Apple Computer’s Sculley to Give Up CEO Position
John Sculley, the soft-drink marketeer turned high-tech executive who led Apple Computer through 10 years of explosive growth, said Friday he has stepped down as chief executive.
His replacement is Apple President and Chief Operating Officer Michael H. Spindler, who has been running the company on a day-to-day basis for some time. Sculley will remain chairman.
The change comes at a critical juncture for Apple, which is struggling to maintain its position in the cutthroat personal computer business even as it launches a series of risky but critically important initiatives in consumer electronics, multimedia information services and corporate computing.
Since its archetypal founding in 1977--in a Silicon Valley garage by two long-haired youths, Steve Wozniak and Steve Jobs--Apple has been a symbol of freewheeling, idealistic, high-tech creativity. The company virtually invented the personal computer industry with its Apple II and achieved a second major breakthrough with the Macintosh, so user-friendly it has developed almost a cult following.
Although Apple has lost much of its uniquely youthful culture, it is still the world’s No. 2 personal computer vendor and a leader in many critical new technologies, and it still wages irreverent war against the IBM-compatible standard that dominates the market.
Resented by many as an outsider, Sculley never did win the heart of Apple’s techies. Nevertheless, during his tenure Apple became a household name. The company launched a broad range of Macintosh computers and accessories, including its phenomenally successful Powerbook laptops, and grew in sales from less than $1 billion a year to more than $7 billion.
Analysts and Apple insiders Friday praised the promotion of Spindler, whom many say is the unsung hero largely responsible for Apple’s solid performance in recent years. Apple shares, which have fallen sharply in the past two weeks because of worries about poor earnings, closed at $41, off 25 cents.
Just as Sculley was brought on board in 1983 to implement a technology strategy defined by Apple co-founder and then-Chairman Jobs, Spindler’s job will be to execute a plan largely defined by Sculley. And Sculley said he will remain actively engaged as chairman, focusing on alliance-building and long-term technology strategy.
“This is not my swan song,” he said in a telephone interview. “I hope to be around for a while.”
Sculley said he had been considering stepping back from operations for some time, and that the timing of the move was driven in part by his desire to begin in July the six-week sabbatical to which all Apple employees are entitled every five years.
Yet several sources at the company painted a different picture of events, noting that the board meeting on Thursday--where the change was made--was scheduled at the last minute.
Sources who asked not to be named suggested that the change was a victory for those inside Apple who believe that the company must focus more tightly on its core business--namely, the Macintosh computer--and be less distracted by initiatives such as the much-hyped Newton hand-held computer.
Signs of turmoil at Apple have been mounting for several months. Two key executives responsible for Macintosh products left for competitor Dell Computer. Apple announced last week that earnings would be below forecast as a result of ongoing computer price wars. And some in the industry even question Apple’s long-term viability as PCs using Microsoft’s graphically oriented Windows operating system grow ever cheaper and more powerful.
Spindler is expected to deal forthrightly with these problems in a major restructuring that will include layoffs. Friday he would not directly confirm layoff plans but said the company would do “everything we have to do to maintain growth and profitability.”
In the long run, though, Apple’s success will still depend on the new directions launched by Sculley over the past two years. In the core computing business, Apple will be undertaking a risky transition to a new type of high-speed computer chip and a new type of advanced software system as part of its much-publicized alliance with International Business Machines.
The new chip, dubbed the Power PC, was originally designed by IBM and is being developed jointly by IBM, Apple and Motorola. A new generation of Power PC-based Macintosh computers will begin appearing next year, and although they will run existing Macintosh software, completely new software will be required to exploit the machines’ potential.
“They’re painting a picture of the transition from (the current Macintosh) to the Power PC that is very rosy,” said Stewart Alsop, editor of InfoWorld. “But it’s a transition that no company has pulled off without trouble. . . . It’s been done only three or four times in history.”
Indeed, there are signs already that the specter of this transition has slowed the development of new software for the Macintosh, and traditionally it has been software that drives the sale of PCs. Apple’s gains in market share over the past two years, driven by lower prices and the success of its Powerbook portables--have leveled off.
Apple’s other major initiatives--and the area that Sculley has devoted most of his time to over the past two years--are in an area the company groups under the heading of “personal interactive electronics.” Most prominent is the Newton, a hand-held personal organizer and communications device scheduled to go on sale in September.
Newton is just one piece of a broader thrust into the electronic information and communications business. New Apple information services will deliver news, stock quotes and other types of information to the Newton. Apple is also planning a broad presence in on-line information services that can be accessed by a personal computer.
And Apple hopes to be at the heart of the amorphous but exciting new businesses of multimedia and interactive television. Through Kaleida Labs, a joint venture with IBM, and other internal projects, Apple aims to provide the software for a whole new generation of consumer-oriented devices including computerized cable television boxes and machines that read information from compact disks.
“The strategy of trying to position Apple at the convergence (of computing, communications, publishing and entertainment) was the right strategy,” said Jonathan Seybold, head of a Malibu-based consulting firm. “They’re moving beyond the computer industry, which is what Apple has to do.”
In fact, Sculley has done much to define and even advance the development of a broad new range of products and services that are now being made possible by digital electronics. He coined the term “personal digital assistant,” or PDA, to define the Newton and other related devices, and made headlines by declaring that the technology would erase the boundaries between industries and someday create a $3-trillion industry.
It is in this area--developing alliances with publishing companies, cable TV firms, consumer electronics manufacturers, communications carriers and Hollywood studios--that he will now concentrate his efforts as chairman.
Sculley said Friday that he plans to set up an office in the New York area--he bought a house in Greenwich, Conn., last year--and divide his time between the East Coast and California.
While some analysts suggest that Sculley is simply on a graceful transition out of Apple, executives who know him believe that he remains driven by a desire to leave his own legacy and prove that he is true technology visionary.
“John desperately wants to leave Apple with something he was responsible for,” said Roger Heinen, who was head of Apple’s systems software division before leaving for Microsoft in January. “He’s been the carrier of the vision of Steve Jobs.”
Indeed, Apple today remains a company whose success is based almost entirely on Jobs’ Macintosh. Sculley, an architect by training who made his name as a sharp marketer and shrewd corporate powerbroker at PepsiCo, came aboard in 1983 to bring stable leadership to the company.
For a time he had an excellent partnership with Jobs, who had recruited him. But in 1985, during one of Apple’s periodic crises, he pushed Jobs out of the company in a bitter power struggle. Many in Silicon Valley have never forgiven him for that, and he remains an outsider in the high-tech fraternity.
Many techies, in fact, considered it an affront when Sculley anointed himself chief technology officer of Apple 1990. And there are those who believe that he did not even exploit the Macintosh correctly, keeping prices too high for too long and forgoing the opportunity to make the Mac a broad-based standard.
“Between 1987 and 1990, they had a once-in-a-lifetime opportunity to build market share, and instead they went for profit margins,” Seybold said. “They dug themselves a very big hole.”
Today, Apple has just 10% of the personal computer market, even though the Macintosh had about a seven-year lead over Microsoft’s Windows technology.
Still, Apple grew enormously under Sculley. Alsop, who probably knows Apple and Sculley as well as any analyst, credits Sculley with making a number of difficult but correct decisions--such as a 1990 restructuring--that were anything but obvious.
And Sculley said he is confident that the strategies he has set in motion will bear fruit. “The Power PC decision--and there were many other choices at the time--turns out to have been an incredibly smart one,” he said. “And we took some bets a couple of years ago that didn’t seem obvious at the time--that the real sweet spot was low-cost communications products with very good interface technology.”
Richard Shaffer, principal of Technologic Partners in New York, agrees that the Newton and related products represent “fundamentally sound strategies” aimed at the biggest new growth opportunities in computing.
But he notes that nothing has been delivered yet: “You can only sell videotapes for so long,” Shaffer said.
For much of the past two years, Sculley has indeed been popularizing concepts rather than focusing on products, executives and analysts say, remaining disengaged from day-to-day operations as he courted media moguls and Hollywood stars and generally became a celebrity.
Many expected Sculley, a Republican who was an early supporter of President Clinton, to take a job in Washington--especially after he made national television sitting next to Hillary Rodham Clinton during the State of the Union address.
But Sculley has consistently denied interest in a Washington job. He also says he took himself out of the running for chairman of IBM after the IBM board rejected his suggestion that the “good parts” of IBM be merged with Apple. Whatever his ultimate legacy at Apple, though, few doubt that if he wanted to leave the company where he made himself a household name, he would have plenty of options.
Times staff writer Martha Groves contributed to this story.
Profile: John Sculley
* Born: April 6, 1939
* Hometown: New York City
* Education: B.A. in architectural design from Brown University, 1961. MBA, Wharton School at the University of Pennsylvania, 1963. Honorary doctorates: University of Rhode Island, Johns Hopkins University, Babson College.
* Career highlights: Before joining Apple in 1983, he was president and chief executive of PepsiCo for five years, leading Pepsi to the top market share position in the United States. In 1991, he became chairman of the Computer Systems Policy Project, a group of CEOs who focus on policy issues relating to global high technology. He is also chairman of the National Center on Education and the Economy. In 1992, he spoke at President-elect Bill Clinton’s economic conference in Little Rock. His autobiography, “Odyssey,” was published in 1987.
* Family: Married to Carol Lee (Leezy) Sculley. Children are Meg, Laura and Jack.
* Quote: “This is not my swan song.”
* THE NEW CHIEF: A look at Michael H. Spindler, Apple’s new CEO. D1.
