Warp 12 and accelerating: How Steve Jobs is determined to save Apple or kill it, whichever comes first
bob@cringely.com
There is this wonderful "Star Trek" episode from the old days, when Captain Kirk was slim. A gang of Romulans was humiliating the Enterprise with super high-speed strafing runs and massive attacks that suggested the bad guys had invented some dreadful new technologies threatening the entire Federation. Jim postured, Scotty fretted and Bones complained as Spock pored over the all-important energy consumption curves for the Romulan ship. It made no sense. Unable to decipher the Romulan technology, Kirk instead considered Romulan psychology and decided that maybe the mystery ship wasn't fast, but reckless. Sure enough, it was a Romulan suicide mission and the crew could go so fast and expend so many weapons because they were never going home.
Welcome to Romulus. Welcome to Apple Computer 1998.
Apple Computer has been making a very public search for a new CEO to replace interim CEO Steve Jobs. Here's what they have to offer the new guy -- a big salary and stock options, one of the best-known brand names in the world, more than a billion in cash, customers who are fanatical despite many years of abuse, a brilliant if dispirited engineering staff, and what looks like a suicide plan to save the company. Obviously, it's this last point that has kept Apple from finding a new boss. Steve Jobs is looking for a new Apple CEO while at the same time requiring that CEO to accept the Jobs vision of Apple's future. He wants a super-tough follower, a lapdog in body armor. He wants the impossible. But knowing Steve, he just might get what he wants.
Even Steve Jobs would say that a CEO worth having should be allowed to run the company as they like until results show it isn't working. But in this case, Steve is absolutely certain what path Apple should follow. The strategy seems so obvious to him that his definition of "CEO worth having" has become synonymous with "candidate who recognizes the wisdom of my plan." Apple will just keep looking until a candidate with the right qualifications agrees to do as he or she is told.
And here's the plan, pulled together from new and old sources, from Steve's own words, and from 20 years of watching the guy operate. The Jobs plan has three goals, three product lines and three underlying principles. The goals are profits, margins and market share. The product lines are servers, high-end workstations and low-end computer-like devices. The enabling technologies are Rhapsody, new microprocessors, and a different approach to both manufacturing and marketing. Add to this the tenth component, which is a determination to destroy anyone who gets in the way, no matter what the cost.
This is clear: Apple is in a downward spiral that cannot be stopped by anything less than a total effort, and to Steve Jobs "total effort" means committing resources to such an extent that failure means bankruptcy. And why not? The guy owns ONE SHARE of Apple stock. It's easy for him to order human wave attacks since neither his resources nor his ego are on the line. If the Jobs plan fails, it will be John Sculley's fault, or Mike Spindler's, or Gil Amelio's. It's easy to fault Jobs in this area, but the truth is he's correct. Betting the farm is all Apple can do at this point and Jobs is right to push it.
The ultimate objective is profits, something Apple has seen little of in a long time. Profits are achieved by increasing profit margins and market share at the same time. So anything that drags down profit margins has to go immediately. This means that Apple will be slashing inventory, eliminating products and entire product lines (Jobs says 70 percent of the product list will go), and eliminating anything that negatively affects the cost of sales, which mainly means dealers.
Dell Computer is an important model for Apple. Dell is bigger than Apple and has grown so entirely by selling its computers directly, bypassing distributors, dealers and mail order companies. Apple will do the same starting right after Christmas. That's when the direct sales operation of Power Computing comes inside Apple for good. Dell is also selling $3 million per day over the Internet. So will Apple. Cutting out dealers and distributors will allow Apple to make higher profit margins even if it has to cut prices to gain market share. The dealers lose, but Jobs will lose no sleep over that.
Remember that Apple competes not only with Compaq and Dell, but also with Microsoft, and the biggest opportunity Jobs sees is in competing with Microsoft's Windows NT operating system. Compared to a Mac, NT is a bitch to set up and administer. There are hundreds of thousands of network administrators who would exchange their NT or Netware server for Apple if it provided the same performance and features as Microsoft but was easier to use. Microsoft's NT business is now worth a billion bucks and Jobs sees it as ripe for picking. And his implement of choice for picking NT is Rhapsody, Apple's next-generation operating system. Rhapsody is the Mac interface on the Mach microkernel with very robust networking support. It really is what NT should be. Look for Rhapsody to appear priced to compete directly with NT, not Win95.
While a $1 billion market is big, it isn't big enough to save Apple. But $1 billion is just the software component. Like Sun Microsystems, which sells Unix software, Apple is also in the hardware business and can probably count on selling four dollars worth of hardware along with every dollar of software. That's a $5 billion market -- half of what Apple needs to get back in the game.
Alas, there are two problems with this server strategy and they are both spelled I-N-T-E-L. The market has stupidly decided that Intel microprocessors are better than Apple's preferred PowerPCs, so Apple will be at a disadvantage trying to sell PowerPC machines into the Intel market. This is what's right now killing Silicon Graphics, which is finding rough going pitting its MIPS processors against Intel. Worse still for Apple, there will be an Intel version of Rhapsody. One argument says that earning the 90 percent profit margin on a copy of Rhapsody for Intel is better than nothing, but that's not the way Steve tends to see things. For awhile, he was determined to kill Rhapsody's Intel version, then changed his mind when he decided instead that Apple would build its own Intel boxes.
Yes, Apple will build computers with Intel processors. Their aim, as in all of these products, is for the high end. Based on Intel's new Merced chip, the new Apple machine will have PCI slots, Universal Serial Bus, Fast Ethernet, IEEE 1394 FireWire, IRDA, DIMM sockets, but no ISA slots and no backwards compatibility to DOS. So this is NOT a PC in the strictest sense, since it will only run Rhapsody, but not System 8 or Windows NT. It will run Mac applications inside Rhapsody. And because Apple is both the author of Rhapsody and the designer of this machine, Jobs believes that more customers will want to buy their Rhapsody wrapped in Apple hardware than not. This will definitely be the fastest Rhapsody machine on the planet, which should shiver some timbers not just at Compaq and Dell, but also at Sun and SGI. Jobs would be thrilled to kill SGI outright.
Oh, Apple will continue to make computers with PowerPCs, too. And what about Microsoft and it's well-publicized $150 million investment in Apple? That means nothing to Steve Jobs.
The rest of Apple's strategy lies in computer-like devices. Jobs loves for good reason the eMate notebook, which runs the Newton OS. We'll see much more of these simple machines that are rugged and have great battery life. Apple will also introduce network computers, and not just because Larry Ellison in on the board, but because to do so makes some sense. But Apple won't be building these devices. Here's an important distinction from the old days: just as many chip companies no longer manufacture their own chips, it makes little sense for many PC companies to build their own PCs. Apple can make higher profit margins buying its NCs and other little devices from contract manufacturers than by building them in Apple factories. The truth is that Apple doesn't really know how to build things cheaply, so they will concentrate their own manufacturing resources on expensive devices where the manufacturing cost is less important.
So that's the plan: Screw the dealers, sell direct, pit Rhapsody against NT, build Intel boxes, contract out the cheap stuff, and throw away the rest of the company. It just might work with the right leadership and no flinching.
Steve Jobs's father-in-law is Ray Smith, CEO of Bell Atlantic/Nynex, the biggest of the Baby Bells. A couple years ago Ray sent a group of Bell Atlantic engineers and managers to California to meet with Steve. For three hours, Steve screamed at them, telling the Bellheads their work was terrible. At noon he sent their catered lunch away, deciding the Easterners didn't deserve to eat. Remember these weren't NeXT employees or Pixar employees, but just employees of Steve's father-in-law.
If what it takes to save Apple is a Romulan CEO, Steve Jobs is as Romulan as they come.








