Steve Jobs on Corporate Governance

The original business plan — selling the Pixar Image Computer, a high-end visualization machine — failed. Sales were inadequate, losses grew, and Jobs kept increasing his investment in exchange for a larger stake, reducing management and employee ownership until his cumulative $50 million gave him control of the entire company. In April 1990 Pixar sold its hardware division to Vicom Systems, and early 1991 brought layoffs that cut the staff to roughly forty-two people, its original size. On March 6, 1991, Jobs bought the company outright from its employees and became full owner; he contemplated folding it into NeXT, but NeXT's co-founders refused. As late as 1994 he considered selling Pixar to Hallmark Cards, to Microsoft co-founder Paul Allen, or to Oracle chief Larry Ellison, and only after New York critics signaled that Toy Story would be a hit did he decide to give the studio another chance, take an active leadership role, and make himself chief executive.

The original Disney arrangement rankled: Pixar created and produced the films, Disney marketed and distributed them, profits and costs split equally, but Disney kept all story, character, and sequel rights plus a distribution fee of 10 to 15 percent. Renewal talks through 2003 and 2004 failed repeatedly, and in January 2004 Jobs announced he would never deal with Disney again while Michael Eisner ran it. The deadlock broke when Bob Iger replaced Eisner in October 2005 and moved quickly to mend the relationship; on January 24, 2006, Jobs and Iger announced Disney would buy Pixar in an all-stock deal worth $7.4 billion. The merger made Jobs Disney's largest individual shareholder with about seven percent of the stock and a board seat, and his holdings passed on his death to the Steven P. Jobs Trust. Iger later wrote that Jobs rarely created trouble for him and speculated they would have explored merging Disney and Apple had Jobs lived.

At the August 1997 Macworld Expo in Boston, Jobs announced a partnership with Microsoft whose terms included a five-year commitment to keep releasing Microsoft Office for the Macintosh and a $150 million investment in Apple. The long-running patent dispute over whether Windows infringed Apple's interface rights was settled, and Internet Explorer would ship as the Mac's default browser. Jobs framed the deal for the audience as the end of an era of rivalry: for Apple to win, Apple had to do a really good job, and if others helped, so much the better. The money was largely symbolic — Apple's market capitalization stood at $2.46 billion the day before, with $1.7 billion in quarterly revenue and $1.2 billion in cash reserves — but the psychological effect was immediate, signaling that the returning founder would trade pride for survival, keep Office on the platform, and refocus the company on execution rather than litigation.

Apple's first outside money came from Mike Markkula, a semi-retired Intel product-marketing manager and engineer, who also brought the company to investor Arthur Rock; after seeing the crowded Apple booth at the Homebrew Computer Show, Rock started with a $60,000 investment and joined the board. Markkula next recruited Mike Scott from National Semiconductor to serve as Apple's first president and chief executive in February 1977, a decision Jobs openly disliked, an early lesson that professional managers rather than founders were running the corporate show. The pattern repeated across Jobs's career: he recruited or inherited successive chief executives, from Scott through Sculley, Spindler, and Amelio, before taking the title himself in 1997 and holding it until weeks before his death. The Markkula-Scott phase professionalized bookkeeping, inventory, and channel strategy while the founders kept product control, the division of authority whose collapse later produced the 1985 rupture.

In 1983 Jobs recruited John Sculley, president of Pepsi-Cola, to become Apple's chief executive with the famous pitch contrasting a career spent selling sugared water with a chance to change the world. The hire was meant to give the founder operational cover while he focused on the Macintosh; instead it created a rival power center with board backing. Their visions diverged sharply: Sculley favored open-architecture machines like the Apple II aimed at education, small business, and home markets less exposed to IBM, while Jobs wanted the closed-architecture Macintosh positioned as the business alternative to the IBM PC. The two divisions operated like separate companies, duplicating services, and the January 1985 annual meeting failed even to mention the Apple II group still providing 85 percent of sales, an omission that helped push Wozniak to leave amicably, sell most of his stock, and complain the company had been heading wrong for five years.

By early 1985 the Macintosh's failure to dent the IBM PC had strengthened Sculley's hand. In May, encouraged by director Arthur Rock, Sculley proposed reorganizing Apple to strip Jobs of the Macintosh group and park him over new-product development, a role that would have rendered the founder decorative. Jobs answered with a plan of his own to oust Sculley, but the scheme leaked; confronted, Jobs said he would leave, and the board declined his resignation and asked him to reconsider, while Sculley made clear he held the votes. On September 17, 1985, Jobs submitted his letter of resignation to the board, and five senior Apple employees resigned with him to join his next venture. The ouster became the hinge of his biography: twelve years in exile, then a return with the operating system, the design taste, and the scar tissue that would save Apple.

Apple acquired NeXT in December 1996, returning Jobs to the company he had co-founded, and after the board ousted Gil Amelio as chief executive on July 9, 1997, Jobs became de facto leader, formally interim chief executive on September 16. He moved fast: in March 1998 he terminated the Newton, Cyberdog, and OpenDoc projects to concentrate resources on returning to profitability, and employees joked darkly about sharing an elevator with him in case the doors opened without their jobs, his summary executions being rare but a handful sufficing to terrorize a company. He rewrote the Macintosh clone licensing program to make it prohibitively costly, ending the clonemakers' free ride on the Mac OS. Much of NeXT's technology, most importantly NeXTSTEP, was folded into what became Mac OS X. At Macworld in January 2000 he dropped the interim label and quipped about serving as iCEO, the pun marking a permanent restoration.