Sculley to Head Small Networker
By John Markoff
The New York Times
San Francisco -- October 18, 1993 -- John Sculley, who resigned on Friday as chairman of Apple Computer Inc., confounded the computer and communications industries today by betting his grand vision of a digital-information future on a little-known wireless networking company.
Mr. Sculley said he would become chairman and chief executive of Spectrum Information Technologies Inc., a company based in Manhasset, L.I., that controls a series of crucial patents related to the wireless transmission of computer data.
Spectrum, whose financial dealings have brought shareholder lawsuits and an inquiry by the Securities and Exchange Commission, saw its stock soar, and then plummet, in the spring after announcing a patent-licensing deal with the American Telephone and Telegraph Company. A few days after Spectrum had predicted that the licensing agreement could be worth hundreds of millions of dollars, A.T.& T. said Spectrum was exaggerating the scope and value of the deal.
Sees Important Technology
But Mr. Sculley, in a telephone interview today from Washington, where he has been secluded with engineers and lawyers for several days reviewing Spectrum's patents, said he thought Spectrum's technology could play an important role in the emerging wireless-communications market. "This is one of the those little businesses that could turn into a major enabling technology," he said.
Spectrum's patents cover methods for using cellular telephone networks for transmitting computer data through wireless modems. Its technology is intended to work with notebook computers and the new generation of hand-held communications products like Apple Computer's Newton Messagepad and the A.T.& T. EO Personal Communicator, devices known as personal digital assistants.
The suddenness of Mr. Sculley's move, taking the reins of a company whose executives he had just recently met, seemed to have much to do with the frenetic deal-making that is sweeping the entertainment, communications and computing businesses. All those industries seem to be fusing, or trying to fuse, under the rubric of digital convergence.
In fact, he said, he had been looking for something that would strike an unexpected note -- one as unlikely as the television and movie executive Barry Diller's decision early this year to go to QVC Network, the home-shopping channel. Mr. Diller is using the cable channel as a beachhead in the coming interactive television wars, and is now leading QVC in a bidding war with Viacom over Paramount Communications.
"My dream was that I could find something in my world that was equivalent to Barry and QVC," Mr. Sculley said today.
In his final months as chairman of Apple -- he had stepped down as chief executive a few months earlier -- he had been criticized for preaching his vision of digital multimedia instead of tending to the financially troubled company's business operations. Today, he suggested that he had experienced a personal shift. "I was beginning to feel that the world of multimedia was becoming over-hyped," he said. "My general perspective was: What's happening in the wireless side of this digital convergence?"
He acknowledged, though, that he had stumbled into the relationship with Spectrum, an eight-year-old company. Spectrum's chief executive, Peter T. Caserta, had been trying to reach Mr. Sculley without success until recently, when he managed to enlist the assistance of a Manhasset neighbor, a woman who had worked with Mr. Sculley years ago when he was an executive at Pepsico. She called him and persuaded him to take Mr. Caserta's call.
The next day, Mr. Caserta arrived at Mr. Sculley's house in Greenwich, Conn., in a limousine "so large it would barely fit in my driveway," the computer executive recalled. A meeting planned to last an hour stretched to five hours as he became intrigued with Spectrum's technology.
Mr. Sculley had been Apple's chief technology officer as well as chairman, and he demanded a demonstration. It proved spectacularly successful when Mr. Caserta was able to send a fax from his Newton palmtop computer to the fax machine in Mr. Sculley's office without using telephone wires. "The light bulb went off in my head," Mr. Sculley said.
For Spectrum to fulfill his vision of providing "a major enabling technology" of the wireless era, the company will have to successfully defend its patents against legal challenges. Although A.T.& T. and Rockwell International have licensed the technology, other companies have called the patents impossibly broad, and are challenging them in court.
Significantly, it was Apple's inability to protect the intellectual-property rights to its Macintosh computer software against Microsoft that led to many of the problems that forced Mr. Sculley to leave Apple.
He is confident that Spectrum will be able to defend its territory. "In the world of cellular," he said, "they seem to be rock-solid in patent protection."
Several communications and cellular analysts said they thought Mr. Sculley had embarked on an indirect strategy in which he would use Spectrum as a shell to take over much larger companies. "He's after bigger fish," said Alan Reiter, editor of Mobile Data Report, an industry newsletter in Alexandria, Va. "I think possibly he might want to position it for sale."
Mr. Sculley, though, was sounding today much like the marketing wizard he proved to be at Apple and Pepsico. He said he was eager to build brand recognition for Spectrum and was interested in pursuing major alliances. "My contribution will be to open the doors at the top with telecom companies," he said.
To do that, he must overcome industry hostility to a company with a reputation for pressing larger ones into licensing its patents in wireless-data-communications technology. Many executives view Spectrum with suspicion. Two concerns, Microcom Inc., of Norwood, Mass., and Data Race Inc. of San Antonio, challenged the validity of some patents this year after Spectrum sued them.
Geoff Goodfellow, an executive at Radiomail Corporation, a wireless electronic-mail concern in San Mateo, Calif., took the skeptical view. "I wonder if he knows what he's getting into," he said. "My prediction is that he won't last a year with that company."
GRAPHIC: Graph: "Taking Flight Again" shows daily closes for Spectrum Information Technologies from Jan. to Oct. (Sources: Datastream, Security and Exchange Commission filings, Bloomberg Financial Markets)
Copyright 1993 The New York Times Company