Steve Jobs

It had taken Microsoft a few years to replicate Macintosh’s graphical user interface, but by 1990 it had come out with Windows 3.0, which began the company’s march to dominance in the desktop market. Windows 95, which was released in 1995, became the most successful operating system ever, and Macintosh sales began to collapse. “Microsoft simply ripped off what other people did,” Jobs later said. “Apple deserved it. After I left, it didn’t invent anything new. The Mac hardly improved. It was a sitting duck for Microsoft.”

His frustration with Apple was evident when he gave a talk to a Stanford Business School club at the home of a student, who asked him to sign a Macintosh keyboard. Jobs agreed to do so if he could remove the keys that had been added to the Mac after he left. He pulled out his car keys and pried off the four arrow cursor keys, which he had once banned, as well as the top row of F1, F2, F3 . . . function keys. “I’m changing the world one keyboard at a time,” he deadpanned. Then he signed the mutilated keyboard.

During his 1995 Christmas vacation in Kona Village, Hawaii, Jobs went walking along the beach with his friend Larry Ellison, the irrepressible Oracle chairman. They discussed making a takeover bid for Apple and restoring Jobs as its head. Ellison said he could line up $3 billion in financing: “I will buy Apple, you will get 25% of it right away for being CEO, and we can restore it to its past glory.” But Jobs demurred. “I decided I’m not a hostile-takeover kind of guy,” he explained. “If they had asked me to come back, it might have been different.”

By 1996 Apple’s share of the market had fallen to 4% from a high of 16% in the late 1980s. Michael Spindler, the German-born chief of Apple’s European operations who had replaced Sculley as CEO in 1993, tried to sell the company to Sun, IBM, and Hewlett-Packard. That failed, and he was ousted in February 1996 and replaced by Gil Amelio, a research engineer who was CEO of National Semiconductor. During his first year the company lost $1 billion, and the stock price, which had been $70 in 1991, fell to $14, even as the tech bubble was pushing other stocks into the stratosphere.

Amelio was not a fan of Jobs. Their first meeting had been in 1994, just after Amelio was elected to the Apple board. Jobs had called him and announced, “I want to come over and see you.” Amelio invited him over to his office at National Semiconductor, and he later recalled watching through the glass wall of his office as Jobs arrived. He looked “rather like a boxer, aggressive and elusively graceful, or like an elegant jungle cat ready to spring at its prey.” After a few minutes of pleasantries—far more than Jobs usually engaged in—he abruptly announced the reason for his visit. He wanted Amelio to help him return to Apple as the CEO. “There’s only one person who can rally the Apple troops,” Jobs said, “only one person who can straighten out the company.” The Macintosh era had passed, Jobs argued, and it was now time for Apple to create something new that was just as innovative.

“If the Mac is dead, what’s going to replace it?” Amelio asked. Jobs’s reply didn’t impress him. “Steve didn’t seem to have a clear answer,” Amelio later said. “He seemed to have a set of one-liners.” Amelio felt he was witnessing Jobs’s reality distortion field and was proud to be immune to it. He shooed Jobs unceremoniously out of his office.

By the summer of 1996 Amelio realized that he had a serious problem. Apple was pinning its hopes on creating a new operating system, called Copland, but Amelio had discovered soon after becoming CEO that it was a bloated piece of vaporware that would not solve Apple’s needs for better networking and memory protection, nor would it be ready to ship as scheduled in 1997. He publicly promised that he would quickly find an alternative. His problem was that he didn’t have one.

So Apple needed a partner, one that could make a stable operating system, preferably one that was UNIX-like and had an object-oriented application layer. There was one company that could obviously supply such software—NeXT—but it would take a while for Apple to focus on it.

Apple first homed in on a company that had been started by Jean-Louis Gassée, called Be. Gassée began negotiating the sale of Be to Apple, but in August 1996 he overplayed his hand at a meeting with Amelio in Hawaii. He said he wanted to bring his fifty-person team to Apple, and he asked for 15% of the company, worth about $500 million. Amelio was stunned. Apple calculated that Be was worth about $50 million. After a few offers and counteroffers, Gassée refused to budge from demanding at least $275 million. He thought that Apple had no alternatives. It got back to Amelio that Gassée said, “I’ve got them by the balls, and I’m going to squeeze until it hurts.” This did not please Amelio.

Apple’s chief technology officer, Ellen Hancock, argued for going with Sun’s UNIX-based Solaris operating system, even though it did not yet have a friendly user interface. Amelio began to favor using, of all things, Microsoft’s Windows NT, which he felt could be rejiggered on the surface to look and feel just like a Mac while being compatible with the wide range of software available to Windows users. Bill Gates, eager to make a deal, began personally calling Amelio.

There was, of course, one other option. Two years earlier Macworld magazine columnist (and former Apple software evangelist) Guy Kawasaki had published a parody press release joking that Apple was buying NeXT and making Jobs its CEO. In the spoof Mike Markkula asked Jobs, “Do you want to spend the rest of your life selling UNIX with a sugarcoating, or change the world?” Jobs responded, “Because I’m now a father, I needed a steadier source of income.” The release noted that “because of his experience at Next, he is expected to bring a newfound sense of humility back to Apple.” It also quoted Bill Gates as saying there would now be more innovations from Jobs that Microsoft could copy. Everything in the press release was meant as a joke, of course. But reality has an odd habit of catching up with satire.

Slouching toward Cupertino

“Does anyone know Steve well enough to call him on this?” Amelio asked his staff. Because his encounter with Jobs two years earlier had ended badly, Amelio didn’t want to make the call himself. But as it turned out, he didn’t need to. Apple was already getting incoming pings from NeXT. A midlevel product marketer at NeXT, Garrett Rice, had simply picked up the phone and, without consulting Jobs, called Ellen Hancock to see if she might be interested in taking a look at its software. She sent someone to meet with him.