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How Apple Took Its Ne Xt Step


News: Analysis & Commentary: COMPUTERS

HOW APPLE TOOK ITS NeXT STEP

When its Mac OS efforts failed, it turned (again) to Steve Jobs

It was a true Silicon Valley moment: the return of Steven P. Jobs to Apple Computer Inc., the company he co-founded 20 years ago. As word spread of Apple's $400 million purchase of Jobs's NeXT Software Inc. on Dec. 20, one NeXT employee brought his pajama-clad son to witness the press conference at 7:15 that evening. A software executive called to ask if he could bring a date.

But if the yuletide surprise made great theater, it was a frantic final act to Apple's search for a software strategy. And like most rush jobs, this one raises as many questions as it answers. Can Apple maintain the loyalty of past customers and software developers by adapting all programs for existing Macintosh computers to run on NeXT's software? Since NeXT's software runs on Intel Corp.'s microprocessors, will Apple risk further eroding its products' distinctiveness by offering its operating system on industry-standard PCs? And just how will Apple forge a winning platform from Copland, Apple's failed effort to upgrade the Mac's operating system, and NextStep, an aging program that has done little on its own? "They must get it right to have a reasonable chance at a turnaround," says Dean Witter Reynolds analyst Eugene G. Glazer. "Obviously, Microsoft isn't standing still." Wall Street is unmoved by Apple's prospects: Its shares traded at about $23, almost unchanged, a week after the announcement.

What's clear is that this decision shouldn't have taken so long. By early 1995, many Copland engineers knew their project was hopelessly behind schedule. With Microsoft Corp. steadily trimming Apple's technology lead, Apple managers had responded by loading new features into Copland--putting it still further behind. Last May, three months after taking the company's top job, Apple CEO Gilbert F. Amelio reorganized the project. That fix was a failure, and in August, newly hired chief technologist Ellen Hancock froze development altogether. Besides being late, Copland lacked key features, such as protected memory, which prevents system crashes, she says. But freezing Copland set off howls from software developers and customers. To appease them, Amelio promised to unveil a new software strategy on Jan. 7, at the MacWorld trade show in San Francisco.

PLAN BE. To meet the deadline, Apple began to search seriously for an alternative. Jean-Louis Gassee, head of Be Inc. and a former chief technologist at Apple, had approached former Apple CEO Michael H. Spindler in 1994 and again in 1995 about merging his company, which is developing a new operating system, with Apple. He made headway in late July, after pitching his idea to Hancock at a dinner party. Gassee, however, overplayed his hand, demanding at least a 10% stake in Apple, worth $285 million at the current price, for tiny, 50-person Be. Amelio refused to go above $100 million, and Apple execs seethed at Gassee's demand for full control of Apple's software development and Be's persistent leaks to the press. Talks stalled in early November. "The press [leaks] absolutely backfired" on Be, says Hancock.

As "Plan Be" faded, Apple widened its search. In November, Hancock

told the 10-person team that had secretly assessed Be's software to consider Sun Microsystem Inc.'s Solaris, Microsoft's Windows NT, and even Taligent, an Apple-IBM joint venture that was all but scrapped 18 months ago. Hancock even prepared to go it alone. On Nov. 15, she gave the O.K. to a long-suppressed plan favored by many Copland staffers to quickly come up with

a less ambitious version of Copland.

Then, Steve Jobs entered the picture. Reading about the Be rumors, Jobs called Amelio in mid-November to set up a meeting. "At that point, I was really just calling to offer my advice, not to sell my stuff," says Jobs. The two execs arranged to meet when Amelio returned from a business trip in Asia. But by then, Apple was already deeply interested in NeXT. Why? On Nov. 25, Hancock happened to return a call from a mid-level NeXT manager, Garrett L. Rice, who had been searching for licensees for the company's NextStep operating system. "To be honest, we had not heard much about it, but I was impressed by what he said they had," says Hancock. She sent a team to NeXT's offices to take a look.

When Jobs and Amelio finally met on Dec. 2, Amelio had narrowed his options down to Be or NeXT. And Jobs came prepared with a presentation of NeXT's technology in his laptop. Jobs's advice also struck a chord: Make a radical move, but go with a technology that's battle-tested--such as NextStep.

With the Jan. 7 deadline looming, Apple techies invaded NeXT's offices almost daily. And after Jobs and technical chief Avie Tevanian made a pitch to Apple's seven-member executive board at a Palo Alto (Calif.) hotel on Dec. 9, the deal was all but done. Strolling around the block afterward, "we pretty much knew the deal was going to go down," says Tevanian, who will be Apple's new operating-system chief, reporting to Hancock. Amelio and Jobs wrapped up details at Jobs's home later that week.

MONSTER CHALLENGE. Who got the best of the bargain? Clearly, Jobs comes out fine. After years of trying to take NeXT public, he'll get some $175 million in cash and stock for his 45%-plus stake. And other than a part-time consulting role--he'll even have an office at his old haunt--he's free to focus on Pixar Animation Studios and other interests. "I'll advise Gil as much as I can, until I think they don't want my help or I decide they're not listening," he says.

As for Apple, a monster challenge remains: to remake its Mac OS operating system work with NextStep and simultaneously persuade Mac programmers burned by Apple's slow sales of late to stay the course. Apple says it will deliver a version of NextStep for Mac hardware by late 1997, but it won't run Mac software. Even in 1998, it's unclear what titles will run on the new OS. The big risk: Software developers may drop work on Mac software in the meantime. "They've basically frozen new development through the end of 1997," fumes longtime Mac developer Chuck Shotten. "I'm going to do the exact minimum possible." If nothing else, that sort of talk sends a clear message to Apple: Get it right. You may not have another chance.By Peter Burrows in San Mateo, Calif.Return to top


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