The End of Innocence: What Happened After Apple Fired Steve Jobs

It seems unthinkable today — but more than two decades ago, when personal computers were still new and everybody listened to music on a Walkman, Steve Jobs was cast out of Apple. The year was 1985. IBM and Microsoft dominated the world of computing. The revolutionary Macintosh, launched with such fanfare just a year earlier, appeared to be foundering. And Jobs, the guiding force at Apple from the beginning, seemed not just expendable but a threat to the company he’d built. In West of Eden — a national best-seller when it was first published in 1989, in 1989, now available from Amazon in an updated edition — Wired contributing editor Frank Rose tells how it went down. In part one of this two-part essay, first excerpted from the introduction to the new edition in 2009, Rose recalls the downward spiral Apple fell into after Jobs was dismissed.

Apple has a lot of great qualities, but openness has never been one of them. In January 2009, when it became obvious that its CEO was seriously ill, that lack of candor spawned a crisis. Less than five years earlier, Steve Jobs had undergone surgery for a rare form of pancreatic cancer. He’d recovered well, but now his increasingly gaunt appearance was fueling the Wall Street rumor mill.

Apple’s stock, which a year earlier had been trading at nearly $200 a share, was bouncing up and down in the $100 range. Reporters were calling MDs to check the credibility of the latest corporate health bulletin. Legal experts were publicly debating the board’s responsibility. Even the SEC, newly risen from a long, deep slumber, was said to be investigating.

Over the past decade, Apple has become one of America’s greatest corporate success stories — and Jobs, who co-founded the company back in 1976 and been expelled from it less than a decade later, has been hailed as the man who engineered its triumph.

At a time when one technology giant after another — Dell, Microsoft, Motorola, Sony, Sun, Yahoo — has stumbled, Apple seems to be doing everything right.

It’s not just that the company is making money, or that it’s just re-entered the Fortune 100, or that it’s kept growing at 40 per cent per year even as it hit $33 billion in sales — though in the teeth of the worst recession since at least the early 1980s, those two accomplishments alone would be remarkable. It’s that Apple has become a cultural icon. Apple sells us lustrous white laptops and impossibly slim music players and software that transforms bedrooms into recording studios and cell phones that function as fabulous electronic toys and wireless hubs — wireless hubs! — that look like desktop flying saucers.

Apple has confronted first the music labels and then the mobile phone carriers, forcing change on two of the world’s most monopolistic and hidebound industries. Apple papers our cities with dancing silhouettes and exhorts us in banners to “think different.” Apple is not just a source of profits; it’s a source of joy.

But spin the time machine back a quarter-century. In the mid-1980s, when many of Apple’s current enthusiasts had yet to be born, the man now credited with all this was ejected from his company in the power struggle that West of Eden recounts. Defrocked and disillusioned, the young Jobs—he’d turned 30 just a few months earlier — had to watch in exile as his expulsion was celebrated on Wall
Street and in the media.

Yes, people agreed, Jobs was brilliant, but he was far too reckless and impulsive to suit the Fortune 500 corporation Apple had become. He was an entrepreneur, and sooner or later the entrepreneurs had to go so their companies could settle down to business. John Sculley, the suave
East Coast marketing executive Jobs had recruited from PepsiCo less than three years before, took for himself the mantle of Apple’s visionary leader. Nearly everyone pretended not to notice how badly it fit.

For awhile, all went well. Sales were up. The new regime got great press. Macintosh, the revolutionary personal computer Jobs and his team had built and launched with such fanfare in 1984, regained its momentum. Sculley penned a best-selling book and took on celebrity status. He even invented a new techie term: PDA, for personal digital assistant.

But there were problems. In 1988, Apple jacked up its prices and Macs suddenly stopped selling. The product line proliferated willy-nilly, confusing customers and blurring the image. And when
Sculley’s much-heralded PDA, the Newton, finally appeared in 1993, its wretched performance and dismal sales made it the Edsel of Silicon Valley. Sculley was soon out.

His replacement, a hard-charging, German-born Apple executive named Michael Spindler, lasted less than three years. In February 1996, with losses piling up and market share plummeting, the board brought in Gil Amelio, the CEO of National Semiconductor, to run the company.

Amelio had a reputation as a turnaround expert, but essentially he was just a numbers guy, devoid even of the pretense of charisma. Under his watch, Apple appeared to fall into a death spiral. By early 1997 it had just 3.3 per cent of the personal computer market and its stock was down to $14 a share. The venture that was supposed to change the world seemingly had but one hope left: to be a takeover target.

“When a company has as strong a brand and consumer franchise as Apple, it is very hard to destroy it,” technology analyst Richard Shaffer told the New York Times. “But it can be done.” And from 1985 to 1997, it very nearly was.

Almost inadvertently, however, Amelio made one smart move: He bought NeXT, the computer company Jobs had started after Sculley showed him the door. NeXT was never terribly successful: Its hardware was gorgeous but far too expensive for the education market it was intended for, and by now it was focusing exclusively on software. But functioning software was something Amelio desperately needed, and for $425 million he got it—and Jobs in the bargain.

Seven months later, in July 1997, Amelio was sacked. The topmost exec left standing was the CFO, who announced that the board would conduct a search for a new chief executive, that Jobs would serve as an advisor to the board, and that no one should even think about the company becoming profitable again any time soon. At this point, Apple was running on momentum alone; the idea that anyone could turn it around seemed almost absurd.

Part II: What would Steve do?

See Also:

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• Forbes Uncovers Jobs’ Deposition From Backdating Scandal
• Steve Jobs: Health Problems ‘More Complex Than I Originally
• Steve Jobs is Not — Repeat, Not — Dead
• ‘Citizen Journalist’ Could Face Prison for Fake Jobs Story