TURMOIL AT APPLE : Down This Road Before : Amelio Knows Turnarounds, Though Some Say He’s Overrated
When Gilbert F. Amelio was anointed chief executive of ailing National Semiconductor Corp. five years ago, Silicon Valley pundits scoffed at the notion that this calm Rockwell executive could succeed where the company’s scrappy founder, semiconductor pioneer Charles Sporck, had failed.
Amelio quickly erased those doubts by engineering a remarkable turnaround at National.
Now with Amelio, 52, taking on the challenge of bringing Apple Computer Inc. back from the precipice, he is once again the subject of intense scrutiny. Many who have worked with him in the chip business say he may be the right man for the job.
“Gil is able to very quickly take command,” says Pat Weber, vice chairman of Texas Instruments, who has worked with Amelio on the board of the Semiconductor Industry Assn. “He gets to the heart of the issue and attacks the problem instead of the people.”
Weber says Amelio moved National from a manufacturer of commodity products to one that developed products oriented to specific markets and customers. “He’ll do the same with Apple.”
The turmoil at Apple, the third-largest personal computer maker, took a strange twist Friday with Amelio resigning from National’s board and telling people privately that he might take over at Apple for beleaguered Chief Executive Michael H. Spindler. It was not until late Friday that Apple announced that Amelio had the job and that Chairman A.C. “Mike” Markkula would become vice chairman.
Some analysts say Amelio’s challenges at Apple won’t be that different from his challenges at National.
“Apple is like National used to be,” says Dan Hutcheson, a chip analyst who has consulted for Amelio. “The company has good technology but it has been poorly marketed.”
But skeptics, including some former National executives, say Amelio gets too much credit for a turnaround that was begun by Sporck and fueled by strong industry growth.
“One thing I do know for sure, he likes to spend money,” says one Silicon Valley executive. “I really think that the guy has an unbelievable ego.”
Apple’s decision to appoint Amelio to its board last year sparked speculation that he might be considered as a replacement for Spindler.
As an Apple board member, Amelio has had a chance to study the problems that led to Apple’s $69-million loss for the most recent quarter.
But even Amelio’s biggest fans say the avid pilot, who flies his own Piper Cheyenne airplane for fun on weekends, will have trouble steering Apple through the turbulence it now faces.
Amelio will certainly face different conditions at Apple. When he came to National, he found the employees had lost their confidence and the company was failing financially.
Although Apple is financially on the ropes, many argue that it maintains the arrogance that has been its downfall. “You have prima donnas who think they don’t have to ship product on schedule and don’t have to listen to their customers,” Hutcheson said. “Amelio’s approach is to develop products that people want to buy.”
Perhaps Amelio’s greatest strength is the combination of a deep understanding of the industry and the technology and his knack for managing people.
Amelio, with a doctorate in solid-state physics from Georgia Tech, began his career as a scientist at Bell Laboratories. He put his name on 16 patents and was credited with co-inventing the revolutionary light-sensing device that is the critical component of video camcorders.
Amelio moved into management as head of the microprocessor division of Fairchild Camera & Instruments in 1971. But it was as head of Rockwell Communications’ semiconductor division starting in 1983 that he showed his turnaround skills. The division was a general supplier of chips for Rockwell products. But Amelio identified its core technology in communications and turned the company into a major supplier of components for modems and other communications equipment.
When he was appointed chief executive of National Semiconductor in May 1991, he faced a bigger challenge. National, best known as a low-cost manufacturer of memory chips, was watching its markets being overrun by aggressive Japanese manufacturers. It had lost money in eight of the previous 11 years and there were serious questions about its survival.
Amelio identified analog chips used for networking and other communications in computers and telecommunications equipment as the company’s core strength and began paring away other operations.
But Amelio also had to deal with a company that was thoroughly demoralized. Amelio began to change that situation by holding meetings throughout the company, most of which he attended, to outline a vision.
“He understood that unless people knew what the vision was and unless they subscribed to it, change wouldn’t take place,” says William Simon, who co-wrote with Amelio a book titled “Profit From Experience.”
In the book, Amelio calls his approach “transformation management” to distinguish it from the turnaround “pirate who sails away, leaving a floundering crew on a plundered ship heading toward disastrous storms.”
A boom in the semiconductor business helped speed National’s recovery.
In the fiscal year ended in May 1991, the company lost $151 million. In the six months ended Nov. 26, 1995, National earned $153 million on sales of $1.4 billion. The company’s stock was at $17, down from a high of $32 last fall, but still four times the 1991 low.
Despite critics who say he has taken too much credit for National’s turnaround, respect for Amelio is strong inside the company.
“Gil gave this company its pride back,” says Ellen Hancock, National’s chief operating officer. “This company has a vision and it has a language that everyone uses to talk about that vision, and that came from Gil.”
More Apple Coverage:
* Apple ousts chief executive. A1
* Stocks traded as Apple was mum. D3
* Spindler: What went wrong? D3
* Markkula is kicked downstairs. D3
