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WILL APPLE SLIDE INTO HIGH-TECH IRRELEVANCE?It's late in the game for new directors to make a differenceEver since Apple Computer Inc. was little more than a dream in a garage, A.C. ''Mike'' Markkula Jr. has been the pivotal player behind the company's fortunes and foibles. The intensely private former chip executive penned Apple's business plan in 1976, recruited directors, and orchestrated every major management upheaval. Truth is, Markkula has long been the only director on Apple's smallish board who really mattered. In the past year, just when the company needed guidance from its board most, Markkula has faded into the woodwork. Having passed up opportunities to sell Apple to IBM in 1994 and Sun Microsystems Inc. a year ago, the board now seems destined to preside over an accelerating slide into high-tech irrelevance. ''I don't know how many more mistakes the Apple board can make,'' says Joseph Graziano, former chief financial officer. ''They lost the last year, and now they are faced with starting all over again--unfortunately, from an even weaker position.'' INERTIA. The lost year began in February, 1996, when Markkula belatedly moved against CEO Michael H. Spindler. Rather than recruit an outsider, he replaced Spindler with director Gilbert F. Amelio. Then, directors went along with a tepid restructuring that has left Apple with just 5.2% of the market--down from 7.9% a year ago. ''Mike Markkula has to take full responsibility,'' says Lawrence J. Ellison, CEO of software maker Oracle Corp. Now, facing fresh losses ($120 million in the December quarter and a possible net loss of more than $500 million this quarter due largely to its buyout of NeXT Software Inc.), the board is again standing on the sidelines. Rather than laying off 20% of its workforce and refocusing on its core business, as had been expected, Apple on Feb. 4 announced plans for a vague reorganization to be detailed by month's end. That sent its shares to around 15. Amelio now concedes Apple executives must ''narrow our focus more than ever.'' Even if the former chairman of National Semiconductor Corp. can save his broken recovery plan, he likely won't get much help from Markkula. The long-time director has sold 2 million shares since 1994 and, according to sources close to the company, has wanted off the board since last summer. Markkula couldn't be reached for comment. Markkula's fellow directors can also take some of the blame. They sat by when Markkula tapped Amelio as CEO without even doing an external search, headhunters say. Then, Markkula ceded the board chairmanship to Amelio. Meanwhile, the full board awarded Amelio a pay package worth some $10 million. Complains one former major shareholder: ''The board is a bunch of dilettantes.'' Amelio did demand some new faces on the board when he took the top job, says an insider. He has added former DuPont Co. Chairman Edgar S. Woolard Jr. and Gareth C.C. Chang of Hughes Electronics Corp. Amelio says he's trying to lean on the board more to run Apple. These moves are long overdue, but they may make little difference near-term because most directors have little experience with Apple and its industry. Five of the seven directors have been on the board for three years or less (table). No outsider boasts any experience in the computer business. They also don't have much of a stake in Apple: Six of the directors own less than $100,000 in company stock. ''HAD ENOUGH.'' One well-regarded board member has already left in disgust. B. Jurgen Hintz, a former Procter & Gamble Co. executive who joined in 1994, chose not to run for reelection this year. A friend says Hintz became ''totally frustrated'' with the board's lack of influence. ''He just had enough.'' Now, Markkula has left a power vacuum into which cofounder Steven P. Jobs is rushing. Jobs, who returned with NeXT, lobbied to have Chief Technology Officer Ellen Hancock stripped of her research and development duties. He and co-founder Stephen Wozniak will sit in on executive committee meetings. That has fueled a new rumor that Jobs will team up with Oracle's Ellison to buy Apple. ''We think the stock can get down to $10,'' says Ellison. Jobs calls such talk ''fantasy.'' Or could it be wish fulfillment?
By Peter Burrows in San Francisco and John A. Byrne in New York
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Updated June 15, 1997 by bwwebmaster
Copyright 1997, by The McGraw-Hill Companies Inc. All rights reserved.
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