turned out a little different”, Steve joked. Then he discussed Pixar’s concern about Disney’s right to make sequels to Pixar’s first movies:
We feel sick about Disney doing sequels, because
if you look at the quality of their sequels, like The Lion King 1/2 and
their Peter Pan sequels and stuff, it’s pretty embarrassing.
He ended the conference by reassuring the shareholders, saying he
had had calls from four other major studios who seemed more than willing
to distribute Pixar’s films in the future. The relationship with Disney
was dead and buried.
Save Disney
However, change at the Magic Kingdom made way for quite a different
future. Indeed, increasingly exasperated by Eisner’s management —
including his fight with Pixar, Roy Disney had publicly announced he was
resigning from the company’s board in November 2003. Shortly
afterwards, he started a public campaign called “Save Disney” whose sole
purpose was to oust the current CEO. He got support from prominent
figures in the animation business, as well as thousands of individual
Disney shareholders.
To the surprise of many, the campaign worked. At Disney’s annual
shareholders meeting, in March 2004, the vote of confidence to renew
Eisner’s position only garnered 57% of the votes. It was unheard of in
the company’s history. The board took notice, and some six months later,
the CEO announced he was going to retire the following year. His
successor would be the company’s COO, Bob Iger.
The day he was informed of his promotion, Iger phoned both Steve Jobs
and John Lasseter to pay his respects. He made sure they understood
that the hateful days of Eisner were over.
Shaking hands with Disney CEO Bob Iger in October 2005
The merger
In the summer of 2005, Steve Jobs and Bob Iger met in person in a
very different context. Steve didn’t come as head of Pixar, but as
Apple’s CEO. He was working on the next-generation iPod, which would be
able to play video. However, there needed to be some way to acquire
video content legally, or Apple would be accused of supporting piracy
again. That’s why part of the announcement would be the launch of an
expanded iTunes Store, where one could buy TV shows. As it happened, the
two most successful TV shows in the US,
Desperate Housewives and
Lost, were both owned by ABC, whose parent company was no other than Disney.
Apple made a deal with Disney to sell both shows and a couple more on
iTunes, and Iger went on stage during Steve’s keynote to announce it to
a stunned audience of journalists and media experts. The handshake
between the two CEOs was a strong signal that a new cooperation between
Pixar and Disney was increasingly likely.
Yet very few people envisioned the scope of that renewed partnership.
Iger proposed to Jobs no less than merging both companies. He said he
understood that Pixar was the only creative force that Disney could rely
on for its future in animation. After making sure that the animation
studio would keep its independence — staying in Emeryville and keeping
its logo — Steve signed a deal for Disney to buy Pixar for $7.4 billion.
That was a lot by any standard, given the company’s revenues — but Iger
was willing to pay it for John Lasseter’s leadership in animation. The
merger was announced on January 24, 2006, at Pixar studios in
Emeryville.
John Lasseter, Steve Jobs, Bob Iger and Ed Catmull
announce the Disney-Pixar merger
to Pixar employees in January 2006
Under the terms of the deal, Steve Jobs, who still owned close to 50%
of Pixar’s stock, became Disney’s single largest individual
shareholder, with a share of 7%. Ed Catmull, Pixar’s former president,
was named president of the combined Disney-Pixar studios, while John
Lasseter was chief creative officer. Steve was now an influential board
member of the Walt Disney Company, a position he still holds today. That
left him with even more time to concentrate on Apple.
Apple Inc.
Apple’s momentum
The company’s decade-long fight to gain market share in the PC
industry, especially in the consumer market, was actually finally
starting to pay off around 2006. The transition to Intel was rapid yet
smooth. The entire product line was ported in less than a year: it
started with the iMac and the pro notebook, re-christened the MacBook
Pro, in January 2006. Then came the Mac mini in February, followed by
the MacBook (replacing the venerable iBook) in May and the Mac Pro
(former Power Mac) and XServe in August.
All of these new Macs sold very well, especially the MacBooks and the
consumer desktop, the iMac. But, inspired by its success with the iPod,
Apple was starting to expand outside the computer industry into
consumer electronics. Steve Jobs finally saw his dream of making Apple
the Sony of the digital age materialize. His vision was encouraged by
the brand’s undeniably powerful image thanks to the iPod, as well as the
incredibly hot Apple retail stores. Indeed, the stores had been
designed as lifestyle boutiques demonstrating the power of Macs to run
your digital life — that concept obviously worked very well with
consumer electronics too.
In February 2006, Steve unveiled the iPod hi-fi, a stereo speaker
system designed to work only with iPods. He claimed its quality was
rivaling with high-end, $10,000 audio systems, while it cost only $349.
The market thought otherwise, as the product flopped and was
discontinued in September 2007. The company gave it another shot with
the Apple TV, originally known as iTV, a wireless set-top box that
basically linked your Mac with the widescreen TV in your living room.
The Apple TV was officially released at Macworld 2007, but it has yet to
prove itself as a successful product.
Left: talking with Apple’s Senior VP of
Retail Ron Johnson on the inaugural day of Apple’s 5th Avenue store in
Manhattan (May 2006)
Right: Steve unveils a prototype of Apple TV in September 2006.
iPhone
Steve Jobs with Cingular’s Stan Sigman
Since you are such well-informed readers, you probably already know
that Apple’s biggest move outside its computer and music businesses was
announced at Macworld in January 2007: it is the iPhone.
The iPhone project started in 2003 — although rumors about such a
product had circulated even before that, with the much-hyped Apple PDA.
The basic idea was to build a digital convergence product, the ultimate
digital device that would combine a phone, PDA, and iPod. Actually,
Apple had already moved into the phone business with the Motorola ROCKR
in late 2005 — a standard chipset that was compatible with iTunes. But
the product was lame, and it was just a temporary solution before Apple
came up with its own phone.
One of the first thing Steve Jobs did before developing iPhone was to
go to the cell phone carriers. He talked to them separately in early
2005, promising to build a device
“light-years ahead of anything else”.
He soon made a deal with America’s #1 carrier, Cingular. The provider
knew that the only way to increase its profits was not by competing on
price, but by charging users for their increasing use of data online.
Since the iPhone was going to surf the Web, it fit their strategy pretty
well.
By looking at Apple’s deal with AT&T, one has once again to
wonder at Steve Jobs’ extraordinary negotiation skills. Before iPhone,
wireless carriers treated handsets manufacturers like slaves. They used
to dictate the phone’s features, pricing and marketing, in exchange for
the right to use their networks. The iPhone deal completely reversed
this balance of power. AT&T-Cingular begged Apple for five years of
exclusivity and a 10% margin for sales in its stores, just so they could
be the one carrier to support iPhone. Apple kept complete control over
design, manufacturing and marketing — and they even managed to garner
$10 a month from every iPhone Cingular plan. AT&T didn’t even see
iPhone until a couple of weeks before it was introduced in January 2007:
although such secrecy was common at Apple, it was unheard of in the
cell phone industry.
Work on the iPhone really intensified by early 2006. The product was,
once again, a tribute to Apple’s unique ability to innovate in the
consumer electronics industry. It was a miracle of the marriage of
hardware and software, and Apple was the only company that excelled in
both. On the software side, it used Mac OS X, the exact same system that
was used on Macs. This made iPhone potentially able to run any kind of
Mac software. As for hardware, its most revolutionary feature was its
touch-screen display, a technology Apple originally developed for a
tablet PC... that would eventually be introduced three years later
(iPad, folks!). The development of iPhone had its share of tough
drawbacks, especially when it was almost restarted from scratch in fall
2006. But the prototype was eventually ready for Macworld, on January 9
2007.
That day, when Steve took the stage at Moscone Center in San
Francisco, he told his audience they would making some history together.
He knew iPhone would be one of the most important product in Apple’s
history, one that would set its destiny for decades to come. This little
box less than half an inch thick was the ultimate digital pocket
device, a computer/iPod/phone that allowed its owner to make calls, take
photos, handle contacts and email, browse the Web, listen to music and
watch movies in a powerful yet incredibly easy fashion that was
unmatched by any of its predecessors.
iPhone is five years ahead of what everybody else has got. If we didn’t do one more thing, we’d be set for five years!
Steve Jobs, Newsweek interview, January 2007
To concretize Apple’s transformation — obvious as it was at the end
of his Macworld keynote, after he had introduced both iPhone and Apple
TV — Steve announced that the company’s name was going to change from
“Apple Computer Inc.” to just “Apple Inc.” (watch the NeXTSTEP vs. OS X
video in our Movies section).
It was now official: after thirty years, the fruit company had helped
turn the turbulent prince of Silicon Valley into the king of the digital
age.
Difficult times
Although Steve’s “Second Coming” (to use biographer Alan Deutschman’s
words) is regarded as one of the most spectacular success stories in
the history of business, recent years have not been all that rosy for
the iCEO.
The backdating scandal
Backdating is an illegal accounting process consisting of picking a
date in the past, when a stock's value was lower, to assign the exercise
price of options. It basically involves faking documentation and lying
to investors. Although backdating is unlawful, it was common practice in
Silicon Valley for a long time — until a 2006
Wall Street Journal article exposed it, denouncing a number of highly-regarded public companies. Apple was not cited by the
Journal,
but it decided to hire a special legal committee to do an in-house
investigation on its own situation. These lawyers unveiled they had
discovered “irregularities” involving more than 6,000 grants in the
1997-2001 timeframe.
The complete story was revealed later, after the SEC investigation.
Steve Jobs was actually directly involved with two illegal procedures
related to backdating.
The first happened in October 2000. The global state of the tech
industry was disastrous, because of the burst of the dot-com bubble.
Several companies were trying to sway talented executives away from
their competitors, and Apple was a popular target. Steve decided to give
some of his top executives a substantial team grant to serve as golden
handcuffs. But Apple’s legal counsel failed to deliver the grant on the
date that had been agreed upon — which was problematic since the stock
had gone up in the meantime. As a remedy, the options were backdated
from their actual delivery date of Feb. 7 to Jan. 17 — with Steve’s
agreement.
The second irregularity involved Jobs himself. From 1997 on, he had
refused to get more than $1 in annual salary from Apple. His official
claim, especially when he first arrived as interim CEO, was that he was
there
“to help” and not for the money. The $1 was there only so
his family could be on the company’s health benefits plan. But, in
January 2000, after it was clear Apple had resurrected during his
tenure, and after he had announced he was becoming full-time CEO, the
board agreed to compensate him. First, by buying him a
private Gulfstream V jet,
with taxes — which amounted to $88 million. Second, by giving him a 40
million options mega-grant, i.e. approximately 6% of the company.
But when it was time for these options to vest, the dot-com bubble
had burst, and Apple’s stock price was worth only half what it was the
year before. Steve came to the board asking for new options:
Everybody likes to be recognized by their peers,
and the closest that I’ve got, or any CEO has, is their Board of
Directors. [...] I spent a lot of time trying to take care of people at
Apple and to, you know, surprise and delight them with what a career at
Apple could be — could mean to them and their families. And I felt that
the board wasn’t really doing the same with me. [...] So I was hurt, I
suppose would be the most accurate word, and, you know, the board had
given me some options, but they were all underwater [...] and here I had
been working, you know, I don’t know, four years, five years of my life
and not seeing my family very much and stuff, and I just felt like
there is nobody looking out there for me here, you know. [...] So I
wanted them to do something, and so we talked about it.
I thought I was doing a pretty good job. [...] I’d wished they had
come to me and said, “Steve, we’ve got this new grant for you,” without
me having to suggest anything or be involved in anything or negotiate
anything. That would have been much better from the company’s point of
view because it would have made me feel better at that time.
Steve Jobs’ deposition in front of the SEC, March 2008
Nancy Heinen
The directors agreed to give him a new batch of 15 million options in
August 2001. However, Steve only agreed on the condition they would
replace his 2000 40-million-option grant, having suffered from the
public criticism he had faced the year before. This turned out to be
impossible because of accounting complications —which dragged the
negotiations until December 2001. The price of Apple stock had gone up
again, so Apple’s legal counsel Nancy Heinen arranged for fake paperwork
to date the options back a month, corresponding to $20 million more for
Steve’s pockets. However, he never cashed in those options, and
actually traded them for 10 million restricted shares in March 2003. As
of early 2008, those shares were worth $1.2 billion pretax, compared to
the $5.8 billion pretax of the 2003 grant — Steve did a bad deal for a
change.
After several weeks of reviewing those facts, the SEC announced in
April 2007 that they would file charges against Apple’s former legal
counsel Nancy Heinen — for the backdating of the two grants of options
mentioned above — and its former CFO Fred Anderson, for negligence over
one grant. Anderson settled the charge by paying a $3.6 million fine,
but used the occasion to publicly denounce the commission’s exoneration
of Steve Jobs: the CEO was aware of the backdating, since he picked up
retroactive dates himself. However, the SEC did not react, and did not
personally sue Steve. They also did not sue Apple itself, citing the
company's
"swift, extensive, and extraordinary cooperation," including its
"prompt
self-reporting, an independent internal investigation, the sharing of
the results of that investigation with the government, and the
implementation of new controls designed to prevent the recurrence of
fraudulent conduct."
The case was closed in August 2008, when Nancy Heinen agreed to pay
$2.2 million to the SEC — including the reimbursement of her illegal
gains on the backdated options, and a fine. The commission had cleared
Steve Jobs, confirming Apple’s own statement that, although he
"was aware of or recommended the selection of some favorable grant dates," it didn't amount to misconduct, because he
"was unaware of the accounting implications."
However the case tarnished his image and caused debates about the
future of the company when he would be gone — since at some point it was
feared he could have been thrown out of the company by the government.
Health problems
However the most serious troubles Steve had to face in recent years
were not legal ones, but medical ones: in October 2003, while performing
a routine abdominal scan, doctors discovered a tumor growing in his
pancreas. Usually a pancreatic cancer is quick to kill you — but not in
Steve’s case. He was suffering from an islet cell neuroendocrine tumor,
one that can be removed by surgery and usually leave the patient with
some ten more years on earth, or more.
But Steve Jobs was no ordinary patient. True to the Eastern mysticism
of his youth and his strange yet deep beliefs about medicine and food,
he stubbornly refused to have the surgery, sticking to a special diet
that he thought would cure him from his cancer. This lasted for nine
long months, while his family and Apple’s top people got increasingly
concerned about him. However, observing that his situation was not
improving, he reluctantly agreed to have the surgery in August 2004, at
the Stanford Medical Center. It was only then that the news were made
public, with Steve himself writing a letter to Apple employees from his
hospital bed. He took one month off and came back as CEO in September,
assuring everyone he was
“cured.” This first event was felt as a
shock by the Apple community worldwide, but it was even more shocking
to the company’s shareholders, who argued that they should have been
aware of the CEO’s diagnosis early on, given his importance to the
company. Most lawyers did agree that such move wasn’t mandatory though,
since Jobs had a right to protect his privacy.
About a year ago I was diagnosed with cancer. I had a scan at 7:30 in
the morning, and it clearly showed a tumor on my pancreas. I didn't
even know what a pancreas was. The doctors told me this was almost
certainly a type of cancer that is incurable, and that I should expect
to live no longer than three to six months. My doctor advised me to go
home and get my affairs in order, which is doctor's code for prepare to
die. It means to try to tell your kids everything you thought you'd have
the next 10 years to tell them in just a few months. It means to make
sure everything is buttoned up so that it will be as easy as possible
for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a
biopsy, where they stuck an endoscope down my throat, through my stomach
and into my intestines, put a needle into my pancreas and got a few
cells from the tumor. I was sedated, but my wife, who was there, told me
that when they viewed the cells under a microscope the doctors started
crying because it turned out to be a very rare form of pancreatic cancer
that is curable with surgery. I had the surgery and I'm fine now.
Steve Jobs’ Stanford Commencement Speech, 12 Jun 2005
Of course, as you noticed, Steve didn’t mention his nine-month refusal to have surgery and his special diet techniques.
The case seemed closed for a while, before it surprisingly resurfaced
some three years later, in 2008. First came rumors following Steve’s
public appearances at Macworld in January, but especially at WWDC in
June 2008. He obviously had lost weight in a substantial and even
frightening way during those six months. Many blogs and dedicated
websites speculated his cancer had come back. Because of increasing
pressure from journalists, Apple’s spokeswoman Katie Cotton had to issue
a public statement after the WWDC keynote, confessing Steve was
suffering from
“a common bug.” Considering Steve’s gaunt
appearance, many people found it hard to believe. They didn’t feel more
relieved when, the following month, CFO Peter Oppenheimer declared at
the company’s earnings conference call that:
“Steve’s health [was] a private matter.”
As if to make things worse, press agency Bloomberg accidentally
published Jobs’ obituary in late August 2008. It is common practice in
the media to keep such obituaries ready in case of emergency — but the
publication obviously added concern to the issue of Steve’s health.
Steve himself reacted to the news in his September 9 Music Event, using a famous quotation from Mark Twain:
He reiterated in his October 14 event Media Event, when he told journalists his blood pressure was 110/70:
“and that’s all we’re gonna talk about Steve’s health today”.
Although most laughed at the joke, hardly any of them failed to notice
that, in addition to his still alarmingly frail look, he unusually
shared the stage with several executives — most notably Apple’s #2 Tim
Cook and Senior VP of Design Jony Ive, keeping only the introduction of
the new laptops for himself.
Unfortunately, those growing concerns eventually proved justified. On December 16, Apple made a shocking announcement:
Apple today announced that this year is the last
year the company will exhibit at Macworld Expo. Philip Schiller, Apple’s
senior vice president of Worldwide Product Marketing, will deliver the
opening keynote for this year’s Macworld Conference & Expo, and it
will be Apple’s last keynote at the show.
Although the demise of Macworld seemed inevitable to many, as the
company did progressively scale back from its trade shows one after the
other, the real shock was that it wouldn’t be Steve, but head of
marketing Phil Schiller, that would appear on stage for the last
Macworld keynote in history. There was no doubt that the CEO, who hadn’t
missed a single Macworld keynote since his return (except Apple Expo
2004, one month after he had his cancer surgery), was simply not in good
enough health to go on stage and face Apple’s fans (including your
fellow webmaster).
Because of the stream of reactions that the statement caused, Steve
once again made a personal announcement on Apple’s website on January 5,
2009, the day before Macworld. He explained his medical situation in
those terms:
As many of you know, I have been losing weight
throughout 2008. The reason has been a mystery to me and my doctors. A
few weeks ago, I decided that getting to the root cause of this and
reversing it needed to become my #1 priority. Fortunately, after further
testing, my doctors think they have found the cause—a hormone imbalance
that has been “robbing” me of the proteins my body needs to be healthy.
Sophisticated blood tests have confirmed this diagnosis.
Steve said he would remain CEO during his recovery. He contradicted
himself some nine days later, in an email to all Apple employees that
was made public:
During the past week I have learned that my
health-related issues are more complex than I originally thought. In
order to take myself out of the limelight and focus on my health, and to
allow everyone at Apple to focus on delivering extraordinary products, I
have decided to take a medical leave of absence until the end of June.
The CEO would continue to oversee key strategic orientations, while
he left most of the day-to-day tasks to his second-in-command, COO Tim
Cook, as he had already done in 2004. As a result, the company and the
whole Apple community learned how to live without Steve Jobs for half of
2009. This was a historic moment, reminding everybody of the simple
truth that Steve was not eternal.
It would be later revealed that Steve underwent a liver transplant in
April 2009. It actually is not uncommon for his type of pancreatic
tumor to metastasize in other organs, including the liver. According to
Philip Elmer-DeWitt, author of the Apple 2.0 blog at CNNmoney.com,
Steve’s
“lost his gall-bladder, part of his stomach, part of his
pancreas, the upper end of his small intestine and now has someone
else’s liver, which probably means he’ll be on immunosuppressant drugs
for the rest of his life.” “That can’t be fun,” he added. The
transplant took place at the Methodist University Hospital in Memphis,
Tennessee, one of the nation’s leading center for such surgery. The
hospital officially disclosed that Jobs
“received a liver transplant
because he was the patient with the highest MELD score (Model for
End-Stage Liver Disease) of his blood type and, therefore, the sickest
patient on the waiting list at the time a donor organ became available.”
Left: Apple’s COO and second-in-command Tim Cook
Right: standing ovation as Steve came back on stage on Sep. 9 2009
The transplant worked, and Steve went back to Apple in late June 2009, as planned. It wasn’t long after that that the
Wall Street Journal ran a story about Steve
“being back at Apple and focusing on [the] new tablet”, with employees complaining they
“had to readjust”
to their boss’s demanding habits. Good old Steve was definitely alive
and well. He eventually proved it at the September 9 2009 Music Event,
when he was welcome on stage by a standing ovation from Apple employees
and several hundreds of journalists — before unveiling exciting new
iPods, as he had done in the previous four years.
2010: Steve is back. Again.
After an almost entire year of complete absence from the media scene,
due to his health problems, Steve has made an impressive comeback in
2010. The charismatic CEO has taken the public spotlight several times
during that year, often to make game-changing announcements.
iPad
The biggest of all was undeniably on January 27, when Steve Jobs
finally introduced iPad, Apple’s much-anticipated tablet. There were
rumors on an Apple tablet even before there were rumors on an Apple
phone, and for good reasons: the labs of Cupertino started working on a
tablet years before they worked on iPhone.
I actually started on the tablet first. I had this
idea of being able to get rid of the keyboard, type on a multitouch
glass display. And I asked our folks, could we come up with a multitouch
display? that I could rest my hands on, and actually type on. And about
six months later, they called me in and showed me this prototype
display. And it was amazing. This is in the early 2000s. And I gave it
to one of our other, really brilliant UI folks, and he called me back a
few weeks later and he had inertial scrolling working, and a few other
things. Now we were thinking about building a phone at that time, and
when I saw the rubber band, inertial scrolling and a few of the other
things, I thought My God, we could build a phone out of this. And I put
the tablet project on the shelf, because the phone was more important.
And we took the next several years, and did the iPhone.
Steve Jobs at the D8 Conference, 1 June 2010
Throughout 2009, even before Steve Jobs came back from his medical
leave of absence, the Apple rumor mill started spinning again with
increasing confidence about an upcoming incredible device, a handheld
tablet halfway between a Mac and an iPhone. The rumors went even crazier
after Steve Jobs presented a prototype of the device to several major
US publishers, who couldn’t help talking about it off the record. The
Wall Street Journal’s Walt Mossberg, one of Steve Jobs’ favorite
industry analyst, reported early on that :
It’s better than the average movie experience, when you hold this thing in your hands.
Expectations were high to say the least.
Then, on January 27, Steve Jobs finally took the stage and unveiled
iPad to the world. The presentation was bare, almost simplistic, with
Steve sitting on a couch and demoing the device for most of his keynote.
iPad disappointed the majority of analysts at the time. It was deemed
“a bigger iPod touch”, nothing else. Steve was being mocked for calling it
“a magical device”
during his keynote, and in Apple advertising too!
Yet, once again, the market proved the critics wrong, and iPad turned
out an amazing success. Apple sold 7.5 million of them as of September
2010, representing close to 8% of its 2010 fiscal-year revenues (iPods
amounted for 13%).
Asked what his feelings about iPad were at the famous All Things D
conference in June 2008, Steve Jobs boldly made the following comments :
When we were an agrarian nation, all cars were
trucks, because that’s what you needed, on the farm. But as vehicles
started to be used in urban centers, and America started to move into
those urban, then suburban centers, cars got more popular and
innovations like automatic transmission and power steering and things
that you didn’t care about in a truck as much, started to become
paramount in cars. And now, probably [...] one out of every 25 vehicles
is a truck, where it used to be 100%... PCs are gonna be like trucks.
They’re still gonna be around, they’re still gonna have a lot of value,
but they’re gonna be used by one out of x people. [...] And this
transformation’s gonna make some people uneasy — people from the PC
world, like you and me. It’s gonna make us uneasy, because the PC’s
taken us a long ways — it’s brilliant. And we liked to talk about the
post-PC era, but when it really starts to happen, I think it’s
uncomfortable, for a lot of people [...] So... I think that we’re
embarked on that.
Steve Jobs at the D8 Conference, 1 June 2010
It is worth thinking about these comments for a minute. If we assume
Steve Jobs is right about this, and almost everyone (but Microsoft’s
Steve Ballmer) agrees he is, then he will be a unique case in history of
someone who has been instrumental in both creating and putting an end
to an industry. Indeed, Apple was a key player in starting of the
personal computing revolution in the early 1980s, and there would not
have been an Apple without Steve Jobs. But Apple will also likely be the
company leading the transition away from the PC, and this time there’s
no denying this would not have happened so quickly without the iOS
mobile revolution... What other man can be credited for such a huge
impact on a multibillion-dollar industry?
Apple’s possible future
2010 has seen Apple’s dominance in the high-tech industry reinforced.
The company is the market leader or a dominant player in four huge and
growing markets: digital music players (with iPod), digital music
distribution (with iTunes), smartphones and mobile apps (with iPhone,
iPod touch and the App Store), and tablet PCs (with iPad).
This unique position at the crossroads of the digital revolution,
makes the fruit company the subject of many a fantasy. Two trends have
constantly re-emerged when speculating on Apple’s future.
The first is its take on the television market. Steve Jobs himself
has commented at length on it at D8 (again), saying it was impossible
for Apple to enter this market because of its structure. He talked about
an insoluble go-to-market impossibility.
Yet only three months later, he introduced a revamped, network-based
Apple TV at the traditional September Apple Media Event. The new box is
iOS-based and most people think it won’t be long before it runs iOS
apps. To speak more generally, it is very likely that, unlike what Steve
Jobs has explained, Apple will try very hard to enter and revolutionize
this “other” consumer electronics space that is television, and the
Living Room in general — following a strategy that was conceived some
four years earlier with iPod hi-fi.
Another controversial issue is that of Apple’s relation toward its
new arch-rival, Google. This relation is controversial because for
several years, Google was not an enemy, but an ally in the war against
the behemoth of Redmond, Microsoft. Google’s CEO Eric Schmidt even sat
on Apple’s board of directors for three whole years, from 2006 to 2009.
But it’s no wonder he left in 2009: by entering the smartphone market
with its Android mobile OS (and its own app store!), Google had become a
direct competitor of Apple. This conflict of interest was as good a
reason for him to leave, as Steve Jobs’ shrinking tolerance for what he
felt was a plain and simple betrayal.
Google’s increasing market share in the smartphone market led many
observers to think that the scenario of the 1990s was being played
again. Google, in the role previously played by Microsoft, was going to
crush the industry innovator, Apple and its closed system, by licensing
its “open” software to a myriad of different hardware companies... Steve
Jobs supposedly had not learned from his own mistakes, and was going
down the wrong path again because of his stubbornness. Of course it’s
far too early to judge if this opinion is justified or not, but it’s
fair to say that the fight between Apple and Google will be interesting
to watch in the coming decade.
Has Steve changed?
Finally, an old debate about Steve’s personality has also re-emerged
in 2010: has he changed? Although some of his traits, such as his
propensity to take the spotlight then and again to unveil insanely great
products to the world, have not changed... People have noticed two
minor evolutions in his public persona.
The first is his increasing habit of communicating by writing emails
to customers. He has been known to do so for years, and he is famous for
reading a ton of them, but never before 2010 had he replied to so many
of them, so often. Usually, he has used them to publicly respond to hot
issues about Apple or to spread rumors himself. Some even pretend he has
theorized this method, which is in essence a new way for CEOs to deal
with PR, bypassing the traditional press.
Another change is more profound, and has to do with his implication
on charity issues. Steve’s reputation in Silicon Valley was not very
positive on this particular topic, as he was often dismissed for
basically being stingy. Yet, in addition to large donations to
charities, he spoke publicly twice for the defense of organ donations in
2010, and even played a critical role in the creation of the nations’
first organ donor registry in October 2010. This was obviously a
praiseworthy side effect of the liver transplant that had saved his life
one year earlier.
Steve Jobs hugs Barbara Ralston of Stanford
Hospital during a ceremony to create the nation's first organ donors
registry on Oct. 5, 2010
Conclusion
So here’s where we are today. Apple, on the verge of bankruptcy a
decade ago, is now one of the most powerful and influential high-tech
company in the world. It is the most innovative brand in the computer
industry, a leader in the music and phone businesses, and a likely
consumer electronics powerhouse for decades to come. As for Pixar, it is
the single most successful movie studio in the history of Hollywood,
having yet to release a dud after more than twenty years of existence.
It has defined the future of animation and is now at the center of this
industry after it s merger with Disney. The founder of both these
companies, Steve Jobs is now routinely voted one of the world’s most
important business leaders, after having been called a one-time fluke
for years.
Now that we have followed together the most important events in
Steve’s life — especially his career of course — it is time to step back
and try and look at the big picture.
I am going to get personal here: it is hard for me to put into words
how much admiration and huge respect I have for Steve Jobs, and how much
inspiration I draw from him. Let’s face it, business history has seen
many another genius entrepreneur, inspirational leader, or industry
visionary. But among them, who has had as big an impact as Steve Jobs on
the rest of humanity? Who has faced greater glory and worse shames, all
in one life? Here we are talking about a man who has dedicated his life
to giving the power of technology to the masses. He has democratized
computers with the Apple II. He has made them human and even friendly
with Macintosh. He has almost single-handedly made possible the desktop
publishing revolution. Here is a man whose company, Apple, is so
innovative its products inspire the whole high-tech world, whose
corporate culture is so powerful, it has millions of fans worldwide
whose following is akin to that of a cult. Here is a man who has changed
the way we all listen to music with iPod, who has shaken the music
business with iTunes and the phone business with iPhone. Here is a man
without whom 3D animation might have never taken off, or certainly would
not have taken off the way it did thanks to Pixar. Here is a man who
has made millions of lives so much easier by making technology seamless,
intuitive, exciting and beautiful, instead of complicated, arcane, dull
and ugly.
The question remains open to me: which business figure can claim so
many achievements? Whose influence has been greater? That’s why I
struggled for so long to find appropriate words to summarize the essence
of Steve Jobs, a genius, but also a man, an icon with flaws, full of
paradoxes, a visionary who has sometimes proven dead wrong. I thought
hard — until I realized Steve himself had found these words. So let me
conclude with the voice from Apple’s
Think Different commercial:
Here’s to the crazy ones. The misfits. The rebels.
The troublemakers. The round pegs in the square holes. The ones who see
things differently. They’re not fond of rules. And they have no respect
for the status quo. You can quote them, disagree with them, glorify or
vilify them. About the only thing you can’t do is ignore them. Because
they change things. They push the human race forward. And while some may
see them as the crazy ones, we see genius. Because the people who are
crazy enough to think they can change the world, are the ones who do.
This biography was last updated in November 2010, and the last year of Steve's life is missing. A new version is in the works.
Steve in his Los Gatos home, 1981. Photo Ted Thai
Steve and Laurene Jobs, 1991
Steve, Eve, Reed, Erin and Laurene Jobs in Italy, 2003
Steve, Reed and Laurene in Palo Alto
A Joy of Tech comic on Steve Jobs's clothing habits
Steve Jobs and President Obama, February 2011
Kobun Chino presided over Steve's wedding in March 1991
Steve gets off his jet
A 2003 Fortune cover story that infuriated Jobs
