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Weekly Column

Love-Hate: Why iPod chief Tony Fadell is really leaving Apple

Status: [OPEN] comments (29) | add a comment
By Robert X. Cringely
bob@cringely.com

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Steve Jobs is not like you and me. He has millions of customers, 32,000 employees, and a board of directors who think he can do no wrong. Running a company that is immensely profitable, gaining in market share, has no debt and $20 billion in cash, he can afford to make bold moves, the most recent of which is his decision to replace Tony Fadell, until moments ago head of the division that produces Apple’s iPod. Like everything Jobsian, Fadell’s departure is part of an Apple GRAND PLAN.

The variables at work here are (in no particular order) ego, competitive advantage, ego, management technique, ego, strategic thinking, and ego.

To say that Steve Jobs’ ego can expand to fill any known space might be an understatement but I’ll stand by it anyway. Fadell’s failing in this regard is his being hailed as the “father of the iPod.” What does that make Jobs? Who made THE BIG DECISION? Who committed the company? Who – most importantly of all – seduced all the record companies? That last guy would be James Higa, but since I don’t want to get HIM fired, too, let’s just attribute it all to Steve Jobs – for all intents and purposes the REAL father of the iPod.

All hail Steve.

Apple exists solely as an extension of Steve Jobs. Remember that. Anything attributable to Apple is really attributable to Jobs. Other people work at Apple, of course, and excel at their positions, but that is primarily because they were chosen, anointed, or inspired by Jobs.

Not that Jobs doesn’t make the occasional mistake. Look at the Mac Cube, for example. But that was our mistake as consumers, not realizing that it really ought to have been worth an extra $500 to us to have a computer with no cooling fan.

Steve Jobs makes very few such mistakes, in fact. That, and his total domination of Apple at every level allow the company to be literally the only PC vendor to have anything like a strategic plan. Dell and HP have the odd strategic initiative, like getting into or out of media players or TVs, but the idea of a comprehensive corporate strategy, well that’s too much to expect from companies that are managed, not led.

Steve Jobs is a leader 100 percent in the mold of General George S. Patton. Rent the movie and it will start to make sense. Heck, rent it on iTunes.

So here’s what’s going on with Tony Fadell. First, he was vulnerable as a charismatic leader in his own right who has been talked about in the press as a possible heir to Jobs. That alone meant he had to die, but it wasn’t enough to mean that he had to die just now. That decision required an external variable in the form of former IBM executive Mark Papermaster.

Steve Jobs wants to give Tony Fadell’s job to Papermaster. It’s not that Papermaster would be any better at the job than Fadell, but there are two over-riding factors here: 1) Jobs can only have so many direct reports, and; 2) he thinks putting Papermaster in Fadell’s job is the best way to get past any legal objections from Papermaster’s former employer, IBM.

Papermaster most recently ran IBM’s blade server division and in the mind of Steve Jobs blade servers and iPods couldn’t be farther apart. One is an enterprise sale while the other is consumer. One is a clear IT sale and the other has nothing to do with IT, really, since iPods and iPhones aren’t aren’t computers or computer peripherals. Jobs thinks Apple can make this point stick with a judge and he might well be correct.

Papermaster has to be gone from IBM for a year before he can take a job that clearly competes with his last position at IBM. But Jobs doesn’t want Papermaster for blade servers, nor does he even want him for iPods. Jobs wants Papermaster for the expertise he showed two jobs ago at IBM running Big Blue’s PowerPC operation. Jobs wants Papermaster to lead Apple’s PA Semi acquisition and create a new family of scalable processors optimized for Snow Leopard and beyond.

Having Papermaster run iPod hardware is a placeholder to let him get used to Apple and get ready to take over the Apple processor job, some of which will be used in iPods and iPhones, so the job isn’t a total waste. But for the few months he’ll be running iPod hardware, Papermaster will mainly be overseeing the implementation of Fadell’s strategy.

If that seems like a game of musical chairs in the Cupertino executive suite, well it is. It’s also a game we’ve seen played over and over again.

Back to point 1 from five paragraphs ago: Jobs can have only so many direct reports. Steve Jobs believes the key to his success is in finding, hiring, retaining, then firing the best talent in the world. He would maintain in the very moment he’s firing Fadell that Tony is better at his job than anyone else on Earth. Yet still Fadell must go and that’s because – ego issues aside – Jobs had to make room in his inner circle for Papermaster.

Everyone close to Jobs is under continual analysis: is this person really (or still) the best in the world? If they aren’t, or if someone else is just as good but more important for some additional reason, then the incumbent has to go. Steve Jobs ultimately betrays all of his direct reports in this manner. It’s just the way he is. And if it costs Apple a few million to remove one extra head from the room, well that’s okay with a board that KNOWS (as we all do, to put it fairly) that Jobs really is the secret of Apple’s success. His system may be brutal, but it works.

So Fadell was already in danger because he had become known as an individual. Remember that when PortalPlayer (now part of nVidia) was making the guts of every iPod the company was forbidden by Apple to acknowledge that. Even in its financial reports PortalPlayer was forbidden to use the “A” word and simply had to attribute to some unnamed company 85 percent of PortalPlayer’s revenue.

Just as Jobs was scourging Fadell, though, he was seducing Papermaster. Jobs can be VERY seductive. And he was hardly going to seduce the IBM executive with a promise to put him two levels down. So as the most vulnerable person in Jobs’ inner circle, Fadell had to go. That Fadell’s wife was head of Human Resources for Apple and was forced, essentially, to terminate her own husband, well that was just gravy and yet another reason for Apple employees to take the stairs rather than risk sharing an elevator with Jobs.

Fear can be a remarkable motivator.

Don’t feel bad for Fadell, though. His $8+ million golden parachute stock grant is coming at a time when Apple shares are depressed and could easily double by the time he can sell them in 2010. He get’s $300,000 per year to “advise” Jobs (I’d like one of those jobs, too, Steve) and then there’s his wife’s departure package, which hasn’t been mentioned. Clearly out of the picture as an heir to Jobs, Fadell will next appear in 2010 as a CEO somewhere in the South Bay.

Of course IBM with its largest corporate legal department on earth has filed suit against Apple, trying to block Papermaster from taking the Apple position. Apple’s legal department is fairly accomplished, too, and Cupertino is a much stronger company than Armonk, which will lead to the ultimate solution to this legal problem. Apple still hopes to convince a judge that it is correct about Papermaster. But if Apple fails in that, Steve Jobs will just pick up the phone and choose IBM Microelectronics as the fab to build the next generation of Apple’s PowerPC processors – a contract worth billions, but ONLY if IBM drops all legal action.

Apple will win in the end -- I guarantee it. And the way Jobs negotiates, Big Blue will probably end up losing money on the chip deal, too.

Comments from the Tribe

Status: [OPEN] read all comments (29) | add a comment

There are days when I'd love to be a fly on at Apple.

Assuming Steve is in good health. Age is catching up on him. At some point he and Apple need to start seriously thinking about succession planning.

Maybe this was part of a bigger plan for life after Jobs in Apple. Maybe it is not and maybe it was a step in the wrong direction.

Apple's board and Steve need to find and cultivate a person or team of people who can replace Steve.

John | Nov 10, 2008 | 2:39PM

"Spinning my wheels (IBM)."

The lucky people at IBM actually get wheels to spin. In my case I am trying to start a car engine with a rope as the starter is missing. Others on my team are looking for some wheels that will fit. You'd be amazed much scavenging one has to do just to get to the point where one can spin one's wheels.

Pray for us.

John | Nov 10, 2008 | 3:01PM

In light of all this, it is interesting watching things play out in court as IBM attempts to enforce its non-compete agreement.

Ray | Nov 10, 2008 | 3:12PM
[OPEN] read all comments (29)

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