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Weekly Column

It's Not Personal, It's Business: Steve Jobs, MacOS-X and the Abuse of Customer Loyalty

Status: [CLOSED]
By Robert X. Cringely
bob@cringely.com

This week, I attended the big MacWorld show in San Francisco. Having written last fall that Steve Jobs would do something heroic to rescue Apple's Christmas quarter (if only to save his own stock options), I've been quite embarrassed that it didn't play out that way. People — lots of people — bought Apple shares on my recommendation only to see them drop even further. I'm sorry. Now the pressure is on, and I am trying even harder to understand where Apple is going. I thought that maybe attending MacWorld would help.

So I was there for the Jobs keynote, tasted the Flavorade, which was plentiful, though somewhat weaker than in years past, and did my best to analyze Steve version 2001. And what I came away with was a sense that investors, analysts, and Apple, itself, are on very different timetables. The market is thinking about this quarter or next. The users are thinking about when will OS-X ship and will it run on my present hardware? But Steve Jobs, a guy I first met almost 24 years ago when I helped him unload the trunk of Woz's Fiat at a Homebrew Computer Club meeting, is thinking in much longer terms — years.

"We have $4 billion in cash," Steve said. "We'll be okay for awhile." He's right, but what about his customers? Even losing $250 million per quarter, Apple could go another five years with investment income. "Right now, we're introducing products for our professional customers," Steve continued, referring to the new G-4 Macs that run up to 733 MHz and the snazzy titanium PowerBook G-4s. "To those customers, who have plenty of money to spend, our products are cheap." And he's right again. If you want to master a DVD, the non-Apple solution costs 10 times as much.

The question is how many people want to master DVDs?

The even bigger question is whether Apple can deliver on its limited promises. The hot machine is that titanium PowerBook, a thin yet large yet light notebook that is going to be the next purchase for a few hundred thousand status-conscious executives, BUT THAT'S ONLY IF APPLE CAN ACTUALLY DELIVER THE MACHINES. There is no problem with Motorola delivering the 400 and 400 MHz G-4 chips, but what about those titanium cases and slot-loading DVD drives? These are exactly the kind of areas where Apple has screwed up in the past. And don't forget those Pioneer DVD-R "Superdrives" Steve touted. Those won't be certified and in production for at least another month.

In a time of uncertainty, Jobs and Apple are leaning on the deep pockets of the media industry customers who have been the company's core users for as long as there have been Macintoshes. This is a sound strategy and one that is not very expensive for Apple. As time and money permit, they'll bring out new home machines, too.

Of course, this is no recipe for wresting control of personal computing from Microsoft, but I don't think that is Steve's goal anymore. The mystery to me is what IS his goal? Can it just be to hunker down until the next economic expansion? Is it that simple? Or does he really think that OS-X will wrest a few million units from Microsoft and Linux? While I have serious doubts about this, I have been wrong before.

One part of Steve's Macworld keynote that was particularly curious was his announcement that while OS-X will ship March 24th, it won't come loaded on new machines until July. Figuring that — if it makes the March 24 deadline at all — OS-X probably won't go to production before early March, I guess it makes some kind of sense to wait on the preloads. Or does it? Steve said the OS-X applications won't be there until July (and Microsoft Office for OS-X won't ship until fall), so it makes little sense to preload the software before then. Huh? This is an operating system that, depending on how you calculate it, is either two or four years late. The new OS will still run nearly all the old applications. Developers and more than a million end-users have had OS-X beta and server code for years. They've been told for months that the OS would ship in late 2000. So why won't the applications be ready until July?

The answer is both obvious and deplorable: Steve wants to suck another $129 in almost pure profit from the very customers who will already be saving his and Apple's butts. For the early purchasers of these new Macintoshes — the first Macs that are specifically built to run OS-X — there will be no free upgrade to the new OS. So the first four months of production — perhaps a million units — will probably have to be upgraded for an extra $129 million. That will help Apple's earnings and stock price, but is an arrogant abuse of customer loyalty.

And Apple still has serious problems in other parts of its business, especially education. In terms of institutional sales, they can't seem to get out of their own way. The state of California, for example, has recently given an extra $179 million for K-12 schools to order new computers. Apple could claim 20 percent or so of that amount almost without trying except that the sales are all to be conducted through a state web site, and Apple couldn't get its act together in time to be a part of the site. This happened only last week. All Apple had to do was decide what systems it would offer to K-12 and set prices. Despite pleading from California education officials, Apple missed the deadline for inclusion. It's a small example, but typical of a company in turmoil. That suggests to me that Steve's (and Apple's) calm is only on the outside.

But this too shall pass. Okay, OS-X is late (again) and Apple is mildly abusing its best customers. Is that going to be the difference between life and death for Apple? No.

Changing subjects, I had lunch on my way to MacWorld with Ronna Lichtenberg, author of a new book on career building called It's Not Business, It's Personal. The book is all about building relationships that help your career, and I wanted to know how any list of rules could help during the current dot-com meltdown. Say I'm set adrift in a suddenly hostile tech job market. Are there any rules of behavior that could help even me?

"It's tough going from being in demand to not," said Ronna. "Oh first there's the warm feeling of peeing in your pants, but that's temporary. Then you have to get to work finding a new job. But the problem that people have who are leaving dot-coms is they've been changing jobs so often they usually don't have many strong work relationships to fall back on. They often don't know their co-workers well enough to trust them. They don't have much support from people who really know them.

"It's much easier to maintain a relationship than to create a new one. I knew a woman who was so busy with work that she didn't return any calls for two years. Then she was laid-off and suddenly couldn't get a job. Should that have been a surprise? Her contacts were all gone, burned up on a pyre of those pink phone message slips. She (and a lot of other people) didn't understand that it was her job to manage her own career.

"The rules are simple. Spend more time with people who are either helpful or at least entertaining and spend less time with jerks. We all know who those people are. Think of relationships as assets. You'll get a better return on your investment in relationships than from any other kind of asset. And remember the relationships that pay off aren't typically those where the person you know hires you. The help usually comes when they recommend you. Someone asks 'What do you think of Bob?' and as a result you've got a new gig."

Ronna is smart and so is her book. The challenge, of course, is to apply these rules to a 300-pound coder who refuses to bathe.

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