(Photo credit: designmilk)
By Eric Jackson & Rod Martin
The Steve Jobs biopic (Jobs) premiers August 16th, lionizing the late Apple CEO, who revolutionized every field he touched, founded the legendary Apple Computer, and made it the most valuable company in history.
But Jobs’ legacy would be very different without one man: Gilbert Amelio. Because there literally wouldn’t have been an Apple without Amelio.
The board meeting at which Amelio was named CEO, January 31, 1996, was called not to hire a new Chief Executive but to sell the company. It seemed Apple’s only chance to survive in any form.
Indeed, then-CEO Michael Spindler had told his board almost a year earlier that a sale was Apple’s only hope. He’d spent the year since seeking someone, anyone, who would pay more than a fire sale price, all the while digging Apple’s hole deeper by the day. He came to this New York meeting pleading for a sale “on any terms Sun offered.” The terms were not good.
Why? Years of mismanagement. Apple the technology pioneer had given way to Apple the channel-stuffer: inflating sales figures by forcing far more products – increasingly low-margin, low-quality products – through the distribution channel than could possibly be purchased by the public. Massive returns had become the norm, forecasting had completely broken down, no new operating system had been released in years, and top executives had ceased to understand their own product line or marketplace.
These chickens came home to roost. By October 1995, with losses mounting, Spindler shocked the board, informing them that of $6 billion in products already “sold,” Apple would have to write off $1 billion worth, returned and basically worthless. And by January 1996, Apple was not just hemorrhaging money: it had less than three month’s cash in the bank.
The ship was going down.
Despite all this, the board rejected Spindler’s call to pull the plug on one of history’s greatest companies, and decided to give things one last try. It replaced Spindler with Gil Amelio, assigning him a task perhaps appropriate for John McClane or Ethan Hunt. Or possibly the defenders of the Alamo.
He was the logical choice. A longtime Apple fan and recent board member, Amelio was a turnaround legend, having saved a key division at Rockwell and then brought National Semiconductor back to life. What he lacked in dazzling stage presence he more than made up for in the experience and discipline Apple desperately needed.
Solving the cash crisis came first. Almost immediately, he succeeded where Spindler had failed in convincing a consortium of Japanese banks to extend Apple’s loans by six months: breathing room.
Two months later, with Goldman Sachs, he pulled off a first-of-its-kind financing deal that put $661 million in Apple’s coffers. Jobs himself later told Amelio: “I certainly couldn’t have done that and I don’t know of anyone else who could have, other than you. It was one of the more brilliant business maneuvers I’ve ever seen.”
The company was saved, for now. But serious changes were needed, fast. Amelio provided them. Painfully, he cut $250 million in expenses per quarter and 3,000 workers, reorganizing the dysfunctional company into fighting form. He eliminated Apple’s countless fiefdoms, reasserted the CEO’s role in product development, streamlined an incomprehensible product line, and crucially, reestablished proper quality assurance.
But he also began laying the foundation for the future. First, he laid out a five-year development plan, which included the iMac and which Jobs would later follow in almost flawless detail. He killed Copland, Apple’s in-house effort to create a modern OS, long-since stymied. Then he bought NeXTstep, the advanced operating system which became the basis of OS X.
With it, he brought Steve Jobs back to Apple, a gutsy, dangerous call that ended in a boardroom coup.
Much of this detail was lost in the ensuing media frenzy. But the facts remain. As one senior Apple veteran put it, “Steve was the reconstructive surgeon…who made the patient healthy and pretty again, but Amelio was the guy in the MASH tent near enemy lines who kept them alive long enough to get there.”
So Gil Amelio saved Apple. And saying so takes nothing from the greatness of Steve Jobs. We take our hats off to both.
Eric M. Jackson is CEO of CapLinked, a platform for managing financings and M&A transactions. Rod D. Martin is CEO of Advanced Search Laboratories and founder of the Martin Organization. Both were part of the startup team at PayPal.
