The impatience of Jobs

In less than a year Steve Jobs has put the long-suffering Apple Computer back into profit.
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The Independent Culture
When a group of Apple Computer executives tried to enter the MacWorld Expo in New York last month, Steve Jobs was turned away. Jobs had forgotten his ID badge, having just arrived on an overnight flight to deliver the exhibition's keynote speech. But if it were not for Jobs, there might not have been a MacWorld Expo this year - or ever again.

Apple recently surprised Wall Street by announcing a profit of $101m, but this time last year, the company seemed doomed. It had lost billions of dollars in the previous two years, and its once-popular Macintosh computers had seen their market share slashed. The company's share price was tumbling, and senior executives were resigning - or being sacked - almost daily.

The most high-profile casualty was Apple's chief executive, Gil Amelio, a corporate rescue expert who had been brought in only 18 months earlier, specifically to try to save Apple. Jobs was appointed "interim" CEO following Amelio's forced resignation, and at last year's expo he gave the speech that is now seen as the turning point in Apple's fortunes.

He began by announcing his own appointment to Apple's board of directors. That announcement alone was enough to induce rapture in the audience of Mac fans. Jobs was one of Apple's original founders but had been pushed out in a boardroom coup in the mid-Eighties. His return seemed like an omen, suggesting that Apple could make a comeback of its own.

But the speech delivered more than just symbolism. Having announced his own return to the board, Jobs then revealed that the rest of the board had resigned en masse. There was little doubt that the board's resignation had been engineered by Jobs, or that the new directors he named had been hand-picked by Jobs himself. He had been working as a consultant for Amelio for several months, but the make-up of the new board made it clear that he was now completely in control of Apple once more.

As an encore, Jobs stunned the audience by announcing a major deal with Apple's arch-rival, Microsoft. There were jeers from the audience when Bill Gates made an appearance via satellite, but the terms of the deal were enormously advantageous for Apple. Microsoft was to invest $150m in Apple and promised to continue developing its Microsoft Office software suite for the Macintosh for at least the next five years. This display of support was a vital boost to Apple's credibility, and the company's share price had almost doubled by the time Jobs finished his speech.

Jobs is one of the few people in the computer industry who can pick up the phone and chat with Gates on equal terms. However, the Apple-Microsoft deal was also testament to the clarity of Jobs's vision. In an article in Time magazine, a Microsoft executive revealed that Amelio had attempted to broker a similar deal during his time at Apple. It revolved around a number of intellectual property disputes which Apple had launched against Microsoft. Amelio and his legal advisers had been attempting to reach a settlement with Microsoft for months, but their negotiations always got bogged down.

When Jobs re-entered the scene, he was able to focus on the core issues. Apple agreed to a technology cross-licensing deal that ended the legal wrangling between the two companies. In return, Microsoft pumped $150m into Apple and promised to continue developing the Mac version of Microsoft Office.

It is his ability to focus on essentials that has marked Jobs's leadership of Apple over the last 12 months. He decided that Apple should focus on selling computers to its two core markets - education and "creative" users, such as designers and desktop publishers.

To reduce manufacturing costs, he streamlined Apple's product range, reducing it from more than a dozen different models to a core group of desktop and portable computers. He also axed a number of costly research projects and products, such as the handheld Newton MessagePad. His most controversial move was the decision to end licensing of the Mac operating system to manufacturers of Mac-compatible "clone" computers. This was unpopular with Mac users, who had benefited from price competition among the clone manufacturers. But the clones were undercutting Apple's own sales and Jobs argued that the licensing programme had to end in order to ensure Apple's survival.

Amelio had attempted to make similar changes, but has spoken openly of his frustration at being unable to get things done within Apple's "unbusinesslike" culture. This reflects another difference between Amelio and Jobs. To Amelio, Apple was just another big company, one that could be run according to the normal rules of business. But Apple is not just a company - it is a culture, one summed up by the "Think Different" slogan used in its current advertising campaign.

Jobs understands the Apple culture better than anyone else because he created it. It was his determination to develop "insanely great products" that brought about the original Apple Macintosh. His critics depict him as a control freak who oversees every detail of every product. There is probably some truth in this, but it seems that this kind of single-mindedness is needed to provide a focus for a company such as Apple.

Six months after that ground-breaking speech, Apple announced a profit of $45m for the last three months of 1997. That was followed by a $55m profit for the first quarter of 1998, and the second quarter results for 1998 give Apple three profitable quarters in a row. But Apple is not out of the woods yet. Mac sales have stabilised and are now showing modest signs of improvement, but price cuts in the PC market mean that Apple's revenues are still lower than they were this time last year. Jobs's strategy has been primarily defensive, cutting costs and concentrating on Apple's existing markets in order to get back into the black. The challenge now is to increase Mac sales and regain some of the market share that it lost in recent years.

The omens, however, are promising. This month Apple launches the iMac computer. Its eye-catching design is aimed directly at the home and consumer market, where Apple's sales collapsed in the past two years. Its reception in the industry has been positive. Apple's dealers are predicting huge sales and, importantly, software developers are giving it their support.

Games and entertainment software are crucial if a computer is to succeed in the consumer market, and Apple's sales have suffered because most games developers ignore the Mac and concentrate on PCs and games consoles. But software companies have been queueing up to lend the iMac their support, including Eidos, which has promised to develop Mac versions of its popular Tomb Raider games for the first time. Apple has also healed a damaging rift with Intuit, the company which produces the Quicken personal finance program. Having dropped the Mac version of Quicken, Intuit has now promised to develop a new version as a display of support for the iMac.

A lot of Apple's hopes are riding on the iMac. If it sells well this Christmas, it will boost Apple's market share and restore its credibility as a viable alternative to the Microsoft-Intel duopoly. If it fails, Apple could find itself dwindling into obscurity as PCs gradually take over its remaining markets.

It is too early to say whether the iMac will be a success, but Jobs has already worked one miracle by bringing Apple back from the dead. Who knows what other miracles he can come up with?