The Palace Revolt at Apple Computer

Executive Suite

By Deborah C. Wise in San Francisco
Business Week

June 17, 1985

It was an uncharacteristically sullen Steven P. Jobs who attended Apple Computer Inc.'s executive staff meeting on May 31. Frantic 2 a.m. phone calls and a week of heated discussions had failed to alter the dramatic moment: John Sculley, the company's president of two years, was forging ahead with a reorganization plan that left Jobs, the 30-year-old chairman and co-founder, with no direct control of day-to-day operations. The Macintosh Div., which Jobs had been running, was merged with the Apple II Div., and Delbert W. Yocam, general manager of Apple II, was put in charge.

Jobs, known for his hot temper and autocratic management style, didn't relinquish control without a fight. As plans for the changes were taking shape over the Memorial Day weekend, sources close to Apple say Jobs tried to persuade Sculley and the board to let him hang on to the reins of the nine-year-old company. In the face of declining earnings and slowing sales, however (BW -- June 10), the board and the executive staff backed Sculley, the man Jobs spent four months wooing to Apple. Although Jobs owns 11.3% of the outstanding stock -- about half of the 14 million shares held by company insiders -- he can't command more than his own vote on the board.

A depressed Jobs eventually agreed to cooperate -- surrounded as he was by a management team clearly in Sculley's camp. Indeed, two key executives -- William V. Campbell, vice-president for sales, and David J. Barram, the new financial officer -- were hand-picked by Sculley. On May 31, Jobs toured Apple offices along with Sculley to explain the details of the reorganization and his new role as "global visionary," a position somewhere between product consultant and guru.

Unlike Jobs, industry watchers greeted the news of the reorganization favorably. By splitting the company into two groups -- one for product development and manufacturing, the other for marketing and sales -- Sculley has weeded out several duplicate functions. Previously Apple had two product divisions, each with its own marketing, manufacturing, and development departments. Analysts believe that reorganizing Apple along functional lines should give the company a lower breakeven point.

Combining the product groups could also squelch the intense rivalry that has sapped morale and led to many prominent personnel defections, including that of Stephen G. Wozniak, Apple's co-founder. "It should eliminate the rancor and the miscommunications," says Christopher D. Espinosa, an Apple manager and one of its first employees. "I've been through lots of reorganizations, and this is the most sensible and the most humane." Wall Street, however, was not enthusiastic. On June 3, Apple stock closed at $16 a share, its lowest since 1982 (page 124).

TOEING THE LINE

At Apple headquarters, the mood was frenetic as management scrambled to implement the new corporate structure. But as Apple moves to remake itself in the more corporate image set by Sculley, a former PepsiCo Inc. president, there is still obvious tension about Jobs's role. Upper-level managers are relieved that he appears to be toeing the line. "Word went 'round the company like wildfire that Jobs was in the final reorganization meeting," says Campbell.

Those close to Jobs are convinced he will not remain silent long. He has been shoved aside in previous shuffles and has always fought his way back to the top. In 1982, for example, when he was shunted out of the group developing the Lisa computer, Jobs joined a rival group to build Macintosh. Lisa has been discontinued, and Macintosh is the company's flagship offering.

Before the corporate changes were announced, Jobs's immediate plans included a trip to Europe for the rollout of Macintosh office products, followed by a short vacation. As of June 2, he was still at Apple's Cupertino (Calif.) headquarters, but he refuses to comment. An Apple Computer without a vocal Steve Jobs, however, is unthinkable to all who remember the company's early days. Says Andy J. Hertzfeld, one of Macintosh's original designers, who left recently: "Steve is Apple. I just can't imagine the company continuing to make innovative products without Steve."

GRAPHIC: Picture, CHAIRMAN JOBS STILL HAS HIS CROWN -- BUT NOT HIS CLOUT, BOB SACHA