Apple's 10 Best (& Worst) Business Decisions by Remy Davison Now, with all the accumulated wisdom of hindsight, IGM presents Apple's Best and Worst business decisions. Yes, take a trip down memory lane, make the best or most stupid call, and you too can be Mike Scott, John Scully, Michael Spindler, Gil Amelio or Steve Jobs. Or you can just be Woz if you want. Downing Miller's in the lab while you design the IIgs. Or how about a drop of Home Brew? Licensing the Mac OS ...Or not to license the Mac OS. That was the multi-billion dollar question right from the start. As early as 1985, licensing was looming as the key issue on CEO John Scully's desk. Chairman Bill (the one everyone seems to send their money to) wrote a memo to Scully (about the last time Gates didn't write in code) urging Apple to license the Mac OS. Jobs was against it. CTO Jean-Louis Gassee (in)famously said, "No one will ever catch up to the Mac GUI." Of course, Apple's profits were - and are - in shifting boxes. Not software. So the reasoning was logical enough: why make $100 on an OS license when you can makes thousands on each box? Perhaps the most illogical thing about the original decision not to license was that Apple had unwittingly given away the razor blades by permitting Microsoft to reproduce the window schemes they'd developed for Excel in Windows 1.0 and subsequent versions. When it came time for Apple to sue Microsoft for copying the 'look and feel' of the Mac OS, the original 1985 Apple-Microsoft agreement became the legal basis upon which Microsoft won in court and allowed the company to further develop Windows so that it essentially aped all the critical elements of the Mac OS. So Woz wasn't completely inaccurate when he said a few years ago, "We won. Basically every computer on earth is now a Mac." I guess you could call that 'winning'. Philosophically at least. John Scully, following his fall, confided that he thought not going with Intel chips was his biggest mistake. Which shows Scully learned nothing and understood even less. Had Apple taken this path, programmers could have gotten around ROM blocks or whatever to allow the Mac OS to run on stock Intel hardware. While today, BSD Unix can run on x86, it takes more than a simple recompilation to allow OS X to run on a Pentium (it won't). Fast forward to 1994. Michael Spindler is now in the CEO's chair. Spindler wants to license and license fast, before the Mac OS is squeezed out. No really big names - apart from Motorola - come on board, but Power Computing, Umax, Daystar and others get on board. The clones do well. Too well, as it turned out. Rather than growing Apple's market share, they plunder unit shipments and revenues from the mother ship itself. Using standard PC parts and boxes, the clones offer cheaper, more fully-featured boxes at lower prices than Apple. The only thing the clones couldn't do were PowerBooks. Enter, stage left, Steve Jobs. In 1997, he replaces Amelio and kills the clones, firstly by buying back a license from Power Computing, by far the most successful cloner, for $100 million. And he was right to do it too. It was clear that Apple's market share was not expanding and that the cloners were simply cats licking the cream, even though Apple controlled technology advances. Of course, when it comes to stupid, no one topped IBM. They didn't own the processor (Intel), the OS (MS-DOS/Windows) or even the hardware (any clone will do). Killing Clari(u)s (moof!) Now Filemaker Inc. Claris is dead and buried along with a lot of its employees. We quickly forget that a lot of job-shedding was done at Claris when Steve returned. One wonders whether Claris had been too successful for Microsoft's liking and part of the Apple-Microsoft entente cordiale was ensuring that Microsoft, not Claris, would dominate the Mac business and productivity software market. Have a look through a Claris catalog sometime; tell me that you couldn't run your entire office on its products: Works, Impact, CAD, HomePage, Em@iler. Grab a copy of Apple's OpenDoc and Cyberdog and you have a browser, telnet, another email client and a newsreader. Who needed Microsoft? The other 95% of the world, that's who. Or so they were told. Releasing the Mac Portable Apologies. This should've been on our 10 Worst Macs Ever Built list. Several people wrote in to complain. They were right. Compaq had shown a laptop was possible. Instead, Gassee went for a Mac which was simply 'Portable', but used the already-ancient 68000 CPU, albeit at 16MHz. Worse, it was priced at $6,000. Fortunately, there's a happy ending. Apple's PowerBook team, together with Sony, took the guts of the Portable and shoe-horned it into a svelte, compact case witha revolutionary keyboard-forward design known as the PowerBook 100. The Portable was the end for CTO Jean-Louis Gassee. Only the outcome was worse: the Pepsi-Co guy became CTO. Guess what happened NeXT..? Newton/eMate Yes, The Newton happened. Some wonder whether the biggest mistake was releasing Newton or killing it. Probably most would agree that both actions took place prematurely. Apple sank more than $500 million in development costs into the project before shipping the Newton and its OS too soon. CTO John Scully (giggle) wanted an Apple product that was his baby and his alone and, without blinking, announced that the handheld industry would be worth a "trillion dollars". We assume that, briefly, he'd forgotten how to count. Or perhaps he meant to say zillion. No matter, because when Newton shipped, you couldn't write a six-figure sum on it without it coming out like this: w322221sddsqa. To its credit, Apple seized Newton by the scruff of the neck, and subsequent versions of both hardware and software became better and better. By 1997, it was mature product that was finding its niche, although it was overpriced as a PDA. It even spawned the short-lived eMate, which ran the Newton OS. Designed for schools, it was a heavy duty, clam-shelled not-quite-a-PowerBook which was hideously overpriced. No one could really figure out why it shipped. That it got the nod from Amelio only deepens the mystery, as any sensible person would have killed it. Who was it marketed to? Trying to develop a whole new product category while you're struggling to meet your payroll was not something a sane person would do. Even Microsoft can't bribe people to buy that Windows CE garbage. And even the Palm OS is simply not in the Newton's league. Hiring Gil Amelio The good doctor came with a big reputation for healing sick patients - witness the revival he led at National Semiconductor. Although that turned out sour later. And, of course, we all know that Apple's success in the last 4 years has been due entirely to Gil's good management, prior to the reign of Steve II. Amelio talked consultation but did little of it in practice. He promised a new OS, Copland, but was forced to abandon it after finding out no one would develop for it. He allowed the practice of model numbering to become so proliferate that no one - not even Apple - could tell exactly what a Performa 631 or 578 was. MacWorld Expos became Gil Drones Live for 3 Hours, instead of generating the massive event publicity Expos are designed to attract. You might argue Gil inherited a mess he could not fix. But CEOs are paid huge salaries to solve problems. Conversely, his successor, Jobs, got paid $1 per year and fixed the place in 12 months. Firing Steve Jobs Was this a good idea at the time? As Michael Malone, author of Infinite Loop comments, NeXT (Jobs' second enterprise) gave a glimpse of what a Jobs-run Apple would produce: stylish machines that nobody bought. His critics argued he was disruptive and Wall Street agreed: Apple's share price rose immediately after Jobs' removal. His supporters countered that he drove the Macintosh project to its successful completion (and had had the brainwave at Xerox in the first place). Still others point to the failed Apple III and Lisa projects. But a more mature, experienced Jobs returned to Apple in 1997. Some old habits remained: an aversion to floppy drives; a preference for closed boxes; a predilection for Cubes and, oh yes, the flashes of temper (seen most recently at MacWorld NY). But he has also had the Midas touch on many occasions; hit after hit came to market: G3, Wallstreet, iMac, iBook, Lombard, G4...the list goes on. Sure, he's had a few misses (Cube, education sales force reorganization), but his strike rate is so good and clearly hasn't ended yet, given the success of the TiBook, iBook 2001 and Final Cut. Not to mention the shipping of OS X. I very much doubt whether any other tech CEO can claim such a batting average in recent years. I mean, what does Michael Dell do exactly? (come to think of it, what, precisely, is Steve Ballmer's function? Is he like Andrew Ridgeley to Bill Gates' George Michael or something?). And why is everybody in high technology called 'Steve'? We'll never know. The PowerPC Alliance If you think Apple was the only badly-run tech high-flyer in the 1990s, think again. Cast an eye over IBM. Armonk was not a fun place to be in 1991. Having played too many hands of poker with Andy Grove at Intel and Good Ol' Bill over at Microsoft Farm, IBM CEO John Akers found he'd dealt himself a pair of threes. And IBM was wasting more money on lab coats and pocket protectors than Apple ever sank into Newton. So, IBM thought, who didn't need Microsoft and Intel for anything? Apple, that's who. Apple had its own OS, its own hardware, wrote plenty of its own software and used Motorola chips instead of x86. IBM could design the RISC CPU, Apple could do the software and be its chief customer, and Motorola would bring its chips to the party. Twice the speed, half the cost of x86 was the boast. And IBM could revive its doomed OS/2 and have its servers run on RISC. Thus, Apple-IBM-Motorola (AIM) was born. Unfortunately, Windows 3.0 exploded after 1990 and the PowerPC Macs - released in March 1994 - had only 18 months' breathing room before Microsoft released Windows 95 and Intel shipped the faster Pentiums. Both of these nullified most of the speed advantages initially touted by AIM. And volume brought the Wintels' prices down. Fast. Now, in 2001, Motorola is even looking at selling part of its chip division, IBM has remade itself as an e-services and server company and Apple can't get Mote to build PPC chips faster than 867MHz right now. Although the G5 will change that. But you couldn't say that PowerPC hasn't been a success; the G4 still beats Pentiums at twice its clock speed in certain applications; it runs cool, it's power-efficient and it saved Apple from staying with the end-of-lifed 68000 family (although admittedly a 68060 Quadra would've been a screamer). And, let's face it: RISC is the present and the future, while superscaling the x86 is falling victim to the law of diminishing returns (witness the less than impressive P4). More recently, some journalists have labelled PowerPC a "failure", as it did not dislodge the x86 chip from its dominant position. It also failed to deliver substantial gains in market share for Apple or IBM. The Apple-Microsoft Technology Alliance This really grew out of the reasonably good relations Gates and Amelio enjoyed. Of course, as we all well know, Gil solved all of Apple's problems and is responsible for all its success since 1997. It's just he's so busy going around telling us what a genius he is, he hasn't been able to stay around for the party. Microsoft had stumbled badly with Word 6.0 in 1994 (and Office 4.2). It required bags of memory, wouldn't run on a 68000, was unstable, ugly and crashed all the time. And that was just the Windows version. This hacked-together port cost Microsoft business - big business. So bad was 6.0 that Microsoft was forced to re-release Word 5.1. Gates wanted to ensure he owned the Mac business software market. To do this, a new version of Office was required, but Amelio and Hancock prevaricated on Copland, ultimately leading developers to a dead end. Thus, Microsoft held off until it was clear what OS direction Apple would take. And, of course, to use Office as bargaining leverage - just as Gates had done in 1985 when he held 50% of the Mac software market and threatened to cease Mac development unless Microsoft got an agreement that would allow the incorporation of Mac GUI elements into Windows 1.0. But true Apple-Microsoft rapprochement had to await Jobs' return. For a modest $150 investment in non-voting stock (since sold at enormous profit) and an undisclosed sum to settle outstanding issues ($400 million?), Microsoft got some proprietary code turned over to them, as well as an agreement to kick Netscape off the Mac. In return, on the software side, Microsoft delivered Office 98 (and 2001, as well as Office for OS X) and Bill agreed to appear as Big Brother on a large screen in 1997. Adding to the speculation above, I really ponder whether killing Claris was part of the deal; since Microsoft wasn't bothering to build Access for Mac Office, the retention of Filemaker as the Mac database solution explains why that was the only Claris division that wasn't put out to pasture. Both firms have clearly benefited from the alliance in numerous ways. Cohabitation has worked. But of course, this means Microsoft can copy what it likes with impunity now: right down to the little rubber ducky in Windows XP. The five-year agreement expires in 2002. What are the bets that it'll be renewed? Not Buying Palm Jobs attempted to buy Palm not long after returning to Apple. Now, ironically, Palm is available, but now Jobs is saying the PDA market is "not a good place to be". Too true. Now that Handspring's Visor is setting the pace for PDAs, the development of a Newton-based Palm (or Palm-based Newton) appears highly unlikely. Of course, Palm has licensed its OS widely, which perhaps gives an insight into what might have happened at Apple had licensing occurred in 1985. But the unwitting inability to buy Palm was perhaps a stroke of good fortune: it's clear there are only small margins to be made in the PDA market now; the real money happens when you own a market (Apple II, Mac OS). The Newton could have owned the PDA space for quite a while. Palm did until quite recently. Until, as always, the competition caught up. But even the marketing muscle of Microsoft hasn't put Windows CE in a dominant position (although watch this space). As far as buying Palm goes, that's quite a few hundred million well saved. Not to mention vital engineering resources. Good strategy, Apple. Buying NeXT Some would say this was Gil's best - or only good - decision. It must have been a good decision because Gates hated the idea. And even rang Gil personally to say so. For more than $400 million (mostly in cash), Apple got the NeXT operating system - and Steve Jobs and Avie Tevanian as a bonus. There were other, cheaper alternatives. CTO Ellen Hancock even looked at porting Windows NT to PPC. Needless to say, Bill was rather keen on this idea. Former Apple CTO Jean-Louis Gassee also offered his memory-protected, multitasking BeOS (now in the hands of Palm). But NeXT won on features, not on price. Its Unix core was the main attraction, with its firm base of users and developers. The result was OS X. But the last word on this one goes to technology visionary William H. Gates III, to Gil Amelio: "You'll never make it run on your machines." Honorable Mentions: - Yikes/Sawtooth MHz fiasco (fortunately, only lasted a week). - Steve's purchase of a huge amount of plastic (early Steve). - Sacking Mike Scott (not nice). - Apple III - Lisa - The G3 ROM block (tacky). - The Cube (as a business decision, that is). - Flower Power and Blue Dalmation. - Tangerine. - The IIvi/IIvx (not funny). - Appointing the project lead on the PowerBook 5300/190 project - Not simply buying Microsoft and letting John Scully or someone break it in two and run it into the ground.