Amelio: Trying to do what's right

CobraBoy (
Mon, 10 Feb 1997 12:18:05 -0800

* If I have a portable OS that could run on PowerPC, Pentium,
* MIPS, Alpha, all of those chips, that gives us alternatives
* we don't have. What if Motorola and IBM stopped making
* PowerPC chips? This gives me a contingency plan. Now does
* that mean we abandon the PowerPC chip? Heck no. We'd be
* foolish to.

Apple chief talks candidly about his bonus, Steve Jobs, media pressure

Tom Abate

A year ago Wednesday, Gil Amelio became chairman of Apple
Computer Inc. His assignment: turn around a company that was
starved for cash, bloated with inventory, plagued by
computer bugs and stuck with an aging operating system.

Last week, the man who calls himself the Doctor, for his
degree in physics and his penchant for turnarounds, gave a
good news-bad news diagnosis to Apple shareholders in

True, the company had sold its inventory and banked
$1.billion in cash. A repair program had tackled quality
problems, and in a bold move, Amelio had acquired Next Inc.
from Apple co-founder Steve Jobs in a plan to make Next's
powerful software the soul of an improved Macintosh. As part
of the deal, Amelio made Jobs his special advisor.

So why then, are Apple shares near a 10-year low on Wall
Street? And why did Apple's board of directors award Amelio
a $2 million bonus in November, when sales plunged so far in
December that Apple is on the verge of 2,000 to 3,000

Amelio spoke with The Examiner Friday about the slings and
arrows of heading Silicon Valley's most closely-watched

Q: In October Apple turned a profit. In November the board
voted you a $2 million bonus. In December, sales went down.
Did you deserve that reward?

A: There are two components to my contract. One is based on
merit and one is based on living to the next year.

When the board hired me, they wanted to put some golden
handcuffs on me so I would stay. The deal they made was for
every year I clicked off, I earned a million-dollar bonus,
not based on anything but being here.

The other part was a merit bonus. There were specific tasks
the company set. Measured on that basis we did what was
expected of us. We brought down the headcount by about 3,500
people, more than 20 percent. We dropped the break even
point from about $1billion to about $billion. And we did
that by September.

The question the Monday morning quarterbacks ask is: Should
we have done more? The answer is yes. But was there any way
of knowing it at the time? I don't think so.

A few breaks would have made a big difference. The quality
problems on the PowerBooks cost us. We shipped about 100,000
fewer PowerBooks in the fall because of quality problems
with the 5300 model. If the PowerBook had been a little
healthier, if people had bought the normal number of
computers at Christmas, you'd have had a totally different

These two events are partly in our control but not totally.
Had these two things gone our way they could have made a
different scenario. Then you'd probably have been praising
me for being a brilliant manager and I wouldn't be any more
deserving than the converse.

Q:What is it like running a company that gets as much
scrutiny as Apple?

A:If we were doing great and getting this kind of coverage
we'd be thrilled. So it cuts both ways.

My general experience with the press has been that when
things are not going well the press reports it as worse than
it is, and when things are going well the press reports it
as better than it is.

There's no question Apple has some real problems. But
there's some real chicken little reporting going on out

Q:Does the way you handle press make matters worse? For
instance, when you mentioned the possibility of layoffs in
an interview last week you had to realize we'd ask how many.

A: Do I lie and tell you I'm not thinking about it? I'm
better off being straightforward, and if there's something
I'm not comfortable talking about to say "no comment."

But I don't always follow my own rules. I can't tell you the
number of people at this time. It's going to take us weeks
to do this properly. You don't want to shoot first and ask
questions later, especially when there are people involved.

Q: In last week's management shuffle you put Avie Tevanian
and Jon Rubinstein in charge of software and hardware
development. Both worked for Steve Jobs at Next. How would
you respond to people who think you've given Steve a chance
to recreate Next inside Apple?

A: That's not fair. Avie and Jon are two incredibly talented
guys. When Avie came out of Carnegie Mellon (University )
nine years ago he was the most heavily recruited guy at the

You had Steve Jobs and Bill Gates personally trying to woo
him. He's your ultimate Heisman trophy winner for software.

As far as Jon Rubinstein, I was incredibly impressed with
him after I met him. Steve (Jobs) did recommend him, it's
true. But the guy has had his own career in his own right.

As you know, I've felt all along Apple needs to simplify
their hardware models. We made a little progress on this
last year, but not as much as I wanted to.

Jon understood better than anyone else I had met precisely
what I was talking about. So you might say this was the fine
hand of Steve working in the background, but I really think
that's a somewhat simplistic view.

Q: Steve Jobs is charismatic, possibly brilliant. But people
who've seen him at the corporate level say he's a bit
arrogant and ruthless. Didn't you take a chance by bringing
him into the executive council?

A: This is not about my ego. I've always tried to do what I
thought was right for the business and not worry so much
about ego.

Steve is a smart guy. He understands the soul of what Apple
is about. He has an incredibly good understanding of the
industry. I don't mind listening to his points of view. I
don't always agree, but it turns out we agree on a lot of
stuff, and so that's made our relationship easier to manage.

Maybe if I disagreed with him more it would be more
tempestuous. In the final analysis I make the decisions. You
have to look at this and say, if you can get someone who's
smart enough to help you, sometimes you put up with some of
their idiocyncracies.

Q: You have high hopes for the new laptop and desktop Macs
due out soon. Can you be sure they won't be hurt by quality
and backlog problems?

A: On the quality issue we've done some new things. We have
a quality assurance team that literally tries to break the

By the time it survives the torture test it's probably good.
The data show quality on the PowerBook 1400 is 10 times
better than the 5300. So the process works.

It's going to be more challenging to build all the
PowerBooks the market is going to demand. I expect this will
be an extraordinarily hot product and may exceed for a
quarter or two what we can build.

We're limited by our suppliers, especially for flat-panel
screens. I think the new Montana series of desktops will be
really successful, too. They will be out a month or so
behind the PowerBooks. They should be easier to keep in
volume production.

Q: The new Rhapsody operating system, based on Next
technology, will run on Intel chips. Are you contemplating
moving Apple software into the Intel world? And if so, how
do you handle that transition and the people who depend on
the PowerPC chip?

A: If you're in my shoes you want multiple sources of supply
where your business is not held captive by one supplier or
one technology.

Today the Mac OS is not a portable operating system. It's
woven very tightly into the hardware. But if you could get a
next generation operating system that was portable, that
would be the very smart thing to do.

If I have a portable OS that could run on PowerPC, Pentium,
MIPS, Alpha, all of those chips, that gives us alternatives
we don't have. What if Motorola and IBM stopped making
PowerPC chips? This gives me a contingency plan. Now does
that mean we abandon the PowerPC chip? Heck no. We'd be
foolish to.

We have a lot of customers with PowerPC chips and we're
going to support them. But I do look foward to the
possibility, a year or two downstream, where I could come up
with products based on different processors.

Q: Any last words?

A: We have very nervous customers out there because of
saturation coverage we've had in the press. If I could speak
to them directly I would say, be confident. We've got a lot
of great capabilities and great plans.

The middle part of a turnaround is messy. My standard joke
is that there's certain things you don't like to see being
made. One is sausage, another is legislation, and a third is

It's very messy when you're in the middle of it, and if you
chronicle every step, it's pretty frightening.

Having been that road three or four times before, I feel
pretty comfortable telling people there's a light at the end
of that tunnel, but we've got miles to go before we can


It takes Microsoft 10 years to get rid of the mess when you boot, why should we believe that you can make Windows easy to program in only two years ?" - S.Jobs to Microsoft's J. Allchin

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