Hard News by Russell Brown

149

Steve, 1999

Steve Jobs resigned yesterday as the CEO of Apple. It's sad: his resignation letter suggests that his health problems have become too severe to continue. 

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know. Unfortunately, that day has come.

He will now serve as "Chairman of the Board, director and Apple employee," but for how long isn't clear. An extraordinary story may be entering its final chapters. I scratched around this morning for resources to draw on for a blog post, and realised I should simply re-publish the account below, which originally ran in Unlimited magazine.

The story covers my trip to MacWorld Expo New York in 1999, and Apple's history to that point. That was the year the original iBook was unveiled. It was the first consumer PC to ship with what we now know as wi-fi. I've dropped in some relevant video to illustrate the words.

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It's a long way to come for a speech.

 And 6.50am is hellish early to arrive for a 9am event. But we're not the first. About 100 people are already queueing inside New York City's Javits Convention Centre.

"Damn …" says the guy behind us. "I was first into the hall the last time I arrived this early for a keynote."

For the believers, events like this one, Macworld Expo, were once principally an excuse to kvetch and complain about Apple Computer. Many had come to despise Apple's management as much as they loved its creation - the Macintosh computer.

Until, that is, Steve Jobs returned in August 1997 to once more run the company he co-founded in his parents' garage in 1976 - and from which his own board ejected him in 1986.

Although he is still officially only "interim CEO", Jobs is regarded by both friend and foe as Apple's saviour.

Each of his two or three conference keynotes a year have been carefully styled as milestones on Apple's "journey". But this one is special. It will close the loop on the four-part product strategy Jobs outlined two years ago.

Although Jobs' new Apple never comments on unreleased products, the faithful all know he will unveil Apple's consumer portable, codenamed the P1. But nobody outside a very tight circle knows what it will look like or what it will do.

 Behind us, the crowd swells to some thousands, streaming down the outside of the convention centre and around the block in New York's suffocating summer heat. There are greying baby boomers, funky pierced kids, men, women, the grossly obese and, intriguingly, quite a few father-and-son teams.

As Jim Henson and Kermit the Frog stare down from a huge 'Think Different' banner, the buzz builds until, finally, at 9.05am, the roller door of the conference hall rises. Nobody actually sprints to a seat, but the 5500-seater hall seems to fill in only a few minutes. A canned selection of 50s rock 'n' roll tunes pipes cheerily from the PA system.

Then, as if for a rock 'n' roll show, the lights go down. There's a cheer as Jobs is announced. He walks on stage, the giant screen behind him declaring him "Steve Jobs, iCEO" and acknowledges the rowdy applause with his familiar gesture: a shallow bow, hands pressed in front of him. He is dressed as he always is for the big events: black turtleneck skivvy, beltless jeans, sneakers.

"Hi," he says. "Thanks for coming …"

Success is agreeing with him, I'm thinking. Or maybe it's the organic, vegetarian diet. Or … hang on. It's not Jobs. It's ER's Noah Wyle, who recently played Jobs opposite Anthony Michael Hall's Gates in Pirates of Silicon Valley, a current TNT cable movie about the twin tycoons' early years.

The real Jobs bowls on, grinning, looking his age, and declares the actor "a better me than me!"

"I'm just glad you're not mad about the movie," quips Wyle.

"What? Me upset?" says Jobs innocently, provoking the curious sound of several thousand people chuckling knowingly all at once. "Hey, it's only a movie …"

Pirates is only a movie, and the savage scene where Jobs taunts a hapless middle-aged applicant for a management position is really a conflation of a number of actual events. But its contention - that Steve Jobs has a difficult side to his personality - is not inaccurate.

John Sculley, the former Pepsi executive hired as Apple CEO when the company entered the Fortune 500 in 1983, seemed to regard Jobs as an unmanageable stoner unfit for corporate life when he orchestrated his sacking in 1985, only a year after the birth of the Macintosh.

The last Apple CEO, Gil Amelio, felt the bad side of the force after he brought Jobs back into the fold by buying his flagging Next Software for $US400 million in December 1996, getting Jobs as a part-time advisor in the process. In his somewhat self-serving book, On the Firing Line, he tells of Jobs and his confidants sniggering at him behind his back. And then stabbing him in it.

Amelio implied that no one would want to be Apple CEO with a prick like Jobs on the Apple board, and that Jobs was pressured to take the post of "interim CEO" because nobody else would have it.

It is equally possible that Amelio's ousting was always somebody's end game for the Next buyout. That Jobs' inner circle simply let Amelio do the basics on the giddy mess of a company he had inherited from Michael Spindler, including firing a few thousand people - and then had him fired, along with most of the Apple board.

Among the directors to go was Mike Markkula, the eminence gris who had been there when Jobs was kicked out. Now that's revenge.

 

Jobs launches with a recap of Apple's recent Q3 results - a profit of $200 million, the seventh profitable quarter in a row. Apple now has $3 billion in cash, $500 million of which it will devote to a buyback programme "because we feel so strongly about the future of Apple stock".

He pays tribute to the "operational excellence" that has seen the company work its inventory down to a mere 15 hours - better than Dell (six days), Gateway (nine days) and the once-mighty Compaq (28 days). He announces that Mickey Drexler, founder and CEO of hip clothing chain The Gap, has joined the Apple board.

 These are good numbers - and simply great numbers in the context of Apple's recent past, which saw it lose a staggering $760 million in a single quarter before Jobs' return.

That figure was largely self-inflicted - Apple's inventory performance, hampered by a confusing array of product lines, was horrible. Even as its revenue rose, it was making tens of thousands of Mac models nobody wanted to buy.

The stock is a story in itself. Apple shares were barely off their $13 low two years ago. In the week of Macworld the price was bouncing around either side of $55. Analysts' price targets are now about $70 - the price at which Spindler rebuffed a buyout from IBM in 1994.

An informal poll at one MWNY99 event suggested that many Mac users now own Apple stock they bought - on faith, basically - at less than $25.

But the big winner has been Michael Jackson's chum, Saudi Prince Alwaleed Bin Talal, who started buying big chunks of Apple in 1997, and now owns more than 5% of the company.

Jobs himself sold (in desperation, apparently) all but one of the Apple shares he collected in the Next buyout, long before he replaced Amelio.

He accepted, but has not yet exercised, options to buy 30,000 Apple shares at $23.60 granted by the Apple board in 1997, in an effort to woo him into becoming a permanent CEO. He's still a temp. And he still draws no salary from the company he runs.

 

Jobs is warming up now, striding back and forth across the stage as he speaks, gesturing all the time. He moves on to QuickTime, the multimedia software that is "core technology for Apple. It's is incredibly strategic and we think we're way ahead technically of everybody else".

Jobs reprises Apple's Internet hosting of the QuickTime trailer for Star Wars Episode 1: The Phantom Menace - "the largest Internet event in history," with 23 million downloads.

He announces QuickTime TV, an Internet broadcast brand boasting QuickTime streaming from, among others, Disney, ESPN, ABC News, Rolling Stone and the BBC.

Phil Schiller, Apple's worldwide VP of marketing, another Apple alumnus returned to the company (and to Jobs' core team) demonstrates.

He brings up BBC World over the Internet; Anita McNaught appears as a vision on the giant screens, triggering a flutter for the New Zealanders in the crowd.

He finishes by debuting a Disney-hosted trailer for Toy Story II, the follow-up from Pixar, the company where Jobs is actually still officially CEO. The crowd fairly erupts with good cheer.

 

Even in the worst times, QuickTime was a light in Apple's darkness. It plays on both the MacOS and Windows, but its most remarkable feature is the fact that it runs everywhere from the humblest home desktop to professional broadcast editing suites.

Apple executives testified in Microsoft's antitrust trial that the software giant had tried to get Apple to "knife the baby" and leave video playback software to Microsoft. That would have been insane.

The cluster of Disney-owned assets to lined up for QTTV drags the long-rumoured Apple-Disney partnership a little further over the horizon and it helps Apple play content catch-up with the streaming offerings of Microsoft and RealNetworks.

These alliances are stakes in the ground for the day when you really do get your TV over the Internet. But there's money in it already.

Apple's next QuickTime Player will ship stacked with bookmarks leading to, say, streaming music videos on the Warner Music Website. A great Macromedia technology called Flash lets a "buy this record" button be embedded in those videos. And for every person who clicks that button, Apple gets a slice of the action. Very tidy.

 

Schiller returns to demonstrate Sherlock, the desktop search engine that first shipped with MacOS 8.5 and has become the third most popular search tool on the Internet - and which has been considerably enhanced for the forthcoming MacOS 9.

He uses Sherlock 2 to search first for information on that week's Apollo 11 anniversary - and then for products and memorabilia related to the mission - first performing an instant price comparison across cluster of online shops, then at eBay, the popular online auction site.

Sherlock is clever: its results display differently according to the kind of search conducted. Auction results, for example, say how long until bidding closes.

Oooooh, says the crowd …

 

When Jobs first got back in charge at Apple he spent a lot of time killing things. The belated Mac clone programme, the Newton handheld technology, the geek's-dream PowerExpress Macintosh, even most of Apple's merchandise line - all were "Steved" in the interests of narrowing down product lines. ("Jobs is insane. Apple is Jonestown," declared one Apple tracking Website.)

Many of the job-for-lifers at Apple's legendary R&D centre, who stacked up plenty of patents but too few products, were invited to leave.

But Jobs also testified to the amount of "low-hanging fruit" there was yet to pluck at the company. In particular, there was a very smart search engine called V-Twin, which sat around for years during the ruinous saga of Apple's never-to-ship next-generation operating system, Copland.

V-Twin is now Sherlock - and it's a tidy little earner. The current version can search e-commerce sites like Amazon.com - and for every book, video or CD that a Sherlock user finds and buys, Apple gets 5-15% of the cover price. Sherlock 2 will do the same thing on steroids.

 

Then the four-square schematic with which Jobs first announced his strategy comes up - it's a teaser; because Jobs is going to talk a bit longer before he announces what everyone knows is coming.

The story of Apple's first really different computer since the first Macintosh, the iMac, is only beginning, he says: "We shipped more last quarter than ever". By the time the iMac turns one year old, on August 15, it will have shipped just shy of two million units. One third of iMac users are first-time computer buyers.

The iMac, Jobs declares, "has become almost pervasive in our culture."

 

In a PC market headed apparently irrevocably for commodity status (hottest PC pricing in the US this year: free machines to people who subscribe to certain online services), Apple did something different with the iMac - it created a real product

For all its faults - and even iMac acolytes despise its crappy little round mouse - the iMac has been America top-selling personal computer, or thereabouts, for each of the last 11 months. Apart from one risible Korean knock-off, already the subject of a lawsuit from Apple, no one else in the PC industry has followed.

 

"We went to the best game authors in the world," says Jobs "And let them beat us up. And they did."

Jason Jones of Bungie Software, demonstrates his company's new multiplayer game, Halo, which ships first on the Mac next year. It looks incredible.

Ahhhhh, says the crowd …

 

Apple's old guard steadfastly ignored a simple fact about the consumer market: quite a lot of people buy PCs to play games on them. The Mac had almost disappeared as a games platform by the time Jobs arrived, but the ground is being slowly recovered.

The new emphasis on graphics performance in Apple machines is having an impact at the other end of the market. G3 Power Macs might seem pricey to consumers - but they're an absolute steal to some graphics professionals.

High-end applications are increasingly being ported from the Silicon Graphics platform traditionally used for big-ticket movie effects - and they're running faster on the Mac.

The crowd starts whooping and cheering as that blank square in the matrix lights up. This is it.

"We went to our customers in the consumer and education markets and asked them what they wanted from our portable product," says Jobs. "And what they wanted was an iMac to go."

And they've called it … iBook.

Jobs runs through the iBook specs; drawing applause for the graphics card, 300MHz PowerPC chip and six-hour battery life. The iBook is, he claims, second only to Apple's own pricey PowerBook for mobile speed.

And then it appears in his hands; a vision in tangerine and white. The audience roars, almost as much in relief as appreciation. It's here. It looks good. It has a price ($US1599).

The mood turns relaxed and amiable as Jobs tickles the crowd's collective tummy; showing four prospective TV commercials for the iBook and asking for an applause-o-meter vote afterwards: "Is it possible to fall in love with a computer?" breathes Jeff Goldblum over one ad. "Ohhh, yes …" But the clear favourite is the one accompanied by a sultry little pre-coital number by Barry White.

 

Barry White? Oh, yes … More women will buy the iBook than any other computer ever. And only partly because it looks like a giant makeup compact. Inside a week, PC Magazine columnist John Dvorak will turn out a bizarre column in which he attacks the iBook not for its specs, but for looking "girly" and "effeminate". Perfect.

But wait. There's one more thing, says Jobs. While a TV camera relays the picture, he connects first to Apple Website, then those of CNN and Disney. Thing is, halfway through he picks up the iBook and walks across the stage with it. The Internet connection does not miss a beat.

It takes most of those watching a second or two to register what has just taken place. Suddenly, people are on their feet, shouting and cheering. The iBook is wireless.

Grinning, Jobs passes the iBook through a handy hula hoop. "No wires!" he chirps. "Just what is going on here?"

What is going on is AirPort.

 When it launched the iMac, Apple bet the farm on Universal Serial Bus, the Intel plug-and-play peripheral technology that had made little headway in the PC market (big problem: start Windows in safe mode and you can't see your USB devices any more).

Back then, there were a total 25 USB products in the world. By the end of this year, there will be 250 - many of them encased in new Apple-style PCB.

The big bet this time is AirPort - the Apple product that embodies the new 802.11 wireless standard. Apple will ship a cheap ($US99) iBook card and a funky base station that provides 11Mbit/s networking (faster than the Ethernet network in your office) at a range of 50 metres, without wires. Do you want it already?

It's still a hard, cold world when your competitors are Microsoft and Intel, but AirPort puts Apple about 18 months ahead of anyone else. It is, like all the ads say, thinking different.

 "We have now completed our product strategy," Jobs declares.

He calls on Apple employees scattered throughout the crowd to unveil the iBooks they have been concealing, so that the faithful can touch one, and quietly leaves the stage.

The pumped-up punters stream out of the hall for a spending spree on the exhibition floor. Others gather in front of TV screens on which a reporter from stockwatch channel CNBC, which announced the iBook during the keynote, is interviewing Jobs.

He reprises his onstage patter until the reporter concludes by pressing him on when, if ever, he'll drop the "interim" from his Job title. Two years ago, Jobs reacted to the same line of questioning by storming out. Investors got worried.

This time, he smiles: "We don't comment on that." Apple stock rises two dollars that day.

 The following day, Microsoft CEO Bill Gates addresses his company's annual meeting of financial analysts. He tells them that "the one thing Apple's providing now is leadership in colours". He shows them a PC. It is red.

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