Angry Apple Won’t Invest in Chairman’s Venture
Apple Computer, upset that Chairman Steven Jobs has raided Apple of at least five executives for a mysterious new computer venture, doesn’t intend to invest in Jobs’ new company, Apple officials indicated Monday.
The raid has also raised questions about Jobs’ future as chairman of Apple, the company he co-founded eight years ago, because of the conflict of interest created by his role in luring talent away from the company that he heads.
Jobs was removed as a manager in a shake-up at the company earlier this year but remains chairman of the board and its largest shareholder with about 9% of the company’s outstanding shares.
Apple confirmed Monday that Jobs notified the board last Thursday that he was forming an unspecified new venture in the field of education. Apple said Jobs told them at the time that the new product wouldn’t compete with Apple and that he wouldn’t take Apple employees with him.
But Friday, the company said, Jobs presented a list of five veteran Apple employees--including engineer Bud Tribble, an original developer of Apple’s Macintosh computer--who were resigning to join his new company. The five resigned that day, Apple said.
There were rumors that two more Apple employees quit Monday to join Jobs, although Apple denied that that had happened.
Jobs and the five whose resignations have been confirmed did not return phone calls placed to their Apple offices Monday.
Jobs’ decision to strike out on his own confirmed suspicions raised during the summer, when he sold 1.35 million shares of Apple stock valued at $18 million to $20 million.
But just what he has in mind remains closely guarded secret. Apple officials said that Jobs told the board little about his new product except that it was aimed at education markets.
Another of the employees leaving to join Jobs is Dan’l Lewin, who has headed Apple’s marketing program for schools.
“They’re all computer jocks. It could be almost anything electronic,” said Richard Matlack, president of Infocorp, a Cupertino, Calif.-based market research firm. “The interesting part is the conflict-of-interest situation. You can stay chairman of a company and run another one if it’s not in competition, but when you start stripping away Apple’s key resources, I don’t know.”
The picture is further muddled by Jobs’ continued ownership of the largest single block of Apple stock--about 5.3 million shares of the 60.9 million shares outstanding. Jobs, 30, is prohibited from selling any more stock until Jan. 1 under insider-trading rules, according to editor Michael Murphy of the California Technology Stock Letter in San Francisco.
Jobs’ new venture seems to further his estrangement from Apple and John Sculley, the president that he recruited from Pepsico to bring marketing expertise and professional management to the fast-growing computer company. Jobs was ousted from day-to-day operations in May after he opposed cutbacks that Sculley thought were needed in light of the severe slump in the personal computer industry. Two weeks after Jobs’ ouster, Apple laid off 1,200 employees and shut down three of its six plants.
An Apple official, who asked to remain anonymous, said the board initially voiced interest in investing in Jobs’ new venture. But when the resignations occurred the next day, there was a “need to reassess” because he recruited the employees “while he was chairman of the board.” This official said that Apple now has no intention of making such an investment.
Despite Jobs’ status, he didn’t show much clout with the board during the acrimonious power struggle in May.
Analyst Murphy, a close follower and sometime stockholder of Apple, said he believes that, so far, Jobs is bankrolling the new venture himself. “I don’t think he has talked to venture capitalists at all,” Murphy said.
Analyst Jan Lewis, president of the Palo Alto Research Group, another market research firm, said the real problem for Apple is “how many more people he’s going to end up taking.”