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In West of Eden, Wired contributor Frank Rose recounts what happened at Apple during three pivotal years in the company’s history. The story begins with Steve Jobs, then 27 and excited about the idea that Apple could sell computers as if they were packaged goods, recruiting Pepsi-Cola president John Sculley to run the company. It ends with Jobs stripped of any responsibility in the company and leaving to form NeXT. In between came the launch of Macintosh, a project Jobs had taken over when it became clear the board wouldn’t let him run the company himself, and the crisis that erupted when Mac sales failed to meet expectations and Sculley failed to do what Jobs thinks necessary to save the company. With Jobs and Sculley increasingly at each others’ throats, a showdown was inevitable. At an executive staff meeting in the boardroom on the Friday before Memorial Day 1985, the inevitable happened. *
It was a nattier-than-usual Steve who bounced into the boardroom on Friday morning, a model young executive in a hand-tailored, gray-striped Wilkes-Bashford suit. The other executive staff members were already seated, and since Jay Elliot, the vice president of human resources, had taken Steve’s usual place to the right of John, Steve took a seat at the far end. They were meeting that morning to discuss what John would say to the two dozen middle managers who’d be gathering downstairs to hear a reassessment of their strategy. But the air of expectancy and dread that greeted Steve as he entered the room was caused by more than the fear that they were focusing on the wrong markets after Thursday night’s phone calls, anything could happen. It didn’t take long to find out what.
John had to go, Steve repeated. He looked around the room. They all agreed, he went on. John wasn’t providing leadership, the company was a wreck, they wanted him out.John looked like a man who was trying to summon up his last iota of energy. Gone was the runner’s edge; in the past couple of weeks he’d turned into a sack of parsnips, thin, pale, and misshapen. But as Steve started to sit down, John looked at him head-on across the long expanse of polished hardwood and made an announcement that hit the other end like a bowling ball. He said he’d heard Steve was going behind his back to try to kick him out of the company.
Steve’s pupils narrowed to the size of pin pricks and honed in on John with a stare of laser-like intensity. That’s right, he said. John should leave. He didn’t know how to run the company. And while he was accusing Steve of sneaking around behind his back, he himself had gone to the board in April to have Steve removed as head of the Macintosh division. He was supposed to be Steve’s mentor, supposed to help him learn to manage a big organization, and instead he was trying to kick him out. He was a sleazeball.
John started to stammer, a childhood trait he thought he’d outgrown years ago. Slowly, shakily, he forced the words out. He hadn’t been able to help Steve because the company was in too much of a crisis. He’d tried to save their friendship, but now it wouldn’t work any longer. He couldn’t tolerate this. He couldn’t trust him.
John had to go, Steve repeated. He looked around the room. They all agreed, he went on. John wasn’t providing leadership, the company was a wreck, they wanted him out.
God, John thought, what if he’s right? He couldn’t go on without the others’ support. He’d have to see who they backed. So now, one by one, he called on them to declare their loyalties—starting with Del Yocam, general manager of the Apple II division, who was seated to John’s left.
Suddenly it was their turn to squirm. They’d been expecting something, but not this. As a group they were as unhappy with John as Steve was, but for opposite reasons. No, he wasn’t proving leadership; he was constantly deferring to Steve. They didn’t want either one kicked out of the company; they wanted John to stop Steve from riding roughshod over it.
Having no choice, Del plunged ahead unrehearsed. He loved Steve, he said, loved him for making them what they were today, and he wanted him to play an active role in the company. But he respected John for his experience and capability, and he’d support him in whatever decision he made.
Like Del, Al Eisenstat, the chief counsel, turned to Steve as he began to speak. He said he cared about Steve and John both and he wanted Steve’s contribution to the company, but he’d have to go along with whatever John’s decision was. Then he told Steve how sorry he was.
Across from Al was Bill Campbell, the chief coach of sales. He turned to Steve and spoke in a voice that almost quavered. He said he really wanted Steve to have a role. He said it would be a real shame, not just for John and Steve but for Apple, if the two of them didn’t work out their differences.
Next to Bill was Regis McKenna, Apple’s long-time PR consultant, who sat in on their meetings as an *ex officio *member. He’d told Steve before he couldn’t run the company, and he told him again now. He felt John had to be given the opportunity to run Apple, and he’d support him.
Dave Barram, the CFO they’d hired from Silicon Graphics, had been there less than two months; he echoed the others.
Jay Elliot spoke last. He thought they were both being self-indulgent with their little power struggle. They were too wrapped up in themselves to care about the five thousand people who worked for the company. It was ridiculous that they couldn’t work this thing out. He wouldn’t pledge his loyalty to either one of them; he was pledging it to Apple.
Steve sat listening with his head down. When the litany finally ended, he looked up and in a quiet voice, not quite tremulous, said he wasn’t sure what he was going to do. His face was a mask of utter devastation. There was no trace of the sparks he’d fired earlier; in their place was the uncomprehending stare of a little kid whose world has just been shattered. John, crumpled into his chair at the other end of the table, looked scarcely better. Bill and Jay pleaded with them to keep it together, to work it out, not to blow up Apple in their spat, but it was too late. Finally Jay reminded them that they had a lot of people downstairs and they had to tell them something.
Two floors below, 24 people from across the company were crowded into a long, narrow meeting room to hear John’s pronouncements on the crisis they were facing in the marketplace. Alan Kay was there, and Tom Marano, the sales director who’d just been hired from Pepsi, and Mike Lorellit, the marketing whiz from International Playtex who’d just been hired for the Apple II division. The audience seemed sorted by order of knowledge, with those least aware of the true crisis at the front of the room and those most aware in the rear, as far away as possible. The Macintosh staff was sitting at the very back, and when the exec staff members came down they sat alongside them. Steve came in last, looking like a dead man, and took the backmost seat of all, in a corner.
John made no mention of what had just happened upstairs. Instead he spoke in vague and general terms about Apple’s future and the hard times ahead. John had a mind like an outline processor, able to tick off points and sub-points and sub-sub-points for hours without recourse to notes, and as he addressed them in his dull, dry monotone, this outline processor clicked on. For an hour and a half he droned on about expense reduction and new products and accountability and communication. He sketched out seven goals and announced the creation of “study teams” to investigate their problems and come up with solutions. As he spoke, he moved more and more behind the pillar he was leaning against. Finally, almost hidden, he asked for questions.
Study teams. These were pirates, or had been, and now they were being asked to submit written reports in triplicate. They were taking the committee response. They wouldn’t have to meet the crisis; they could just study it to death. Bill and Del looked disgusted. Steve sat in the corner with his arms folded and his head down. Alan Kay asked why they didn’t give money to universities to fund basic research. Finally, without another word, everyone filed out.
Continue reading 'Guest Post: Steve Jobs In And Out of Exile At Apple'
As Sunday turned into Monday and the long Memorial Day weekend waned, Steve continued to nurse the hope that things would somehow be made right — that John would still be fired, that John would step aside and let him run the company, at the very least that John would relent and put him in charge of product development. He had phoned Mike Markkula, Apple's original angel investor, and tried to set up a meeting at Markkula’s ranch in Carmel Valley, just over the mountains from Big Sur. He wanted to come down with his staff and tell Markkula what was really wrong with Apple. Markkula hadn’t expressed much enthusiasm, but finally he agreed to meet with them on Monday morning at Steve’s house in Woodside.
On Tuesday evening, John phoned Steve at home. It was official now: Steve was being removed as general manager of the Macintosh division, and he wouldn’t be getting any other operational role in the company. In a few minutes, it was over.Like everything else, the meeting with Markkula didn’t go the way Steve thought it would. Markkula set the ground rules. The main rule was, Steve couldn’t say anything. Markkula wanted to hear from Steve’s staff members directly; he didn’t want Steve prompting them.
It was chilly that evening, and there was a draft inside the echoing chambers of Steve’s empty San Simeon. The room was vast, close to 2,000 square feet, and bare except for a single Oriental carpet that covered a fraction of the floor. Markkula listened quietly as Steve’s four lieutenants gave their views of what had gone wrong, of how they’d come to be in this state, of what they could do to get out of it. There was no banter, no chit-chat, no comic relief.
Markkula said almost nothing. When it was all over, he stood up. The matter would be resolved soon, he said, and it wouldn’t be to everyone’s liking. Then he got in his car and drove off.
On Tuesday morning, John had breakfast with Steve and told him he didn’t think there’d be a role for him at Apple. Then he drove to Mike Markkula’s house in Portola Valley, a secluded enclave nestled in the foothills above Stanford, to have his own audience with Markkula and seek his blessing for the step he was about to take.
Steve was right about one thing: Markkula’s was the vote to swing. As a co-founder and former president of the company he held an exalted status on the board; his was the voice of reason. And Steve, by so ineptly forcing the board to choose between John and himself, had in is desperation reduced the issue to a stark and simple choice. They could back John, who might be able to stanch the flow of red ink and lead them back to profitability; or they could back Steve, whose only visible talent was his ability to articulate a vision they’d never fully shared in the first place.
Hours later, John drove away with Markkula’s support. When he got back to his office, he polled the other board members on the phone and got their backing as well. The matter was settled. He was in command.
So on Tuesday evening, John phoned Steve at home. It was official now: Steve was being removed as general manager of the Macintosh division, and he wouldn’t be getting any other operational role in the company. In a few minutes it was over, and Steve was left with the realization that he’d lost—lost the company, lost his dream, lost his chance to change the world.
Over the next few hours, sobbing, he called around to say good-bye. He called Bill. He called Al. He called Mike Murray, the marketing chief of the Macintosh division. Choking back tears, he said he just wanted Mike to know that the past few years had been one of the best times of his life. He wanted to say good-bye. And then the phone clicked dead.
This guy sounds terrible, Mike thought. He decided he’d better see what was happening. He jumped in his car and raced up 280 to Steve’s house. The past three years spun willy-nilly through his mind and he drove, the whole incredible trip. He imagined finding Steve sprawled on the floor, a suicide. He’d have to call the police. Ambulances would come, and then the press. It would be all over the papers in the morning. What would the headlines say? How would Sculley feel? Couldn’t they have talked just one more time?
Continue reading 'Guest Post: Steve Jobs In And Out of Exile At Apple'
The hacienda was completely dark, its white walls gleaming in the moonlight. The front door was open. Mike dashed frantically through the empty rooms. He couldn’t find Steve anywhere. He sprinted up an outside stairway to Steve’s bedroom and knocked on the door. A light was on inside. “Steve?”
Steve knew he couldn’t leave Apple. Apple was his, Apple was all he’d ever known. But what was he going to do there? He was still chairman of the board. What was a chairman supposed to do?It was a spartan room, just a mattress and some blankets on the floor and a single light overhead. A metal break rack against one wall was stacked high with television and stereo equipment; clothes were piled on the floor. Steve was sprawled across the mattress. “Oh, hi,” he said as he looked up, his face bleary-eyed with tears. Mike lay down and put his arms around him, and they cried together. No, Steve assured him, he hadn’t been thinking about anything stupid. He’d just been wondering why it all had to be this way.
Three weeks after the boardroom confrontation that set the whole thing in motion, HR announced layoffs that totaled a fifth of the work force. Some 1,200 people lost their jobs, most of them factory workers. In Cupertino, nearly 250 people were let go. There were generous severance payments and special crisis centers in case anyone got distraught, but there was no arguing whether the cuts were needed. That same day, as laid-off engineers, and marketing people were getting drunk at Eli McFly, the steampunk theme bar down the street, the public-relations office announced that Apple would post the first quarterly loss in its history.
There was one problem no one knew how to deal with—not HR, not the exec staff, not John or the board. What were they going to do with Steve? As the chairman and largest stockholder, he hardly seemed in line for outplacement counseling; and yet they didn’t exactly want him around either.
Steve knew he couldn’t leave Apple. Apple was his, Apple was all he’d ever known. But what was he going to do there? He was still chairman of the board. What was a chairman supposed to do?
That was precisely the question John was wrestling with. According to the corporate by-laws, the sole function of the chairman of the board was to chair the board meetings. Since the board met only a few times a year, that would leave Steve with a great deal of time on his hands. He wanted to do something. But it was too late for that now. There was no role for him at Apple any more, and more than anything else it was the move that made that clear.
In the weeks that followed the layoffs, as the corporate reorganization took hold, nearly everyone at Apple was moved to a new location. As chairman of the board, Steve should have rated an office in the Pink Palace, as the headquarters building was known around Apple. He wanted the office he was supposed to have had when they moved into the building in 1983, directly opposite John’s on the third-floor executive suite. But John didn’t want him around. So he was moved to the annex to Bandley 4, a small white stucco building with a red tile roof across the street from what a few weeks before had been the Macintosh building. Aside from his secretary and the security guard, he was the only person in the building. He called it Siberia.
A week later, he filed papers with the Securities and Exchange Commission announcing his intention to sell a large chunk of his Apple stock—850,000 shares, worth about $14 million at current prices. There’d been reports he’d tried to stage a leveraged buyout, lining up backing from Morgan Stanley to borrow enough money to seize control of the company. The sale made it clear wasn’t contemplating an attack, but it didn’t leave Apple any more secure financially because the natural expectation was that he’d keep selling. The six million shares he had left would keep the stock price down like a rock, and that would leave them vulnerable to a takeover bid from some other quarter.
Steve was selling for the same reason many people sell their stock: He didn’t have any faith in the people who were running the company. First they’d sent him into exile, and now, despite Sculley’s initial statements that he would serve in some vaguely defined role as a corporate visionary, it was being made clear that his ideas were no more welcome than his presence was. A taste of the new order came when one of his former associates tried to find him in Siberia. She didn’t know where his new office was, so she went to the receptionist in Bandley 4 and asked. The response was crisp and to the point: “Steve Jobs doesn’t work here any more,” the receptionist informed her. Yes, she said, but he has an office here and I need to talk to him. At that point the receptionist echoed Sculley’s words to the stock analysts as if by rote: “Steve Jobs,” she said, firmly and with great finality, “does not have any operating responsibility in this company.”
The transition was being made.
*In the second and final installment from *West of Eden *on Sunday, Steve Jobs leaves Apple to found NeXT—and finds himself sued by Apple for breach of fiduciary duty. *
