Apple CEO’s Visions Don’t Guarantee Sustained Gains

Connoisseurs of the phenomenon that is Steve Jobs must be chuckling in appreciation right now.

Just when one might have reason to fear the show was running out of steam, what with Apple Computer Inc. racking up two quarterly losses in a row and sales of its core hardware products hitting various walls, Jobs appears ready to pull the sheet off another wonder.

Among the burning questions is this: Will it get him on the cover of Time magazine again?

And: Will there be any money in it for Apple?

These thoughts are prompted by news that Apple has been in talks to acquire Universal Music Group, the world’s largest music company, from Vivendi Universal for as much as $6 billion. As disclosed Friday by my colleague Chuck Philips, Jobs’ idea is to marry Universal’s huge market power to a service Apple developed that reportedly makes buying and downloading songs onto MP3 players from the Internet as intuitive as ordering a book from Amazon.com. This could add fire to the sales of Apple’s iPod, a high-end MP3 device that is one of the distinct bright spots in the company’s product line.

Although Apple has not responded publicly to the disclosure, certainly the notion that a hardware/software company might eventually profit from the purveying of digital content has Steve Jobs written all over it, if only because it seems at once visionary and premature.

There already is little doubt that digital distribution will one day dominate the music business (assuming it continues to be a business). Although the ease of downloading pirated versions of commercial hits means at the moment that record company revenues and profits face an era of free fall, it stands to reason that the industry will eventually figure out a way to entice customers to pay for new material they receive via cyberspace.

But whether the moment is ripe to invest in that future, as Jobs apparently believes, is another story. And therein lies the problem with Jobs’ enthusiasms: Even when they are correct, they are not always timely. His enthusiasms, moreover, do not always translate into sustained gains for his company, even when they are genuinely innovative.

When Apple launched the first iMac in 1998, commentators swooned over its candy-colored, pod-shaped design but grumbled that, unlike the standard PC of the time, it shipped with no space for internal expansion and no floppy disc drive. The iMac was, however, equipped with a network port. Jobs had determined that such functions as data storage were shifting to the Web.

This was accurate as a forecast, but not as an observation of conditions as they existed in 1998. (It’s still not entirely accurate, but at least the horizon has moved nearer.) Purchasers of iMacs, therefore, had to buy separate disc drives to back up and transport their data, which helped cut into the allure of the iMac’s $1,299 price tag.

Although it’s true that the iMac’s departure from the beige-box style of the average PC set the design standard for the rest of the industry, one might ask how many stylishly odd-shaped household computers sold over the next four years were Apple products. The answer: not enough to reverse the company’s long-term decline in worldwide PC market share, which today stands between 2% and 3%.

Jobs has never lacked for disciples, thanks to what intimates have long referred to as his “reality distortion field.” Drift too close to Jobs in the grip of one of his manias and you can get sucked in, like a wayward asteroid straying into Jupiter’s gravitational zone.

To be sure, much Apple zealotry is well-deserved; the smartest computer engineers I know, some of whom were the designers of the world’s first personal computers, are almost all devotees of the Macintosh. They believe it comes much closer to the ideal integration of software and machine than does the Microsoft Corp. Windows PC, a perennially clunky and bug-addled pain in the prat.

And as the leader of Apple in its crucial early years, Jobs has earned the respect of some genuine Silicon Valley demigods.

“Steve Jobs is on my eternal heroes list,” Bob Metcalfe, the inventor of Ethernet and a man not easily bewitched, once remarked to an interviewer. “There’s nothing he can ever do to get off it.”

But others describe dealing with Jobs himself as akin to getting one’s mind clouded by Lamont Cranston, the “Shadow.”

John Sculley, a rising star at PepsiCo Inc. before he joined Apple in 1983, once recalled the sales pitch with which Jobs enticed him into the company: “He stared at me with the stare that only Steve Jobs has and he said, ‘Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world?’ I just gulped because I knew I would wonder for the rest of my life what I would have missed.”

Sculley soon shook off the spell, arranged to oust Jobs from the company, then presided over Apple’s most profitable years. He was ousted himself when sales slumped, and in 1997 Apple brought Jobs back to rescue the company from a near-extinction he blamed partially on Sculley, who had “corrupted” the company by focusing on “glory and wealth” instead of “making great computers for people to use.”

Since his return as “interim” CEO (he soon removed the qualifier from his title, rather as Napoleon promoted himself to Emperor from First Consul of France), Jobs seems to have settled into the role of First Guru of High Technology. But his company no longer boasts the sure eclat of 20 years ago, when the Macintosh was the best-selling PC in the world and any move Apple made might represent a paradigmatic advance in personal computing.

Meeting “exclusively” with a Time magazine reporter to help launch a new iMac with a flat-panel screen in January 2002, Jobs presented him with diagrams of circles festooned with household gadgets. Then he unburdened himself of Zen-like utterances about what a computer “wants to be,” Apple’s “calling” and whatnot. Time, which transformed itself into an Apple house organ for the occasion, obligingly trumpeted the new machine on its cover as “The Home-Digital Hub of the Future.”

But although Apple today does offer a suite of programs that are great at organizing and manipulating digital files of music, pictures and video, the woods are full of competitors prepared to replicate all the neatest functions of iTunes, iPhoto, and iDVD on any iDevice you please.

The “digital hub” won’t belong to Apple for very long; just consider that over the holiday season more than half of the 216,000 iPods it sold were configured for use not with the Mac, but with the Windows PC.

Meanwhile, the signs multiply that the outside world is less willing than it used to be to take Jobs’ enthusiasms on faith.

Sales of the elegant but pricey flat-panel iMac introduced in 2002 stagnated before the arrival of summer, thanks in part to a saturated market, a lousy economy and consumer recognition that style isn’t everything. Jobs’ periodic product unveilings no longer provide the reliable kick to the stock price they once did. Investors certainly voted with their feet Friday after The Times’ disclosure of the Universal Music talks, driving the stock down to a level it hasn’t seen in nearly five years.

Still, the first public word on the coming synergy of software and music has yet to be uttered by Steve Jobs himself. If the Universal deal takes place, we can no doubt expect a well-choreographed unveiling, with pyrotechnics all around and Jobs at dead center, preaching a vision of the marriage of technology and content that suggests he has figured out something that the old guard of Silicon Valley and Hollywood somehow missed.

Eventually, it will become evident that even if this nirvana comes to pass, it won’t necessarily put money in Apple’s pocket. Until then, however, the acolytes of Steve Jobs will bask in the master’s vision.

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Golden State appears every Monday and Thursday. Michael Hiltzik can be reached at golden.state@latimes.com.