Apple Ousts 2 Top Executives, Hires New Chief
Reeling from losses, executive defections, and persistent reports that it is about to be sold, Apple Computer on Friday ousted Chief Executive Michael Spindler and replaced him with veteran Silicon Valley executive Gilbert F. Amelio.
The appointment of Amelio, until Friday chairman and chief executive of National Semiconductor, marks a new chapter for a company that virtually invented the personal computer and came to symbolize the vibrant entrepreneurial culture of Silicon Valley--only to fall victim to its own arrogance and mismanagement.
The executive shake-up, in which Amelio--already an Apple board member--will also replace A.C. “Mike” Markkula as Apple’s chairman, came against a backdrop of intense speculation about a possible sale of the company to high-flying computer maker Sun Microsystems. Sources said Apple late last week decided not to accept what it considered a low-ball offer from Sun.
The naming of a new chairman and chief executive indicates that a sale will not take place soon, although some analysts believe it remains likely in the long run.
Apple’s disclosure of the management changes capped a day of bizarre developments, with Apple infuriating Wall Street by refusing any comment on newspaper reports that Amelio--who announced in the morning that he was leaving National Semiconductor--had been tapped to replace Spindler. Sources say negotiations continued through the day over Amelio’s demand that he get not only Spindler’s job, but Markkula’s too.
The high drama that accompanied the changing of the guard was all too fitting for a company whose technological brilliance and marketing prowess has always been accompanied by management turmoil. Co-founder Steve Jobs, whose flair for creating great products was matched only by an unwavering belief that his way was the only way, was forced out in 1985 by his hand-picked deputy, Pepsico marketer John Sculley.
Sculley, in turn, was given the ax abruptly in 1993 when the board judged that he had started caring too much about his own image and not enough about Apple’s day-to-day operations. In an echo of Apple’s strange handling of the transition Friday, the board initially insisted that Sculley’s departure was amicable and that he would stay on as chairman, but neither of those things turned out to be true.
Spindler, who was said to be cleaning out his office Friday even as he remained officially on the job, has been the target of blistering criticism in recent months from industry analysts and shareholders who say he has failed to develop a viable strategy for the computer maker.
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Many greeted the news of Amelio’s appointment favorably. “At this point any change would be good news,” said Pieter Hartsook, editor of an industry newsletter. “But Amelio seems to be a particularly good fit. When you look at the job he did at National [Semiconductor], he’ll bring focus but he won’t have Apple in a siege mentality of just cutting, cutting and cutting without any concern about future growth.”
While many of Apple’s troubles can be traced to decisions made by Sculley and the dysfunctional culture instilled by Jobs, analysts believe that Spindler--an intelligent but mysterious man who often has trouble communicating his vision--has exacerbated the problems. The company has suffered an exodus of high-level executives over the past year and posted a $69-million loss for its most recent quarter--even though the industry as a whole enjoyed strong growth.
Throughout 1995, Apple was unable to accurately forecast demand for its flagship Macintosh computer--sometimes building too many machines and sometimes not enough--and failed to expand its 8% share of the worldwide computer market.
The Macintosh retains a large and loyal following. But with new versions of Microsoft’s Windows shrinking the once-vast difference between the Macintosh and IBM-compatible PCs, Apple has been forced to drop prices dramatically to compete. And unlike competitors who do little more than package software from Microsoft and chips from Intel, Apple develops its own technology and thus bears the heavy burden of continually improving both.
Amelio’s first task will be to bring some order to a company that has ground to a virtual standstill in recent weeks. Apple said two weeks ago that it would lay off 1,300 employees--about 8% of its work force--and that more cutbacks were to come. A Wall Street Journal report last week said a sale of Apple to Sun was all but completed.
“The noise level has gotten to be very distracting,” said one mid-level manager. “The only way to get things done is if you have your own personal network because all the systems have broken down.”
While he is credited with executing a dramatic turnaround at National Semiconductor, Amelio will face a far more difficult task at Apple. Although the company still has great technology--and the growth of the Internet computer network presents an enormous opportunity--Apple has been losing customers even in core markets such as publishing and education.
Amelio, 52, must also bring leadership to a notoriously undisciplined work force. Apple engineers have been known to tinker away on projects long after they have been declared dead by management. But if he’s too heavy-handed, the new chairman risks driving away those talented engineers who have not left already.
Markkula, 54, a co-founder of Apple who early on served as the adult supervision for the youthful company, has long been the key behind-the-scenes player at the company. He will remain as vice chairman of the Apple board, though he has clearly agreed to cede all operational authority to Amelio.
Spindler, 52, will leave the company entirely. His severance package includes a requirement that Apple pay to relocate him and his family to France, where he lived when he was head of Apple Europe.
Despite the chaos of his final days, Spindler can claim some accomplishments. Most important, he successfully managed the transition of the entire Macintosh product line to a new microprocessor, known as the PowerPC. Such a change is considered extremely difficult and risky for any computer maker.
Spindler also belatedly launched the first licensing program that allows other computer vendors to use Apple software to build clones of the Macintosh. While the licensing effort has been slow--hindered, in some cases, by internal dissension--it could well play an important part in Apple’s future.
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Indeed, Spindler’s turnaround plan called for Apple to de-emphasize inexpensive Macs, leaving them to licensees, and focus on high-profit areas such as publishing and multimedia. Though few had confidence in Spindler’s leadership, some analysts believe that is still the way to go.
Apple might still be sold eventually, and some believe Amelio’s mission is more to make the company attractive to a purchaser than to assure its long-term independence. Sun, according to some reports, was offering a price well below Apple’s market price--a signal of just how little faith investors have in Apple’s current direction.
The announcement of Amelio’s appointment came after financial markets had closed. Apple shares rose 87.5 cents to $29.25 on Nasdaq.
In a statement, Amelio said: “As an avid Apple user since the days of the Apple II, I am delighted to be joining the management team of Apple, a company with an outstanding reputation for superior technology and customer loyalty.”
* TURNAROUND ARTIST
Gilbert F. Amelio has been down this road before. D1
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