Apple ][

In Brief

Why are you reading this magazine on a Windows machine, and not a friendly Mac? In part two of our series on Apple Computer, you can read about a CEO who hid under his desk, the wonderfully compelling villainy of Bill Gates and ponder that very question.

Party On

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In the last episode, Steve Jobs left Apple after being replaced by an executive with proven management qualifications[1], leaving the company he founded in the hands of John Sculley of Pepsi fame. The board of directors felt that the dream was over, and executives at Apple would have to actually work for the company to succeed. But the board was as ignorant as everyone else -- they had already struck the iceberg, the ship was slipping beneath the waves and would take almost everyone else down with it.

Sculley might have been a capable CEO, but he wasn't Silicon Valley material. He was a product of blue-blood private schools on the East Coast, and cited Pepsi's win over Coca-Cola for market share in the early 80s as his main claim to fame. He was used to the old-boy rules and traditions that defined the eastern Establishment -- not the crazy, wacky anything goes attitude of the West Coast. He was straightforward and honest, and was unprepared when his engineers blew off his orders as merely suggestions, or when the people he worked with lied to him with the fingers crossed behind their back.

The Apple executives quickly took advantage of his technological naivete, quietly driving their own personal missions, and no doubt congratulating themselves on hoodwinking the boss. The hapless Sculley did not fully comprehend the consequences of their actions, and let them hit the accelerator on Apple's inevitable decline.

Driving Without a License

The first big showdown after Jobs' departure was all about licensing the Macintosh operating system to other companies so they could build Macintosh clones. What's more, the Apple suits wanted port the operating system to the Intel platform, which would allow it to run on the thousands of IBM PC compatible systems -- in short, they were selling out to the competition. PCs were at a disadvantage, they had no GUI - everyone was using MS-DOS, and Windows 1.0 was still a few years away.

The idea was that the competition would increase the Macintosh install base, lowering prices and allowing more people get Macs on their desktops. The downside was that Apple would only make $100 for each copy of the OS that was sold, instead of $3,000 per computer. For guys with a head for technical stuff, they sure couldn't add straight. The biggest opponent to licensing was the director of engineering, Jean-Louis Glassee, a colorful Frenchman who would show up to the executive staff meetings in his trademark black leather jacket and black leather pants[2]. Glassee was vehemently opposed to anything that would cause Apple's unbelievable fifty-five percent profit margins to fall. Sculley and Glassee had also received a confidential memo from Big Bill Gates in June 1985 that concluded, "Apple must open the Macintosh architecture to have the independent support required to gain momentum and establish a standard."[3]

There's a Mr. Gates at the Door, Sir

This astonishing document spelled out how Apple could have seized control of the PC marketplace, which would have eventually cost Gates billions of dollars. So why would he offer this advice? At the time, Microsoft's annual revenues were less than $30 million, and their most advanced product was the Excel spreadsheet, which was only available on the Macintosh. Excel was the first graphical spreadsheet, and a dramatic improvement over the text-based interface used by 1-2-3 from Lotus. It became an instant bestseller, and was one of the Macintosh's first "killer apps."[4]

Microsoft obviously had all the financial brains, and figured they'd rather sell applications like Excel for a couple hundred dollars than MS-DOS, which only netted them thirty or forty bucks each. The clever Microsoft boys wanted Apple to sell as many Macs as possible, so they, in turn, could flog more applications. Apple definitely had the best technology, but they were pricing themselves beyond what the mass market would afford.[5] Nevertheless, Glassee's ego would not allow Apple to do anything that might cut into their profit margins, and several possible licensing deals were deposited unceremoniously in the recycle bin over the next few years.

If You Can't Join 'Em, Beat 'Em

Gates hedged his bets -- continuing to work on Windows 1.0.. Windows was a more primitive GUI, looking more like a thinly disguised Mac design than a shining example of Microsoft genius. To this day, Gates insists that his work was based on the work coming out of Xerox -- the same organization that Jobs pillaged. As is to be expected from an industry where the stealing of ideas is rife, and intellectual property is claimed by all, Apple contemplated suing Microsoft for unauthorized use of their design. Sculley claimed that Gates threatened to quit developing applications for the Macintosh unless they dropped the lawsuit. Gates flew to California to meet with Sculley, where Microsoft agreed that Excel would be exclusive to the Mac for a period of time, in exchange for a license for Macintosh's "visual displays" so that the dispute would not happen again in the future.

This license granted Microsoft "a non-exclusive, worldwide, royalty-free, perpetual, nontransferable license to use the derivative works in present and future software programs, and to license them to and through third parties for use in their software programs." Some years later, the courts would interpret "in present and future software programs" had given Microsoft the right to use Apple's innovations in all future versions of Windows, as they all had derived from version 1.0. Sculley had just sold the farm.

Oops

In two not-so-swift strokes, Apple had decided not to seize control of the exploding PC market by licensing their OS so that the common man could afford to buy Macs. They also gave their greatest competitor the right to take advantage of them like a prom date by integrating Apple's innovations into their own products, and Microsoft didn't even bother to buy them breakfast in the morning.

Don't think the disasters stop here. Apple would continue to squander their technological superiority in the future with a series of bad judgment calls that are almost as unbelievable as Denise Richards as a nuclear physicist.

Apple eventually replaced Sculley with Michael Spindler, who was nicknamed "the Diesel." Spindler presented an aura of power and authority, tinged with an impressive, if slight German accent. However, he had difficulty coping with the stress of running a struggling company, and had to be talked out from hiding under his desk on several occasions -- not quite what you would expect from someone in charge of a multi-billion dollar company.

Apple was always at a disadvantage against PC manufactures such as IBM and Compaq, because they had to develop their own hardware and software solutions while their competitors could purchase off the shelf hardware components and Microsoft's operating system. But they continued to throw money at ill-conceived and poorly managed projects. Sure, it easy to criticize them in hindsight, but along with the thousands of dot.com startups popping up every night, it just goes to show any clown can make it in America.

Footnotes

1. As opposed to Jobs, who gained his management qualifications by watching old world war II movies.
2. We would like to point out that for computer geeks in the 80s this was considered very groovy gear indeed.
3. Carlton, pp. 40-43
4. A "killer application" is a program that takes advantage of a computing platform to create an innovative product that is unavailable anywhere else. The Macintosh's first killer apps where Excel and desktop publishing programs such as PageMaker, which allowed a user to design a document onscreen that looked exactly like the final printed copy.
5. One might ask why they couldn't "think different"

 
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