by Eric Jackson and Rod D. Martin
August 15, 2013
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 the public possibly could purchase. Massive returns had become the norm, forecasting had broken down completely, 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 of merchandise, returned and basically worthless. And by January 1996, Apple was not just hemorrhaging money: it had less than three months’ 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 Die Hard’s John McClane or Mission Impossible’s Ethan Hunt. Or possibly the real-life 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. Amelio convinced a consortium of Japanese banks to extend Apple’s loans by six months. At last: breathing room.
Two months later, with Goldman Sachs, Amelio pulled off a seemingly miraculous financing deal that put $661 million in Apple’s coffers. It was genuinely unprecedented: dispensing with the traditional multi-week road show, Amelio and Goldman raised the entire amount on a conference call, and in less than a day.
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 the time being. But serious changes were needed, and soon. Amelio provided them. Painfully, he slashed $250 million in expenses per quarter and cut a total of 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 control.
But he also began to lay the foundation for the future. First, he drafted a five-year development plan, notably including the iMac. Jobs later followed this blueprint in almost flawless detail. Amelio killed Copland, Apple’s in-house effort to create a modern operating system, long-since stymied. Then he bought NeXT, whose advanced NeXTstep OS became the basis of OS X.
With NeXT, 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.