Cringely on Apple

Ernest Prabhakar (
Mon, 20 Oct 97 17:57:53 -0700

An interesting article from Cringely. I'd estimate he's about =
50% correct, based on what I know. Though of course he may know =
more than I do.

For those who are keeping track, Rohit was up here for Seth's =
party, and we said hi to the Bob yesterday, but didn't talk about =
anything relevant to Apple.

One interesting Steve quote (from me, not Bob):
"The question is no longer whether Apple can be saved. I'm sure =
it can be saved.
The question is whether it can be great again. I believe that it =
can." -- Steve Jobs

-- Ernie P.

October 15, 1997
PBS Online I, Cringely
"I think, therefore, I think." Volume 1.28
I, Cringely

Warp 12 and accelerating: How Steve Jobs is determined to save =
Apple or
kill it, whichever comes first
by Robert X. Cringely


There is this wonderful "Star Trek" episode from the old days, =
Captain Kirk was slim. A gang of Romulans was humiliating the =
with super high-speed strafing runs and massive attacks that =
the bad guys had invented some dreadful new technologies =
threatening the
entire Federation. Jim postured, Scotty fretted and Bones =
complained as
Spock pored over the all-important energy consumption curves for =
Romulan ship. It made no sense. Unable to decipher the Romulan
technology, Kirk instead considered Romulan psychology and decided =
maybe the mystery ship wasn't fast, but reckless. Sure enough, it =
was a
Romulan suicide mission and the crew could go so fast and expend =
so many
weapons because they were never going home.

Welcome to Romulus. Welcome to Apple Computer 1998.

Apple Computer has been making a very public search for a new CEO =
replace interim CEO Steve Jobs. Here's what they have to offer the =
guy -- a big salary and stock options, one of the best-known brand =
in the world, more than a billion in cash, customers who are =
despite many years of abuse, a brilliant if dispirited engineering
staff, and what looks like a suicide plan to save the company.
Obviously, it's this last point that has kept Apple from finding a =
boss. Steve Jobs is looking for a new Apple CEO while at the same =
requiring that CEO to accept the Jobs vision of Apple's future. He =
a super-tough follower, a lapdog in body armor. He wants the =
But knowing Steve, he just might get what he wants.

Even Steve Jobs would say that a CEO worth having should be =
allowed to
run the company as they like until results show it isn't working. =
But in
this case, Steve is absolutely certain what path Apple should =
The strategy seems so obvious to him that his definition of "CEO =
having" has become synonymous with "candidate who recognizes the =
of my plan." Apple will just keep looking until a candidate with =
right qualifications agrees to do as he or she is told.

And here's the plan, pulled together from new and old sources, =
Steve's own words, and from 20 years of watching the guy operate. =
Jobs plan has three goals, three product lines and three =
principles. The goals are profits, margins and market share. The =
lines are servers, high-end workstations and low-end computer-like
devices. The enabling technologies are Rhapsody, new =
and a different approach to both manufacturing and marketing. Add =
this the tenth component, which is a determination to destroy =
anyone who
gets in the way, no matter what the cost.

This is clear: Apple is in a downward spiral that cannot be =
stopped by
anything less than a total effort, and to Steve Jobs "total =
means committing resources to such an extent that failure means
bankruptcy. And why not? The guy owns ONE SHARE of Apple stock. =
easy for him to order human wave attacks since neither his =
resources nor
his ego are on the line. If the Jobs plan fails, it will be John
Sculley's fault, or Mike Spindler's, or Gil Amelio's. It's easy to =
Jobs in this area, but the truth is he's correct. Betting the farm =
all Apple can do at this point and Jobs is right to push it.

The ultimate objective is profits, something Apple has seen little =
of in
a long time. Profits are achieved by increasing profit margins and
market share at the same time. So anything that drags down profit
margins has to go immediately. This means that Apple will be =
inventory, eliminating products and entire product lines (Jobs =
says 70
percent of the product list will go), and eliminating anything =
negatively affects the cost of sales, which mainly means dealers.

Dell Computer is an important model for Apple. Dell is bigger than =
and has grown so entirely by selling its computers directly, =
distributors, dealers and mail order companies. Apple will do the =
starting right after Christmas. That's when the direct sales =
of Power Computing comes inside Apple for good. Dell is also =
selling $3
million per day over the Internet. So will Apple. Cutting out =
and distributors will allow Apple to make higher profit margins =
even if
it has to cut prices to gain market share. The dealers lose, but =
will lose no sleep over that.

Remember that Apple competes not only with Compaq and Dell, but =
with Microsoft, and the biggest opportunity Jobs sees is in =
with Microsoft's Windows NT operating system. Compared to a Mac, =
NT is a
bitch to set up and administer. There are hundreds of thousands of
network administrators who would exchange their NT or Netware =
server for
Apple if it provided the same performance and features as =
Microsoft but
was easier to use. Microsoft's NT business is now worth a billion =
and Jobs sees it as ripe for picking. And his implement of choice =
picking NT is Rhapsody, Apple's next-generation operating system.
Rhapsody is the Mac interface on the Mach microkernel with very =
networking support. It really is what NT should be. Look for =
Rhapsody to
appear priced to compete directly with NT, not Win95.

While a $1 billion market is big, it isn't big enough to save =
Apple. But
$1 billion is just the software component. Like Sun Microsystems, =
sells Unix software, Apple is also in the hardware business and =
probably count on selling four dollars worth of hardware along =
every dollar of software. That's a $5 billion market -- half of =
Apple needs to get back in the game.

Alas, there are two problems with this server strategy and they =
are both
spelled I-N-T-E-L. The market has stupidly decided that Intel
microprocessors are better than Apple's preferred PowerPCs, so =
will be at a disadvantage trying to sell PowerPC machines into the =
market. This is what's right now killing Silicon Graphics, which =
finding rough going pitting its MIPS processors against Intel. =
still for Apple, there will be an Intel version of Rhapsody. One
argument says that earning the 90 percent profit margin on a copy =
Rhapsody for Intel is better than nothing, but that's not the way =
tends to see things. For awhile, he was determined to kill =
Intel version, then changed his mind when he decided instead that =
would build its own Intel boxes.

Yes, Apple will build computers with Intel processors. Their aim, =
as in
all of these products, is for the high end. Based on Intel's new =
chip, the new Apple machine will have PCI slots, Universal Serial =
Fast Ethernet, IEEE 1394 FireWire, IRDA, DIMM sockets, but no ISA =
and no backwards compatibility to DOS. So this is NOT a PC in the
strictest sense, since it will only run Rhapsody, but not System 8 =
Windows NT. It will run Mac applications inside Rhapsody. And =
Apple is both the author of Rhapsody and the designer of this =
Jobs believes that more customers will want to buy their Rhapsody
wrapped in Apple hardware than not. This will definitely be the =
Rhapsody machine on the planet, which should shiver some timbers =
just at Compaq and Dell, but also at Sun and SGI. Jobs would be =
to kill SGI outright.

Oh, Apple will continue to make computers with PowerPCs, too. And =
about Microsoft and it's well-publicized $150 million investment =
Apple? That means nothing to Steve Jobs.

The rest of Apple's strategy lies in computer-like devices. Jobs =
for good reason the eMate notebook, which runs the Newton OS. =
We'll see
much more of these simple machines that are rugged and have great
battery life. Apple will also introduce network computers, and not =
because Larry Ellison in on the board, but because to do so makes =
sense. But Apple won't be building these devices. Here's an =
distinction from the old days: just as many chip companies no =
manufacture their own chips, it makes little sense for many PC =
to build their own PCs. Apple can make higher profit margins =
buying its
NCs and other little devices from contract manufacturers than by
building them in Apple factories. The truth is that Apple doesn't =
know how to build things cheaply, so they will concentrate their =
manufacturing resources on expensive devices where the =
cost is less important.

So that's the plan: Screw the dealers, sell direct, pit Rhapsody =
NT, build Intel boxes, contract out the cheap stuff, and throw =
away the
rest of the company. It just might work with the right leadership =
and no

Steve Jobs's father-in-law is Ray Smith, CEO of Bell =
Atlantic/Nynex, the
biggest of the Baby Bells. A couple years ago Ray sent a group of =
Atlantic engineers and managers to California to meet with Steve. =
three hours, Steve screamed at them, telling the Bellheads their =
was terrible. At noon he sent their catered lunch away, deciding =
Easterners didn't deserve to eat. Remember these weren't NeXT =
or Pixar employees, but just employees of Steve's father-in-law.

If what it takes to save Apple is a Romulan CEO, Steve Jobs is as
Romulan as they come.=