Amelio resigns after Apple's board sours on him

Electronic News, July 14, 1997 by Cynthia Bournellis

Dr. Amelio joined Apple early last year from National Semiconductor, where he was CEO. Shortly after, he recruited Ellen Hancock to work as Apple's CTO. Ms. Hancock worked in the office of the president at National. Ms. Hancock also tendered her resignation last week alongside Dr. Amelio. Her responsibilities have been reassigned to Apple VPs Jon Rubinstein, hardware engineering, and Avie Tevanian, software engineering. Ms. Hancock could not be reached for comment.

"The bottom line is the board is not happy with the financial performance of Apple," said Fred Anderson, Apple's CFO, during a press and analyst telephone conference on Wednesday. Mr. Anderson said the board was eager to get the company back on a path of profitable growth and sustained profitability, sentiments Dr. Amelio had been uttering for months. Apple has lost $1.5 billion over the six quarters, during Dr. Amelio's reign. Analysts are suspecting additional loses for the third quarter; Apple will announce its third fiscal quarter results on Wednesday of this week. Meanwhile, Apple's stock hit an 11-year low of $13.06 on July 2. And the share for Macintosh systems continues to stay afloat at a mere 5 percent of the personal computer market.

But, according to Mr. Anderson, "The company has improved its cash position, reduced operating expenses and improved product quality. We have also introduced a series of outstanding products, developed a long-term operating system strategy and consolidated our marketing and sales organizations...the executive management team is committed to continue to build on this foundation.

"Given Gil's background, his strengths didn't fit the profile of what the board thought was necessary (to get the job done)," added Mr. Anderson. While Dr. Amelio himself has prided himself on streamlining Apple's product lines and bureaucracy, cutting back on personnel and creating a new direction for the Macintosh operating system, he did admit in prior interviews with the press that he is more of a technologist than a marketing expert.

Commented one source close to the Apple, "Apple needed Moses to show them to the promised land. That was never Gil. He was a plodder, getting from point A to point B." It's no secret that Apple has been increasingly losing the confidence of its faithful followers, according to industry observers and judging by recent sales. And while there are still many users who refuse to give up their Macs, just as many, or more, are moving to the "Wintel" platform, from software developers to consumer and commercial users to Apple's hardware partners.

As it may come as no surprise that Apple's most influential partners, IBM and Motorola, would not comment directly on Dr. Amelio's departure, an IBM spokeswoman said that Dr. Amelio's leaving will not affect IBM's commitment to Apple. "We are working hard on next-generation processors (for Apple), and we have plans for the PowerPC in a number of other ways." PowerPC is used in IBM's networking products and RS/6000 servers, as well as in products for the embedded space. However, the spokeswoman did admit that the market for PowerPC on the desktop is not one of high growth.

Market research figures indicate that due to the dramatic drop in shipments of Macintosh computers, and the loss of interest in IBM's OS/2 operating system, which once stood as a hopeful candidate for PowerPC, sales of PowerPC processors have been on the decline. The consensus among many analysts is that PowerPC has not lived up to its billing and has been trying to catch up to Intel in terms of performance.

Yet, while PowerPC flounders at the desktop, it does stand a chance in the emerging network computer, or NC, market. But only if that market takes off, said Peter Lowber, a senior analyst at Datapro Information Services Group. IBM's network computer is being built with the 603e PowerPC chip. "The NC could be called the next desktop," said Mr. Lowber. "We think there is a good potential for it." In a recent survey, Datapro found that 2,195 PC users said they'd consider trading in their PC for an NC, if the NC gave them more flexibility and more capabilities with software applications.

While IBM and Motorola, who just introduced the 240MHz 604e PowerPC chip (EN, June 30), declined to speculate on how Apple's travails might affect their Macintosh businesses, other Apple partners were more forthcoming. Said Brad Romney, CEO of Dayna Communications, a Utah-based third-party developer of networking equipment for the Mac: "We decided about four years ago that over the long term, we needed to provide a broader product line to a broader market. We have strongly been moving this past year toward the PC market...and this has been (partly) a reaction to Apple and their struggles. We have been an Apple third-party developer for 13 years, and have had a bit of trouble with Apple, because they have a networking group and have felt free to compete with us in areas where they've added no value." Added Mr. Romney, "If they concentrated on the CPU and operating system, then they'd be better off. Gil hasn't brought a lot of enlightenment to the company; he's more technical-oriented. But he has brought a lot of discipline to Apple. I'd like to see a well-known and charismatic leader take over."