Steve_Jobs_The_Exclusive_Biography

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insisted on pricing them at $22, which would give the company more money if the offering was a success. It was, beyond even his wildest hopes. It exceeded Netscape as the biggest IPO of the year. In the first half hour, the stock shot up to $45, and trading had to be delayed because there were too many buy orders. It then went up even further, to $49, before settling back to close the day at $39.

Earlier that year Jobs had been hoping to find a buyer for Pixar that would let him merely recoup the $50 million he had put in. By the end of the day the shares he had retained—80% of the company—were worth more than twenty times that, an astonishing $1.2 billion. That was about five times what he’d made when Apple went public in 1980. But Jobs told John Markoff of the New York Times that the money did not mean much to him. “There’s no yacht in my future,” he said. “I’ve never done this for the money.”

The successful IPO meant that Pixar would no longer have to be dependent on Disney to finance its movies. That was just the leverage Jobs wanted. “Because we could now fund half the cost of our movies, I could demand half the profits,” he recalled. “But more important, I wanted co-branding. These were to be Pixar as well as Disney movies.”

Jobs flew down to have lunch with Eisner, who was stunned at his audacity. They had a three-picture deal, and Pixar had made only one. Each side had its own nuclear weapons. After an acrimonious split with Eisner, Katzenberg had left Disney and become a cofounder, with Steven Spielberg and David Geffen, of DreamWorks SKG. If Eisner didn’t agree to a new deal with Pixar, Jobs said, then Pixar would go to another studio, such as Katzenberg’s, once the three-picture deal was done. In Eisner’s hand was the threat that Disney could, if that happened, make its own sequels to

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Toy Story, using Woody and Buzz and all of the characters that Lasseter had created. “That would have been like molesting our children,” Jobs later recalled. “John started crying when he considered that possibility.”

So they hammered out a new arrangement. Eisner agreed to let Pixar put up half the money for future films and in return take half of the profits. “He didn’t think we could have many hits, so he thought he was saving himself some money,” said Jobs. “Ultimately that was great for us, because Pixar would have ten blockbusters in a row.” They also agreed on cobranding, though that took a lot of haggling to define. “I took the position that it’s a Disney movie, but eventually I relented,” Eisner recalled. “We start negotiating how big the letters in ‘Disney’ are going to be, how big is ‘Pixar’ going to be, just like four-year-olds.” But by the beginning of 1997 they had a deal, for five films over the course of ten years, and even parted as friends, at least for the time being. “Eisner was reasonable and fair to me then,” Jobs later said. “But eventually, over the course of a decade, I came to the conclusion that he was a dark man.”

In a letter to Pixar shareholders, Jobs explained that winning the right to have equal branding with Disney on all the movies, as well as advertising and toys, was the most important aspect of the deal. “We want Pixar to grow into a brand that embodies the same level of trust as the Disney brand,” he wrote. “But in order for Pixar to earn this trust, consumers must know that Pixar is creating the films.” Jobs was known during his career for creating great products. But just as significant was his ability to create great companies with valuable brands. And he created two of the best of his era: Apple and Pixar.

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CHAPTER TWENTY-THREE

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THE SECOND COMING

What Rough Beast, Its Hour Come Round at

Last . . .

Things Fall Apart

When Jobs unveiled the NeXT computer in 1988, there was a burst of excitement. That fizzled when the computer finally went on sale the following year. Jobs’s ability to dazzle, intimidate, and spin the press began to fail him, and there was a series of stories on the company’s woes. “NeXT is incompatible with other computers at a time when the industry is moving toward interchangeable systems,” Bart Ziegler of Associated Press reported. “Because relatively little software exists to run on NeXT, it has a hard time attracting customers.”

NeXT tried to reposition itself as the leader in a new category, personal workstations, for people who wanted the power of a workstation and the friendliness of a personal computer. But those customers were by now buying them from fast-growing Sun Microsystems. Revenues for NeXT in 1990 were $28 million; Sun made $2.5 billion that year. IBM abandoned its deal to license the NeXT software, so Jobs was forced to do something against his nature: Despite his ingrained belief that hardware and software should be integrally linked, he agreed in January 1992 to license the NeXTSTEP operating system to run on other computers.

One surprising defender of Jobs was Jean-Louis Gassée, who had bumped elbows with Jobs when he replaced him at Apple and subsequently been ousted himself. He wrote an article extolling the creativity of NeXT products. “NeXT might not be Apple,” Gassée

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argued, “but Steve is still Steve.” A few days later his wife answered a knock on the door and went running upstairs to tell him that Jobs was standing there. He thanked Gassée for the article and invited him to an event where Intel’s Andy Grove would join Jobs in announcing that NeXTSTEP would be ported to the IBM/Intel platform. “I sat next to Steve’s father, Paul Jobs, a movingly dignified individual,” Gassée recalled. “He raised a difficult son, but he was proud and happy to see him onstage with Andy Grove.”

A year later Jobs took the inevitable subsequent step: He gave up making the hardware altogether. This was a painful decision, just as it had been when he gave up making hardware at Pixar. He cared about all aspects of his products, but the hardware was a particular passion. He was energized by great design, obsessed over manufacturing details, and would spend hours watching his robots make his perfect machines. But now he had to lay off more than half his workforce, sell his beloved factory to Canon (which auctioned off the fancy furniture), and satisfy himself with a company that tried to license an operating system to manufacturers of uninspired machines.

By the mid-1990s Jobs was finding some pleasure in his new family life and his astonishing triumph in the movie business, but he despaired about the personal computer industry. “Innovation has virtually ceased,” he told Gary Wolf of Wired at the end of 1995. “Microsoft dominates with very little innovation. Apple lost. The desktop market has entered the dark ages.”

He was also gloomy in an interview with Tony Perkins and the editors of Red Herring. First, he displayed the “Bad Steve” side of his personality. Soon after Perkins and his colleagues arrived, Jobs slipped out the back door “for a walk,” and he didn’t return for forty-five minutes. When the magazine’s photographer

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began taking pictures, he snapped at her sarcastically and made her stop. Perkins later noted, “Manipulation, selfishness, or downright rudeness, we couldn’t figure out the motivation behind his madness.” When he finally settled down for the interview, he said that even the advent of the web would do little to stop Microsoft’s domination. “Windows has won,” he said. “It beat the Mac, unfortunately, it beat UNIX, it beat OS/2. An inferior product won.”

Apple Falling

For a few years after Jobs was ousted, Apple was able to coast comfortably with a high profit margin based on its temporary dominance in desktop publishing. Feeling like a genius back in 1987, John Sculley had made a series of proclamations that nowadays sound embarrassing. Jobs wanted Apple “to become a wonderful consumer products company,” Sculley wrote. “This was a lunatic plan. . . . Apple would never be a consumer products company. . . . We couldn’t bend reality to all our dreams of changing the world. . . . High tech could not be designed and sold as a consumer product.”

Jobs was appalled, and he became angry and contemptuous as Sculley presided over a steady decline in market share for Apple in the early 1990s. “Sculley destroyed Apple by bringing in corrupt people and corrupt values,” Jobs later lamented. “They cared about making money—for themselves mainly, and also for Apple—rather than making great products.” He felt that Sculley’s drive for profits came at the expense of gaining market share. “Macintosh lost to Microsoft because Sculley insisted on milking all the profits he could get rather than improving the product and making it affordable.” As a result, the profits eventually disappeared.

It had taken Microsoft a few years to replicate

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Macintosh’s graphical user interface, but by 1990 it had come out with Windows 3.0, which began the company’s march to dominance in the desktop market. Windows 95, which was released in 1995, became the most successful operating system ever, and Macintosh sales began to collapse. “Microsoft simply ripped off what other people did,” Jobs later said. “Apple deserved it. After I left, it didn’t invent anything new. The Mac hardly improved. It was a sitting duck for Microsoft.”

His frustration with Apple was evident when he gave a talk to a Stanford Business School club at the home of a student, who asked him to sign a Macintosh keyboard. Jobs agreed to do so if he could remove the keys that had been added to the Mac after he left. He pulled out his car keys and pried off the four arrow cursor keys, which he had once banned, as well as the top row of F1, F2, F3 . . . function keys. “I’m changing the world one keyboard at a time,” he deadpanned. Then he signed the mutilated keyboard.

During his 1995 Christmas vacation in Kona Village, Hawaii, Jobs went walking along the beach with his friend Larry Ellison, the irrepressible Oracle chairman. They discussed making a takeover bid for Apple and restoring Jobs as its head. Ellison said he could line up $3 billion in financing: “I will buy Apple, you will get 25% of it right away for being CEO, and we can restore it to its past glory.” But Jobs demurred. “I decided I’m not a hostile-takeover kind of guy,” he explained. “If they had asked me to come back, it might have been different.”

By 1996 Apple’s share of the market had fallen to 4% from a high of 16% in the late 1980s. Michael Spindler, the German-born chief of Apple’s European operations who had replaced Sculley as CEO in 1993, tried to sell the company to Sun, IBM, and HewlettPackard. That failed, and he was ousted in February

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1996 and replaced by Gil Amelio, a research engineer who was CEO of National Semiconductor. During his first year the company lost $1 billion, and the stock price, which had been $70 in 1991, fell to $14, even as the tech bubble was pushing other stocks into the stratosphere.

Amelio was not a fan of Jobs. Their first meeting had been in 1994, just after Amelio was elected to the Apple board. Jobs had called him and announced, “I want to come over and see you.” Amelio invited him over to his office at National Semiconductor, and he later recalled watching through the glass wall of his office as Jobs arrived. He looked “rather like a boxer, aggressive and elusively graceful, or like an elegant jungle cat ready to spring at its prey.” After a few minutes of pleasantries—far more than Jobs usually engaged in—he abruptly announced the reason for his visit. He wanted Amelio to help him return to Apple as the CEO. “There’s only one person who can rally the Apple troops,” Jobs said, “only one person who can straighten out the company.” The Macintosh era had passed, Jobs argued, and it was now time for Apple to create something new that was just as innovative.

“If the Mac is dead, what’s going to replace it?” Amelio asked. Jobs’s reply didn’t impress him. “Steve didn’t seem to have a clear answer,” Amelio later said. “He seemed to have a set of one-liners.” Amelio felt he was witnessing Jobs’s reality distortion field and was proud to be immune to it. He shooed Jobs unceremoniously out of his office.

By the summer of 1996 Amelio realized that he had a serious problem. Apple was pinning its hopes on creating a new operating system, called Copland, but Amelio had discovered soon after becoming CEO that it was a bloated piece of vaporware that would not solve Apple’s needs for better networking and memory

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protection, nor would it be ready to ship as scheduled in 1997. He publicly promised that he would quickly find an alternative. His problem was that he didn’t have one.

So Apple needed a partner, one that could make a stable operating system, preferably one that was UNIXlike and had an object-oriented application layer. There was one company that could obviously supply such software—NeXT—but it would take a while for Apple to focus on it.

Apple first homed in on a company that had been started by Jean-Louis Gassée, called Be. Gassée began negotiating the sale of Be to Apple, but in August 1996 he overplayed his hand at a meeting with Amelio in Hawaii. He said he wanted to bring his fifty-person team to Apple, and he asked for 15% of the company, worth about $500 million. Amelio was stunned. Apple calculated that Be was worth about $50 million. After a few offers and counteroffers, Gassée refused to budge from demanding at least $275 million. He thought that Apple had no alternatives. It got back to Amelio that Gassée said, “I’ve got them by the balls, and I’m going to squeeze until it hurts.” This did not please Amelio.

Apple’s chief technology officer, Ellen Hancock, argued for going with Sun’s UNIX-based Solaris operating system, even though it did not yet have a friendly user interface. Amelio began to favor using, of all things, Microsoft’s Windows NT, which he felt could be rejiggered on the surface to look and feel just like a Mac while being compatible with the wide range of software available to Windows users. Bill Gates, eager to make a deal, began personally calling Amelio.

There was, of course, one other option. Two years earlier Macworld magazine columnist (and former Apple software evangelist) Guy Kawasaki had published a parody press release joking that Apple was buying NeXT and making Jobs its CEO. In the spoof