"Look at That!" says Steve Jobs he pulls his Mercedes into a parking space. He's pointing at a new Volkswagen Beetle, and as soon as he parks, he dashes over, circling the shiny black Bug, taking the measure of a well-publicized update of once great product design. "They got it right,'' he concludes.
Last Wednesday Jobs himself received a more thunderous thumbs-up at the announcement of Apple Computer's successor to its own hall-of-fame classic, the original Macintosh: a machine designed for consumers dubbed the iMac (only Apple would dare to lowercase the "I'' in Internet). The crowd in Cupertino, Calif.'s Flint Center--site of the historic Mac launch 14 years ago--largely consisted of Apple employees. But due to an industrial-strength cone of silence shrouding the new product, few had been aware of its existence. So after a morale-boosting slide show documenting the company's new profits, and a demonstration of the speed of its sleek new laptops, the crowd went bonkers when interim CEO Jobs, in a rare appearance in a business suit, literally unveiled a piece of hardware that blends sci-fi shimmer with the kitsch whimsy of a cocktail umbrella. As distinctively curvy as the Beetle, dressed in retro-geeky, translucent plastic, the iMac (due to ship in August) is not only the coolest-looking computer introduced in years, but a chest-thumping statement that Silicon Valley's original dream company is no longer somnambulant.
Ten months ago, when 43-year-old Jobs temporarily assumed control of the company he cofounded in a garage in 1977, the move was widely seen as a last-ditch effort to inject excitement into a barely breathing corporate husk. Maybe Jobs could weave his famous ``reality-distortion field'' and preserve enough interest for some bigger entity to snap Apple up at a face-saving price. But now strange words are emerging from One Infinite Loop, the glass-atriumed Cupertino headquarters. Words like profit. Stability. And even, if you strain to hear, growth. For the first time in years the face icon appearing on the Mac boot-up screen has a reason to smile.
How bad were things at Apple a year ago? "This company was in a death spiral,'' says chief financial officer Fred Anderson. The CEO was Gil Amelio, a semiconductor executive who had cut some costs and reintroduced the idea of product quality, but really had as much business running Apple as Bob Dole. It wasn't just that Amelio was a structurehead who couldn't relate to Apple's notorious freewheeling culture--he couldn't articulate how Apple fit into the present, let alone the future. Check out the index of his recent excuse-laden book and you will not find an entry for ``Internet.'' When Ed Woolard, the former DuPont chairman who'd recently joined Apple's board, called Amelio last Independence Day weekend to set him free, the company was deep in the red, morale was nonexistent and even die-hard Mac fanatics were cracking open copies of ``Windows for Dummies.''
Enter Steve Jobs, who had been advising Amelio since Apple had purchased NeXT, Jobs's software company, late in 1996. Jobs's main gig, heading animation studio Pixar, was finally paying off after a 10-year ramp-up: in the wake of megahit ``Toy Story,'' Jobs's stock holdings made him a billionaire. His financial stake in Apple, though, consisted of a single share of stock. In addition, he had a young family he loved spending time with. So why take up Woolard's offer to temporarily run the company?
Jobs explains that his "reluctant'' acceptance of the task was tied to his belief that "the world would be a slightly better place with Apple Computer.'' Some of his friends, however, think that his motivation was more intensely personal. ``No matter how famous Pixar becomes, Steve is known for Apple; if Apple is tarnished, Steve is tarnished,'' says former Apple exec Heidi Roizen. Larry Ellison, the CEO of Oracle who accepted Jobs's offer of a board seat, adds, ``Apple is like a child who has a drug problem--Steve has come back to straighten her out.''
How did he begin the task? First by making peace with Apple's former blood enemy, Bill Gates. Coexistence with the dominant player was Apple's only survival strategy. The deal announced last August assured that Microsoft would continue writing Mac software, a vital prerequisite to any recovery. Then, in an even more controversial move, Jobs ended the policy of licensing Apple's software to other computer makers, contending that those ``clones'' sucked up profits that were rightfully Apple's.
But most important, he says, ``Apple needed a plan.'' Jobs believed that there was sufficient talent at Apple to regain glory, but no coherent strategy. (Amelio disputes this, insisting that many of Jobs's initiatives are carry-overs from his tenure.) To demonstrate this, Jobs scrawls the names of Apple's mid-1997 product line on a whiteboard. There's the 1400, the 3400, the 6500 . . . 15 in all. ``And you know how many we make now?'' he asks. ``Zero.'' The idea was to concentrate efforts on Apple's key markets: publishing, education and consumer. Ultimately the product list would be winnowed to four: desktop and laptops for the consumer and the professional.
But it would not be easy. ``Focus does not mean saying yes, it means saying no,'' Jobs says. ``I was Dad. And that was hard.'' But Jobs's do-it-and-move-on style is well suited for crisis management. He eliminated some of Apple's work force and, according to Fred Anderson, cut operating expenses virtually in half.
Another streamlining took place in the retail channel. ``Our [Apple] business was almost nothing--we felt they would just dwindle away,'' says CompUSA exec Hal Compton. But when Jobs arrived, CompUSA made a courtesy call, and, says Compton, ``soon we were the exclusive national Apple dealer.'' The Mac's share of computer sales at CompUSA has now risen from 3 percent to 15 percent.
Jobs also revamped the company's image making. ``We had 25 different campaigns running around the world, none of them getting enough media dollars so you'd see any of them,'' Jobs says. He rehired Chiat/Day, the agency from Apple's glory days, and the result was the instantly memorable ``Think Different'' campaign, showing ``what we stand for and who our heroes are,'' says Jobs. (The only setback came when it leaked out that Apple advertised different in Asia, deleting a potentially controversial Dalai Lama.)
Another key decision was to base all of Apple's new products on the speedy G3 PowerPC chip, allowing the company to boast that it made competing Pentium machines look snail-like. Apple has sold 500,000 desktop G3s, a key factor in giving the company, to Wall Street's astonishment, not one but two profitable quarters, putting the company $100 million in the black for that period. ``I don't care how cool the computer is,'' says Apple senior VP of worldwide sales Mitch Mandich. ``If we're losing money, this won't work. Because you have to be viable.''
The remaining gap was the consumer market. ``This was our soul,'' Jobs says, and in early August he began developing what would become the iMac. The ``i,'' of course, means Internet, a natural area for Apple to exploit: information in cyberspace is by and large equally accessible to users no matter what computer they use. In a sense, though, the name of the computer is misleading: aside from an easier setup process, the iMac offers nothing in the way of Internet usage that Microsoft-powered machines don't already have. Another possible flaw is the lack of a floppy-disk drive; although Jobs is correct when he says that it's more common to move information over a network, most iMac users will probably have to spring for an external drive to back up files.
The eye-catching iMac's biggest problem, though, is that many consumer software programs do not run on Macintoshes. If your desire is playing the latest computer-baseball game, for instance, having an ultrafast iMac won't help you--those games run only on Windows. Just days before the Apple event, there was a scare that Intuit, maker of the best-selling financial software Quicken, might abandon the Mac. Fortunately, Intuit CEO Bill Campbell--who sits on Apple's board--announced last week that Intuit will continue updating its Macintosh products. And this week the makers of the PalmPilot will announce new support for Macintosh. Optimists like John Landforce, a retailer who heads the Apple Reseller Advisory Board, predict further improvement: ``If you can sustain price-performance leadership over time, the software comes to you and the customers come to you,'' he says.
But even with the current software base, observers who see the iMac think it will sell, especially at its competitive $1,299 price tag. ``It's definitely going to our audience,'' says AOL president and CEO Bob Pittman. In Steve Jobs's view, ``Apple has already come back,'' and now that his days are not so intently involved in crisis management, and he is able to spend more time with his family, he appears to be having a wonderful time. He runs Apple in a mode that can only be described as post-CEO. Sometimes he will greet visitors in shorts, sandals and a two-day beard growth. His office is a surprisingly compact rectangle cluttered with books, videos and advertising awards. On the phone, sitting at a desk that sports both Mac and Windows laptops, he schmoozes and deals with everyone from Pixar executives to Jerry Seinfeld, concerning Apple's ad on the Final Episode. Last week he spent an extraordinary amount of time monitoring every last detail of the iMac intro; a typical executive decision was the elimination of a clarinet on a video soundtrack because it sounded ``too synthetic.''
Yes, his demeanor can be alarmingly frank--he can sometimes glance at an employee's hard-won accomplishment and sneer, ``This is a `D'.'' But critics who focus on the brutality of his assessments miss the point: Jobs's verbal boot camp can catalyze previously untapped greatness. ``There's too much emphasis on this style issue,'' says Larry Ellison. ``Steve is obsessed with quality, and that can make him uncompromising, but he gets results.'' Fifteen years after the fact, the members of the original Mac team still recall the sting of Jobs's criticism but look back on the experience as the peak of their careers. Those who produced the iMac seem to feel the same way. Would it not be reasonable to assume that those hard at work on the missing piece in Apple's product puzzle--a low-cost laptop due for delivery in the first half of 1999--might now be undergoing that same agony and ecstasy?
Of course, it would be a true distortion of reality to declare Apple totally out of the woods today. It is, after all, a company struggling to secure a sweet spot in an industry dominated by Microsoft. The key to Apple's long-term success is to maintain viability and profitability, hold on to its key markets and hope that whoever is running the company when the next big technological breakthrough arrives will be smarter than those Apple leaders who missed out on the Internet in the mid-1990s. Only then, when the ground shifts and Microsoft conceivably blinks (or is blinkered by the government), can the company truly regain its full former glory.
Meanwhile, Apple is a born-again business whose CEO is still a temporary employee. ``Over the next 12 months, it's very important for Steve to remain in a leadership role,'' says Fred Anderson. Meanwhile, the board of directors, utterly convinced that Steve Jobs is Apple's perfect leader now and forever (even Gil Amelio now says, ``He's doing a fine job''), has tried every imaginable ploy to get Jobs to commit. ``We tried to bear-hug him, to explain to him that his staying was vital,'' says Ed Woolard. But Jobs continues to resist. One day, in the midst of the pressure to stay, he woke up and figured however long ``interim'' meant simply wasn't his problem. He'd stay only as long as it felt good. ``I work hard and don't collect a salary,'' he says. ``I'm not costing the shareholders anything. That's the only commitment I can make.'' Considering the alternative, that's OK with the board. ``Every day we have him is a better day than it would be without him,'' says Bill Campbell.
Jobs takes pains to emphasize that Apple's revival is anything but a one-man show. Indeed, part of the Apple comeback is the revelation that there is still sufficient talent at Apple to produce startling products and--even more remarkably--to market and distribute them in a manner no way reminiscent of the Three Stooges. But for Chris Espinosa, the only remaining Apple employee from the '70s garage days, the resurgence of a computer-industry legend means something more personal. ``It's great to be able to go to parties now,'' he says, ``and not have to apologize for working at Apple.''
With Deborah Branscum in Cupertino