Now, Sculley Goes It Alone At Apple

By Andrew Pollack
The New York Times

September 22, 1985

Cupertino, Calif. -- In the new era at Apple Computer, the day begins at 7:30 A.M. with a meeting of the executive staff.

The almost daily ritual is part of an effort by John Sculley, president and chief executive, to keep a tighter grip on what is happening at Apple as it moves through a period of crisis. ''He's being a wartime general,'' said William V. Campbell, one of his executive vice presidents.

Such strong-handed management is a bit of a departure for Mr. Sculley, who has often given his managers wide latitude. In particular, Mr. Sculley shared so much authority with Steven P. Jobs, Apple's 30-year-old co-founder, that it was sometimes difficult to tell who was running the company - Mr. Sculley, the professional manager and marketing expert, or Mr. Jobs, the visionary entrepreneur.

But Mr. Jobs, who was relieved of operating duties in May, severed his ties with Apple on Tuesday, when he resigned as chairman of the board in an acrimonious dispute. The resignation removes the last link with Apple's folklore past and with the man who helped popularize the personal computer. In doing so, Mr. Jobs has become an American business hero, a sort of Henry Ford for the computer age.

With his departure from Apple's executive suite, the spotlight falls squarely on the 46-year-old Mr. Sculley. The big question is whether he can once again make Apple a hugely successful personal computer manufacturer, even as the industry goes through a disastrous slump. So far, Mr. Sculley's record in 29 months as chief executive is spotty. He led the company out of hard times in 1983 to a banner year in 1984 and then back into serious problems this year. Mr. Sculley has a reputation as a marketing ace from his Pepsico days, but under him Apple has had its share of poor marketing ploys. It has been difficult - until now - to separate Mr. Sculley's record from Mr. Jobs's. But from now on, there can be no excuses.

No one expects any dramatic changes. Long before Mr. Jobs's resignation last week, he had been pushed aside as an active executive, leaving Mr. Sculley to run the company as he saw fit. In addition, product direction for the next six months to a year is already fairly well set.

But problems could arise in a year or two, when the time comes to develop completely new products. Almost all analysts and company officials say that Mr. Jobs lent a certain creative spark and vision to Apple, as exemplified in his leadership in the development of the Macintosh computer, a project he pushed with such passion that he neglected other Apple models. ''He has always been the company dynamo, the company personality,'' said Michael Moritz, author of an Apple history. Some suggest that Apple sans Jobs will be just another company.

Mr. Sculley will hear none of that. ''We have the foundations in place for a really great Apple,'' he said on Friday, in one of the first interviews he has granted since emerging victorious from his struggle with Mr. Jobs. ''We talk about vision and what Steve contributed to vision, and it's an immense contribution, no doubt about it,'' said Mr. Sculley. He sounded sometimes bitter but usually reflective about the souring of his relationship with the young man who founded Apple in his parents' garage in the mid-1970's. Mr. Jobs. developed that first computer with his friend Stephen Wozniak, who left Apple last February in a disagreement with his partner over priorities.

''Computers were big boring blue boxes until Steve Jobs came along,'' Mr. Sculley said. And Apple will continue to be driven by the same vision of making computers for the individual in a youth-oriented company, he asserted. ''But people tend to confuse vision with innovation,'' Mr. Sculley added. ''The real question is innovation, and most of the innovation, including the innovations in Macintosh, came from a lot of people.''

Mr. Sculley has moved swiftly in the last few months to reorganize Apple so that two product divisions became one, ending internal rivalry and overlapping functions. Apple laid off one-fifth of its 6,000 employees and closed three of six factories in a dramatic cost-cutting move. Mr. Sculley has been trying to restore Apple's relations with dealers, software companies and computer users, all of whom are important for the company's success. MANY of these steps had been resisted by Mr. Jobs, who was wedded to his vision of how things should be done. And the steps are already beginning to bear fruit. The reorganization has gone better than expected, Mr. Sculley said.

Sales, particularly to the education market where Apple is the dominant supplier, have picked up in the last two months and the cost-cutting measures are beginning to take hold. After suffering its first loss ever last quarter, the company advised analysts on Friday that it expects earnings of about 20 to 25 cents a share in its fourth fiscal quarter, ending Sept. 30. Analysts had been expecting earnings of 10 cents a share at best in the current quarter and another loss at worst, but even 25 cents a share is slim compared with net income of 50 cents a share in same period last year.

''Because of the soap opera that has happened at Apple,'' Mr. Sculley said, the strengths of the company have been overlooked. Indeed, it was no small irritation to Apple executives that the series of products introduced this week were lost in the furor over Mr. Jobs's resignation, which occurred the same day.

The moves have won Mr. Sculley some support at Apple. Indeed, by removing Mr. Jobs from day-to-day operations four months ago, Mr. Sculley showed a courage and resolve that he had not displayed before. ''He ultimately faced a difficult decision that had to be made, to find a clear and bounded role for Steve,'' said Wayne Rosing, a former engineering director at Apple. ''Sculley earned the respect of the people at Apple.''

''I was there last week and I was very impressed with Sculley,'' agreed Jonathan Rotenberg, president of the Boston Computer Society. ''I was expecting to see a company in disarray, but it was just the opposite. People were on the ball and it was very organized.''

Still, many employees have become demoralized and have left the company, including the core of the team that developed the Macintosh and many of the young computer whizzes who joined Apple in its early years. Five resigned last week to join Mr. Jobs in a new venture to develop a personal computer that might eventually compete with Apple. That has raised cries that Mr. Jobs has betrayed his old company, and Apple is threatening to sue.

''No one denies him the right to go off and start his own life, but this isn't the way to do it,'' said Mr. Sculley. ''As long as Steve goes off and starts from scratch, the way Apple did, that's great.''

Mr. Sculley said that he and Mr. Jobs, ''set our friendship aside,'' during the reorganization that began last May. ''I don't bear Steve any bitterness,'' he said. ''I'm disappointed that someone who has contributed as much as he has to the industry and to Apple's success finds himself in this predicament.''

With Mr. Jobs's departure, Mr. Sculley has transformed Apple's management to the point where most of the top executives are veterans over the age of 40 before they came to Apple. In the last few months alone, Jean-Louis Gassee was brought from Apple's French operations to head product development, Michael Lorelli was recruited from Playtex to serve as vice president of marketing, and David Barram, a former Hewlett-Packard executive, was brought in as chief financial officer.

Mr. Campbell, the executive vice president in charge of sales and marketing, has become particularly prominent, emerging as the company's spokesman and cheerleader when Mr. Sculley became less visible during the reorganization. Mr. Campbell, once the football coach at Columbia and later an executive with Eastman Kodak, is a back-slapping type more able to excite a crowd than the more direct, more reserved and plain-spoken Mr. Sculley.

While Mr. Sculley's new managers are heavily weighted toward pragmatic, East Coast establishment types over 40, Mr. Sculley insists the corporate culture will not change. ''Universities are made up of young people but the deans and provosts are all over 40,'' he said.

The company's major gap is in engineering. The company has no high level engineering manager to guide product development and design, a role that Mr. Jobs filled with so much flair. Mr. Sculley is now looking for such a person, and some analysts say that the person he finally selects for this key post will have to have at least some of the qualities of a Steve Jobs to assure Apple's long-term success. That person will play a role in developing new versions of the aging Apple II, the company's basic model, and the Macintosh, as well as devices and strategies to link machines together into complete office systems.

Apple, after two years, has still not cracked the business market with its Macintosh and the product has appeared to lose momentum after its fast start last year. Mr. Sculley himself has no direct experience in computers, although as a teen-ager he invented a color television tube. But he has hired tutors to teach him computers and he is gaining good grasp of the field.

He had joined Pepsico in 1967, not long after he received a B.A. in architecture from Brown University and an M.B.A. from the Wharton School. Harboring visions of becoming an architect, he was persuaded instead to take a job at Pepsi by Donald M. Kendall, the chairman and stepfather of Mr. Sculley's first wife. Even after the divorce, Mr. Sculley and Mr. Kendall remained friends and Mr. Sculley rose through the company, becoming president of the domestic soft-drink division, the Pepsi-Cola Company, and helping Pepsi unseat Coca Cola as the sales leader in supermarkets.

It was Mr. Jobs, searching for a marketing expert, who convinced Mr. Sculley to join Apple as president and chief executive in April 1983, offering him a multi-year contract that netted Mr. Sculley $2.2 million in salary and bonuses in 1984.

At first, there was great concern about whether Mr. Sculley would be able to blend into Silicon Valley's helter-skelter atmosphere and co-exist with the brilliant but temperamental Mr. Jobs. At first, that turned out to be little problem. The problem, in fact, was probably that Mr. Sculley and Mr. Jobs got along too well. They began finishing each other's sentences and some executives questioned whether Mr. Sculley was exercising independent judgment.

''John's failing in this is that he was seduced by Steve, as were we all,'' said one former Apple manager.

''I think Steve is an exceedingly persuasive person,'' Mr. Sculley explains. He said that he and Mr. Jobs remained close friends until the end of 1984, when business began to sour and the men began to differ in their views of how Apple should be run. IT was always expected that Mr. Sculley's major contribution would be in adding marketing to a company that had emphasized technology. In that area, Mr. Sculley is credited with helping Apple create the concept of ''event marketing,'' a not-always-successful strategy in which a barrage of publicity is concentrated on a given major event.

Apple took up all the advertising, for example, in a special election edition of Newsweek magazine last November and it bought nearly all the commercial time on last Sunday's television airing of ''Death of a Salesman,'' the Arthur Miller play. The company is perhaps best known for its ''1984'' commercial, a bizarre jab in which I.B.M. was implicitly linked to Big Brother in the George Orwell novel. The commercial, which has since become something of a cult classic, aired only once, during the 1984 Super Bowl. On the basis of that commercial and the successful Macintosh introduction, Mr. Sculley was named man of the year by Ad Age magazine in 1984.

But at times, Apple's marketing has been off the mark. The follow-up to the ''1984'' commercial, shown at the 1985 Super Bowl, was the ''lemmings'' commercial, which implicitly equated buying an I.B.M. computer with mindlessly walking off a cliff and was widely condemned as going overboard. Apple's ''test drive a Macintosh'' program, which allowed customers to borrow Macs from computer stores, did not live up to expectations because dealers did not bother with the paperwork during the heavy Christmas selling season last year. And the Macintosh Office campaign has recently been repudiated by top Apple officials because it gave the impression that Apple was trying to compete head-to-head with I.B.M.

These difficulties prompted Mr. Sculley and Mr. Lorelli, the new marketing vice president, to modify the Apple approach to advertising. The new style - introduced on ''Death of a Salesman'' last Sunday - is more subdued, emphasizing basic values such as the usefulness of the Apple II as a home computer for education, as well as for business. APART from marketing, the big challenge for Mr. Sculley is to get new products to market to fill holes in the product line. The Apple II is aging and the Macintosh, while easy to use, is too slow.

Apple last week began the process by unveiling a series of products for both the Apple II and the Macintosh, a product introduction that was all but forgotten in the hubbub over Mr. Jobs's resignation. Among the products was a hard-disk drive for the Macintosh, and Switcher, a program that allows the Macintosh user to easily switch from one task to another. For the Apple II family, Apple introduced a new 3.5-inch diameter disk drive capable of storing 800,000 characters on a disk, a memory expansion board, a new color printer, a modem, and a program that makes the Apple II screen resemble that of the Macintosh.

But far more important, Mr. Sculley must come out with successors to Apple's two main computers - a process under way before the falling out with Mr. Jobs. The company is working on a successor to the Apple II that will process 16 bits of information at a time compared with eight on the existing Apple II, making the desk-top computer both faster and able to handle more memory. And the next generation of the Macintosh will be expandable, unlike the existing Macintosh, which is a closed box. It is expected to have a more powerful microprocessor, making it operate faster, more memory and perhaps a bigger screen. Increasing the Macintosh's power will help keep it from overlapping with the Apple II.

''We have artificially constrained it,'' Mr. Sculley said, referring to the difficulty in adding outside equipment to the Macintosh. He said it would take 12 to 18 months for Apple to realize the potential of the Macintosh.

Apple must also make its machines better able to communicate with the I.B.M. computers - large and small - that now dominate the offices of America. This has been one of Apple's weak points. A file server, which will allow several Macintoshes to share data, was to have been unveiled last January with other Macintosh office products. Mr. Jobs had been developing the file server and his failure to hold to a schedule has made the device so late that Apple officials will not say when it will be available. Lack of that key product, as well as a card allowing I.B.M. computers to tie into Apple's network, have stalled sales of the Macintosh for business use.

To get data communications, Mr. Sculley has decided to turn increasingly to outsiders, a tactic Mr. Jobs avoided. Mr. Sculley said Apple is talking with outside suppliers to provide Apple with equipment to sell under its own name and is also talking again of strategic alliances with larger firms to help sell Apple computers as part of larger systems.

Mr. Sculley has also been trying to improve Apple's relations with dealers, who had been angered by low margins and by Apple's attempts to sell directly to schools and corporations. Those efforts, for which Mr. Sculley was at least partly responsible, have since been largely scaled back.

''Dealers have been badly abused by the old Apple,'' said Richard Wagner, executive vice president of MBI Business Centers, a dealer. ''They have a lot of fences to mend and it's not clear they know what they need to do.'' But he added, ''They're making some progress, I think. I've seen my Apple representative more in the last six weeks than in the last three years.''

CORRECTION-DATE: October 6, 1985, Sunday, Late City Final Edition

CORRECTION: A front-page caption in the Business section on Sept. 22 incorrectly dated a photograph of John Sculley, chief executive of Apple Computer, and Steven P. Jobs. The photo was taken last January.

GRAPHIC: Photo of John Scully (Ed Kashi); Photo of Mr. Scully and Steven P. Jobs at the announcement of Jobs's resignation (AP); Photo of Steven P. Jobs and John Sculley at the intoduction of the Macintosh personal computer (NYT/Marilyn K. Yee); Graph of Apple's stocks and earnings; Chart of Apple Computer financial data at a glance; Graph of Apple's declining market share (Source: Infocorp)