Jobs, Perot Become Unlikely Partners In the Apple Founder's New Concern
By Brenton R. Schlender, Staff Reporter
With Peter Waldman
The Wall Street Journal
February 2, 1987
The partnership sounds like an unlikely match -- Steven P. Jobs, the one-time bearded and barefoot Buddhist who helped start Apple Computer Inc., and H. Ross Perot, the flat-topped, former Navy officer who founded Electronic Data Systems Inc., now a General Motors Corp. unit.
About the only thing they would seem to have in common besides starting what became billion-dollar companies is being cast out of them.
But partners they are. Last week, the 56-year-old Mr. Perot wrote a $20 million check to help fund the 31-year-old Mr. Jobs's new company, Next Inc. For his investment -- his first ever in a computer company -- Mr. Perot gets a 16% stake in the start-up, which intends to develop computers and software for universities. Mr. Perot also gets a seat on Next's three-member board.
"Once Ross saw what we were doing, he said he was very excited," Mr. Jobs says, recalling Mr. Perot's phone call "out of the blue" last November that led to his investment in Next. By the end of the conversation, Mr. Jobs says, "We were finishing each other's sentences."
Mr. Perot's investment comes at a crucial time for Palo Alto, Calif.-based Next. The company, with 50 employees and no manufacturing facilities, had just about exhausted Mr. Jobs's initial $7 million in seed money, and needed more to move from developing a product to making it and bringing it to market. With Mr. Perot's investment in hand, Mr. Jobs invested $5 million more of his own money, and invited Carnegie Mellon University and Stanford University to participate. Together, the two schools are investing $1.3 million for a combined 1% stake in Next. Mr. Jobs retains a 63% stake. The combined $26.3 million in new investment establishes a total value for Next at $126.3 million, which is extraordinarily high for a company without a product.
"One of my keen interests is that we rank at the bottom of the industrialized world in terms of academic achievement. We need to revolutionize our educational system," says Mr. Perot, who has stirred up a lot of controversy in his native Texas over revamping elementary and secondary education there. "I believe Next can help revolutionize higher education."
Mr. Perot says he decided to invest in Next after performing "a tremendous amount of due diligence." After the initial call last November, Mr. Perot spent a day at Next's posh headquarters in the hills overlooking Palo Alto. He also dispatched several former top EDS executives, including its former president, Morton Meyerson, "to take the company apart and put it under a microscope."
Mr. Jobs, who previously had spurned any outside investment in Next, was impressed by Mr. Perot's approach. "Rather than just looking at the numbers, he started with the most important things -- looking under the hood and evaluating the quality of the idea and of the people," he says. Moreover, Mr. Jobs adds, the two hit it off, despite their divergent backgrounds: "Even though I've never lived in Texas and he's never lived in Silicon Valley, it became clear we've had similar experiences."
Neither Mr. Jobs nor Mr. Perot will describe specifically Next's first product, dubbed a "scholar's workstation." "I've seen the product," Mr. Perot says, "and the fact that I wrote that check says more than anything else I can say." Later, however, he said that "with these electronic tools, you can bring the very finest 'courseware' by the very finest professors to even the smallest liberal arts school with no endowment. It's really going to be significant." Courseware is another word for educational software; however, the term also has been used to describe audio-visual teaching aids.
While Mr. Perot now is a director of Next, he doesn't plan to get involved in the day-to-day development of the company or its products, "although I'll help out any way Steve wants me to," he says. "In the early stages of a start-up, you're busy killing snakes, and where I live (Dallas) is a considerable distance away" to get very involved in that. He will be joined on Next's board by Mr. Jobs, and by John P. Crecine, senior vice president for academic affairs at Carnegie Mellon.
Mr. Jobs says the cash infusion will enable Next to "ship something within 12 months," even though he also brags that, technologically, "we're not just taking an evolutionary jump -- it's a pretty big leap." He also says Next is committed to manufacturing in the U.S.
Mr. Jobs, who resigned as chairman of Apple in September 1985, helped design a highly automated plant in Fremont, Calif., where Apple Macintosh computers are made. "I think manufacturing is extraordinarily very important," he says. "If we aren't able to make what we invent, we might as well start learning Japanese."
That kind of talk pleases Mr. Perot, who -- before he stepped down as chairman of EDS and as a GM director last December -- had openly criticized GM for failing to modernize its manufacturing and management. Indeed, as much as sharing common views about education, Messrs. Jobs and Perot seem to enjoy each other's outspoken nature. "It's great fun to be associated with Steve," Mr. Perot says. "Success hasn't made him soft or vulnerable at all."
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