The 28-year-old’s fortune dropped by $423 million yesterday as shares of the world’s largest social media company fell 4 percent to $20.04 in New York, a record low. Zuckerberg is now worth $10.2 billion. He is about $400 million behind James Goodnight, the co-founder of Cary, North Carolina-based software maker SAS Institute Inc., who now ranks as technology’s 10th- richest person, according to the Bloomberg Billionaires Index.
Mark Zuckerberg, chief executive officer and founder of Facebook Inc. Photographer: David Paul Morris/Bloomberg
“From an emotional standpoint, he might care,” said Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, in a telephone interview from Winston-Salem, North Carolina. “He’s much more worried about maintaining Facebook’s market share in the social media space than the day- to-day valuation swings of his company stock. He’s not worried about going broke.”
Facebook shares have fallen 47 percent from their initial public offering price of $38. The Menlo Park, California-based company last week reported earnings that showed slowing revenue growth.
Larry Yu, a company spokesman, didn’t respond to a phone call requesting comment.
Country Club
Zuckerberg’s fortune is based on his ownership of 503.6 million shares of Facebook, including 60 million options that have an exercise price of 6 cents a share. He also has about $150 million in cash and other liquid assets.
Goodnight, 69, co-founded SAS in 1976, and is worth $10.6 billion. The company is the world’s largest closely held software maker and generated revenue of $2.7 billion in 2011, up 12 percent in a year.
SAS is valued at $15.8 billion, according to data compiled by Bloomberg. The valuation is based on the average enterprise value-to-earnings before interest, tax, depreciation and amortization multiple of five publicly traded peers. A premium has been applied, based on recent transactions in the software industry.
Goodnight, who holds two-thirds of SAS, also co-owns the Prestonwood Country Club in Cary, North Carolina, and has collected dividend payments over more than three decades.
Microsoft Corp. (MSFT) co-founder Bill Gates is the richest technology billionaire in the world with a net worth of $61.6 billion, according to the index.
Facebook is mulling over letting children below the age of 13 join its network, but with so many signed up already, what difference would it make?
FACEBOOK'S minimum age should be 21. This argument mooted by CNN blogger John D. Sutter will no doubt get the support of many parents who worry about safety and privacy issues on the social media network. That is, those parents who have not secretly signed up, or helped to sign up, their children on Facebook.
Facebook (FB) already has an age limit 13 years old but the reality is that many “underaged” children already have their own profiles on the site, parents' consent notwithstanding.
In fact, it is estimated that some 7.5 million children below the age of 13 are currently on FB, out of its total 900 million plus users worldwide.
This shows that the minimum age requirement on FB is just a number. Facebook does little, if anything, to enforce it, and one can simply lie about their birth date to circumvent the rule.
So why the charade?
As suggested by the Wall Street Journal, which first broke the news of the social media giant's plans to open up to tweens and even younger kids, Facebook was feeling the heat from the American authorities in relation to the Children's Online Privacy Protection Act (COPPA).
The Act stipulates that online services catering to children below 13 would need to obtain the consent of their parents before collecting data from them. COPPA also requires that parents be given the ability to review, revise and delete their children's data.
Hence, with the number of pre-teen children registering on the site growing by day, Facebook knows it can no longer turn a blind eye to its minefield. Coming clean is perhaps its only option in defending itself from any potential legal action.
As it acknowledged in a statement: “Enforcing age restriction on the Internet is a difficult issue, especially when many reports have shown that parents want their children to access online content and services.”
Facebook founder Mark Zuckerberg himself had earlier said he would like to see kids under 13 use FB “more honestly and in compliance with the law”.
“My philosophy is that for education you need to start at a really, really young age... Because of the restrictions, we haven't even begun this learning process... If they're lifted then we'd start to learn what works. We'd take a lot of precautions to make sure that they (younger kids) are safe...,” he was quoted.
The conspiracy theorists of course say freeing the shackles is one way for Facebook to recoup its losses after a disappointing debut at the share market. Widening its user base will certainly broaden its revenue-raising opportunities, especially in the mobile apps and ad sector, and add to its market value.
Then there is the brand loyalty factor getting them young is the best way to get users hooked for the future, and guard against any possible defection to “cooler” social media networks to come.
Whatever the motive, the reality remains stark there is a high number of active FB tweens and they can no longer be ignored.
Choy: Many parents of children who are being bullied online feel they can’t do anything about it.
“By officially allowing children to sign up, Facebook can keep tabs on how many Facebookers below 13 there are,” he opines.
In Malaysia, for instance, it is no secret that many tweens have their own FB accounts, with most having signed up either with the consent and help from their parents, siblings or close relatives; or by “cheating” Facebook, that is, changing their birth date to make the computer system accept them as above 13.
It is not clear how many Malaysian children are now online but with some 12.5 million Malaysian FB users recorded this year, it is safe to say that there are many.
In fact, global social media and digital analytics company Socialbakers estimated that some 2.2% of Malaysian Facebookers were aged 13 and below last August (around 248, 528). That is a rough estimate at best; with our below-18 population totalling up to 11.2 million (approximately 2.87 million children are in primary school), it is difficult to pinpoint how many FB minors are signed up on a fake age.
This will create openness among the tweens and their parents, says Sharil.
“Children will not need to hide that they have FB accounts any more and would be encouraged to share their online experiences with their parents. If they do not bypass the protection measures (as kids nowadays are very IT savvy), the children should get the age appropriate online protection they need against the adult world' of Facebook,” he adds.
However, both agree that this will only be effective if Facebook fulfils its commitment to introduce a new suite of tools for parents to keep their children safe when they register a FB account and interact on the social networking site.
“Children under 13 are typically in the primary school group and need extra supervision, guidance and care,” he stresses.
Husin proposes that specific accounts for those below 13 be created with suitable contents and safeguards to enable parents and guardians to continually provide assistance as well as monitor the online activities of these young Facebookers.
Sharil: ‘Children need guidance and supervision. Online tools and technologies can never replace the care and guidance that parents can give’
“Facebook for those below 13 should be categorised as a special account, different from the adult Facebook accounts. They should introduce some kind of system to ensure that the children obtain parental consent before they get accepted to sign up, and whenever a child requests for or accepts a new Facebook friend, parents should be alerted,” he adds.
Dangerous playground
Still, as many parents would be deigned to admit, no matter how vigilant you are, it is still a big bad Web out there.
“Parents can only guide and monitor their children, they cannot really change the environment,” says a father-of-three who only wants to be known as Arshavin.
You will still need the help of the policy makers and service providers, among others, to make the Internet, and specifically Facebook, safe for children, he adds.
“No matter how well-trained or educated your children are, some places are just off limits, even if you go there with them.
“I read this one comment that I think captures it well will you let your elementary school child attend a college or adult party?'. You won't, right?” he poses, warning that some parents might be lulled by a false sense of security for their children on Facebook if the new ruling is implemented.
Social media specialist Jasmin Choy agrees, highlighting cyber-bullying as one danger for young children on FB. The problem is intensified as many parents are not equipped to deal with it, she says.
“Many parents of children who are being bullied online feel they can't do anything about it. Then there are those who just don't know what is happening to their kids in cyberspace, or those who are not giving enough guidance to their kids and are becoming bullies online,” she says.
Opposing the social media network's plans to open up their membership for children under 13, the mother of two relates a recent cyber-bullying case close to her heart.
“It happened to a friend's child who is sensitive and fragile. She was already being subtly bullied online when the girls ganged up on her and made her feel like she was stupid. The problem was, the mother didn't know what to do about it. If she intervened, the daughter would be very embarrassed. On the other hand, if the mum didn't intervene, these girls would go on bullying her daughter.”
Another red flag for children, she warns, is online porn and sexual predators.
“Many parents have no idea how much porn is being served up to the kids online. They think they have some idea but are often shocked when they discover how accessible porn is to their six- to13-year-olds.”
As Choy highlights, one only needs to go to some of the game apps on FB to receive porn advertisements.
“Many pop up even on innocent-looking Facebook games. Besides, curious kids are going to share images and if there's FB and Twitter they will see it,” she says, advising parents to “prepare” their children by educating them about the birds and the bees at an early age.
“We can't be prudish about it. They are going to see it anyway, so why not explain to them before trouble brews.”
The main danger she foresees, however, is the breach of privacy.
“Think about all the times we chatted with a young kid on FB. We must have at least mentioned the child's name, asked them how their day was... things like that. We tend to forget the dangers when we are having fun online. Bad people can easily glean information from the chats the adults have with young kids on FB posts,” she says.
Choy also strongly believes that pre-teens are particularly vulnerable because most do not have the maturity to handle problems related to FB or be aware of the dangers.
“Even if they are aware of the dangers, they can't often see the danger in front of them. Even adults don't react fast enough to FB risks, what more children of that age,” she says.
Along with the threat of paedophiles, there is also worry that young children will be subjected to unscrupulous advertisers and marketers on Facebook, or have their personal data sold to advertisers.
Not surprisingly, Zuckerberg has already been lobbied by a coalition of consumer, privacy and child advocacy groups to keep children's data confidential and the site ad-free for the below-13s in the United States.
For bank officer Aslina, addiction is her big worry.
“Just like adults, kids tend to spend way too much time on Facebook and can get addicted to it. Instead of studying or socialising with friends and playing games or sports, they will be logged on FB.”
And, cautions teacher Mary K, parents might not be able to withstand another pressure should FB open its doors to pre-teens peer pressure.
“Now they will be pressured to join because all their friends are on it. It will be a difficult time for parents, “ she says.
Arshavin agrees.
“I asked my 16-year-old daughter why she is on FB, and she said it was to watch what her friends are up to. But when I asked her to log off, she just whined about what she would be missing,” he says.
Calling FB a “different beast altogether”, Choy who is a proponent of the Internet as a study tool vows to keep her children away from it as long as she can.
“I really believe all young kids should have access to the Internet. My six-year-old can Google search for any information related to his hobbies or studies at any time with the tablet. YouTube has given him access to various documentaries he can watch and learn from. And why not? Technology and the Internet have made learning exciting. It has allowed my children to think out of the box. I just don't think they should have an FB account at an early age,” she says.
If parents do decide to let the child open a FB account, she adds, they would need to constantly talk to them about the hazards and teach them good cyber habits.
“Explain over and over again why they should not reveal sensitive information like their names, location of the moment and place of residence. And check, check, check their FB settings,” she stresses.
And constantly but silently read their children's postings to check for trouble, she adds.
This is something Alina does diligently with her two pre-teen children who are registered on FB.
“In the beginning, I was worried that I was making the wrong decision to let them get their own profiles on FB. But I read up on it and made sure that I know what is in store for them. Then I went through all the safety and security features available on FB with them before we registered.”
Most importantly, she adds, she always reminds them to be as cautious online as they would be in the real world.
Sharil agrees children should be taught as early as possible that rules and regulations exist online just as they do offline, and that there are dangerous areas online just as there are dangerous areas or things in the real world.
It is parents' responsibility to cultivate security awareness in their children and educate them on safe Internet usage, says Husin.
“Parents must be alert of any unusual activities of their children on the Net and take the appropriate action to rectify if their child gets caught in any undesirable activities online.”
Sharil, however, reiterates that parents are the best judge of whether their child is ready for Facebook themselves.
“It all goes back to the basic skills of parenting and instilling good moral values in their children. Children need guidance and supervision. Only parents can do this effectively. Teachers, NGOs and the broader community can help but they can never replace the parent,” he notes.
Crucially, parents are at the frontlines of their children's defence, says Sharil.
“Parents should continue to monitor their children's online activities while encouraging appropriate online behaviour. They should not totally depend on Facebook's parenting' facilities. Online tools and technologies can never replace the care and guidance that parents can give.”
Ultimately, he adds, it is extremely important for parents and guardians to become good role models for their children when they are online.
(Reuters) - Four out of five Facebook Inc users have never bought a product or service as a result of advertising or comments on the social network site, a Reuters/Ipsos poll shows, in the latest sign that much more needs to be done to turn its 900 million customer base into advertising dollars.
The online poll also found that 34 percent of Facebook users surveyed were spending less time on the website than six months ago, whereas only 20 percent were spending more.
The findings underscore investors' worries about Facebook's money-making abilities that have pushed the stock down 29 percent since its initial public offering last month, reducing its market value by $30 billion to roughly $74 billion.
About 44 percent of respondents said the botched market debut has made them less favorable toward Facebook, according to the survey conducted from May 31 to June 4. The poll included 1,032 Americans, 21 percent of whom had no Facebook account.
Facebook's 900 million users make it among the most popular online destinations, challenging entrenched Internet players such as Google Inc and Yahoo Inc. But not everyone is convinced that the company has figured out how to translate that popularity into a business that can justify its lofty valuation.
Shares of Facebook closed Monday's regular trading session down 3 percent at $26.90. Facebook did not have an immediate comment on the survey.
While the survey did not ask how other forms of advertising affected purchasing behavior, a February study by research firm eMarketer suggests that Facebook fared worse than email or direct-mail marketing in terms of influencing consumers' purchasing decisions.
"It shows that Facebook has work to do in terms of making its advertising more effective and more relevant to people," eMarketer analyst Debra Williamson said.
Those concerns were exacerbated last month when General Motors Co, the third largest advertiser in the United States, said it would stop paid-advertising on Facebook.
Measuring the effectiveness of advertising can be tricky, particularly for brand marketing in which the goal is to influence future purchases rather than generate immediate sales.
And the success of an ad campaign must be considered in relation to the product, said Steve Hasker, president of Global Media Products and Advertiser Solutions at Nielsen.
"If you are advertising Porsche motor cars and you can get 20 percent of people to make a purchase that's an astonishingly high conversion rate," said Hasker.
"If you are selling instant noodles, maybe it's not," he
WANING ENGAGEMENT
About two out of five people polled by Reuters and Ipsos Public Affairs said they used Facebook every day. Nearly half of the Facebook users polled spent about the same amount of time on the social network as six months ago.
The survey provides a look at the trends considered vital to Facebook's future at a time when the company has faced a harsh reception on Wall Street.
Facebook's $16 billion IPO, one the world's largest, made the U.S. company founded by Mark Zuckerberg the first to debut on markets with a capitalization of more than $100 billion.
It's coming out-party, which culminated years of breakneck growth for the social and business phenomenon, was marred by trading glitches on the Nasdaq exchange. A decision to call certain financial analysts ahead of the IPO and caution them about weakness in its business during the second quarter has triggered several lawsuits against Facebook and its underwriters.
Forty-six percent of survey respondents said the Facebook IPO had made them less favorable towards investing in the stock market in general.
While Facebook generated $3.7 billion in revenue last year, mostly from ads on its website, sales growth is slowing.
Consumers' increasing use of smartphones to access Facebook has been a drag on the company's revenue. It offers only limited advertising on the mobile version of its site, and analysts say the company has yet to figure out the ideal way to make money from mobile users.
Facebook competes for online ads with Google, the world's No. 1 Web search engine, which generated roughly $38 billion in revenue last year. Google's search ads, which appear alongside the company's search results, are considered among the most effective means of marketing.
The most frequent Facebook users are aged 18 to 34, according to the Reuters/Ipsos survey, with 60 percent of that group being daily users. Among people aged 55 years and above, 29 percent said they were daily users.
Of the 34 percent spending less time on the social network, their chief reason was that the site was "boring," "not relevant" or "not useful," while privacy concerns ranked third.
The survey has a "credibility interval" of plus or minus 3.5 percentage points.
Facebook shares fall below $30 as US authorities begin investigation into IPO
Shares continue to slump on Wall Street as lawsuits against founder Mark Zuckerberg allege company misled investors
Electronic screens show the price of Facebook shares after they began trading in New York earlier this month. Photograph: Richard Drew/AP
Facebook's shares dipped below $30 Tuesday as the company's shares hit new lows and continued to struggle in the wake of its massive initial public offering (IPO).
Even as US stock markets bounced back from falls last week, Facebook's shares slumped 9.62% to end the day at $28.84 – almost $10 below the $38 price set at their IPO earlier this month. Stock markets in the US, which had been closed on Monday for Memorial Day, ended up for the day.
The share slide means Facebook is now valued at $61.98bn, a sharp fall from the $104bn it was valued at when the company went public on 18 May.
The IPO has proved a disaster for Facebook and its bankers. US authorities are investigating allegations that the company gave critical information to some investors and not others. Shareholders have launched class action lawsuits against founder Mark Zuckerberg, the company and its bankers, including lead bank Morgan Stanley.
Walter Zimmermann, senior technical analyst at United-ICAP, said there was plenty of evidence that the stock could fall further. He said the share sale had represented "a mania of historic proportions".
"This was an IPO that was going to save California and uplift the western world. It was so overhyped and overvalued that it could only fall," he said.
Some traders pointed to technical reasons for the stock's continuing woes. Trading in Facebook options – contracts that allow investors to make bets on the direction of a company's shares – started Tuesday. Traders can now also "short" Facebook shares, betting that the price will fall.
Sam Hamadeh, founder of analyst PrivCo, said most of the options were "bearish" meaning traders were betting on price falls and that popular contracts were putting Facebook's share price in the mid $20s for June and July. PrivCo estimated Facebook's shares were worth $25 ahead of the IPO.
"The shares would have probably fallen anyway but this probably sped the process up a little bit," he said.
Zimmerman said discussions of technical issues missed a wider point. He said Facebook had sold so many shares – 96m – that there was little appetite from investors who had not bought shares. "Who is left to buy?" he said.
News that the company is considering building its own mobile device, an area where it has struggled to make money, seems to have been shrugged off by investors.
Last week law firm Robbins Geller launched a class action lawsuit on behalf of Facebook investors against the company and its bankers. Massachusetts' secretary of commonwealth William Galvin has sent a subpoena to Morgan Stanley demanding more details of what the bank and Facebook executives told select investors ahead of the IPO.
THERE were two grand illusions about the American economy in the first decade of the 21st century. One was the idea that housing prices were no longer tethered to normal economic trends, and instead would just keep going up and up. The second was the idea that in the age of Web 2.0, we were well on our way to figuring out how to make lots and lots of money on the Internet. Josh Haner/The New York Times Ross Doutha
The first idea collapsed along with housing prices and the stock market in 2007 and 2008. But the Web 2.0 illusion survived long enough to cost credulous investors a small fortune last week, in Facebook’s disaster of an initial public offering.
I will confess to taking a certain amount of dyspeptic pleasure from Facebook’s hard landing, which had Bloomberg Businessweek declaring the I.P.O. “the biggest flop of the decade” after five days of trading. Of all the major hubs of Internet-era excitement, Mark Zuckerberg’s social networking site has always struck me as one of the most noxious, dependent for its success on the darker aspects of online life: the zeal for constant self-fashioning and self-promotion, the pursuit of virtual forms of “community” and “friendship” that bear only a passing resemblance to the genuine article, and the relentless diminution of the private sphere in the quest for advertising dollars.
But even readers who love Facebook, or at least cannot imagine life without it, should see its stock market failure as a sign of the commercial limits of the Internet.
As The New Yorker’s John Cassidy pointed out in one of the more perceptive prelaunch pieces, the problem is not that Facebook doesn’t make money. It’s that it doesn’t make that much money, and doesn’t have an obvious way to make that much more of it, because (like so many online concerns) it hasn’t figured out how to effectively monetize its million upon millions of users. The result is a company that’s successful, certainly, but whose balance sheet is much less impressive than its ubiquitous online presence would suggest.
This “huge reach, limited profitability” problem is characteristic of the digital economy as a whole. As the George Mason University economist Tyler Cowen wrote in his 2011 e-book, “The Great Stagnation,” the Internet is a wonder when it comes to generating “cheap fun.” But because “so many of its products are free,” and because so much of a typical Web company’s work is “performed more or less automatically by the software and the servers,” the online world is rather less impressive when it comes to generating job growth.
It’s telling, in this regard, that the companies most often cited as digital-era successes, Apple and Amazon, both have business models that are firmly rooted in the production and delivery of nonvirtual goods. Apple’s core competency is building better and more beautiful appliances; Amazon’s is delivering everything from appliances to DVDs to diapers more swiftly and cheaply to your door.By contrast, the more purely digital a company’s product, the fewer jobs it tends to create and the fewer dollars it can earn per user — a reality that journalists have become all too familiar with these last 10 years, and that Facebook’s investors collided with last week. There are exceptions to this rule, but not all that many: even pornography, long one of the Internet’s biggest moneymakers, has become steadily less profitable as amateur sites and videos have proliferated and the “professionals” have lost their monopoly on smut.The German philosopher Josef Pieper wrote a book in 1952 entitled “Leisure: The Basis of Culture.” Pieper would no doubt be underwhelmed by the kind of culture that flourishes online, but leisure is clearly the basis of the Internet. From the lowbrow to the highbrow, LOLcats to Wikipedia, vast amounts of Internet content are created by people with no expectation of remuneration. The “new economy,” in this sense, isn’t always even a commercial economy at all. Instead, as Slate’s Matthew Yglesias has suggested, it’s a kind of hobbyist’s paradise, one that’s subsidized by surpluses from the old economy it was supposed to gradually replace.
A glance at the Bureau of Labor Statistics’ most recent unemployment numbers bears this reality out. Despite nearly two decades of dot-com enthusiasm, the information sector is still quite small relative to other sectors of the economy; it currently has one of the nation’s higher unemployment rates; and it’s one of the few sectors where unemployment has actually risen over the last year.None of this makes the Internet any less revolutionary. But it’s created a cultural revolution more than an economic one. Twitter is not the Ford Motor Company; Google is not General Electric. And except when he sells our eyeballs to advertisers for a pittance, we won’t all be working for Mark Zuckerberg someday.- IHT
The lawsuit charges the defendants with failing to disclose "a severe and pronounced reduction" in forecasts for Facebook's revenue growth in the run-up to Friday's IPO.
Facebook, Morgan Stanley and some of the biggest names in Silicon Valley are being pursued over the social network's disastrous share sale by the law firm that won a $7bn settlement for Enron's shareholders.
Robbins Geller is co-ordinating a class action lawsuit alleging that Facebook and its bankers misled investors about the true state of their business while informing a handful of privileged clients about the company's true prospects.
The lawsuit, filed in New York, names Mark Zuckerberg, Facebook's founder, as a defendant, as well as top Silicon Valley investors Peter Thiel and Marc Andreessen, and Goldman Sachs, JP Morgan and Barclays Capital.
The lawsuit, filed in the U.S. District Court in Manhattan this morning, charges the defendants with failing to disclose in the critical days leading up to Friday's initial public offering "a severe and pronounced reduction" in forecasts for Facebook's revenue growth, as users more and more access Facebook through mobile devices, according to Reuters, which cited a law firm for the plaintiffs. (The case is Brian Roffe Profit Sharing Plan v. Facebook, 12-04081.)
Earlier this month, Facebook updated its filings with the Securities and Exchange Commission to say that the shift to smartphones and other mobile gadgets is cutting into the prices it can set for advertisers, which would in turn hurt the company's revenue. In March, the social network had 488 million monthly average unique users of its mobile products, out of a total of just over 900 million registered users.
The plaintiffs charge that the changes to the forecast by several underwriters of the IPO were only "selectively disclosed" to a small group of preferred investors and not to the investment community at large. "The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," the complaint says, per the Reuters report.
Facebook's stock opened Friday priced at $38 and, aside from a slight uptick right at the start, has been trading lower since then. It closed at $31 last night. In early trading today, shares are up better than three percent to around $32.
A report from well-known Wall Street watcher Henry Blodget, citing an unnamed source, posits that a Facebook executive was responsible for telling institutional investors, but not smaller investors, about the reduction in revenue estimates.
Speaking on CBS This Morning today, Blodget described the sequence of events regarding the estimates and the failure to fully share material information. "The fact that it was only distributed verbally to a handful of institutions as opposed to all investors is a problem," he said.
This isn't the only lawsuit related to Facebook's IPO. A Maryland investor, for instance, is suing the Nasdaq stock exchange over glitches in how it handled the offering.
We're reaching out to Facebook for comment and will update this story when we hear back.
by Jonathan E. Skillings
Facebook, banks sued over pre-IPO analyst calls
Wed May 23, 2012 11:02am EDT
(Reuters) - Facebook Inc and banks including Morgan Stanley were sued by the social networking leader's shareholders, who claimed the defendants hid Facebook's weakened growth forecasts ahead of its $16 billion initial public offering.
The defendants, who also include Facebook Chief Executive Officer Mark Zuckerberg, were accused of concealing from investors during the IPO marketing process "a severe and pronounced reduction" in revenue growth forecasts, resulting from increased use of its app or website through mobile devices. Facebook went public last week.
The lawsuit was filed in U.S. District Court in Manhattan on Wednesday, according to a law firm for the plaintiffs. A day earlier, a similar lawsuit by a different investor was filed in a California state court, according to a law firm involved in that case.
In the New York case, shareholders said research analysts at several underwriters had lowered their business forecasts for Facebook during the IPO process, but that these changes were "selectively disclosed by defendants to certain preferred investors" rather than to the public generally.
"The value of Facebook common stock has declined substantially and plaintiffs and the class have sustained damages as a result," the complaint said.
Representatives of Facebook and Morgan Stanley did not immediately respond to requests for comment. Facebook shares fell 18.4 percent from their $38 IPO price in the first three days of trading, reducing the value of stock sold in the IPO by more than $2.9 billion.
(Reporting by Dan Levine in San Francisco and Jonathan Stempel in New York; Editing by Gerald E. McCormick and Lisa Von Ahn)
Political advertisers are going to flock to FB this year
There’s certainly money in politics, and Facebook knows it. The company, now under pressure to to justify its enormous $104 billion IPO, is trying to hire someone to maximize political advertising sales during the 2012 election season in the U.S.
“The Client Partner will establish and strengthen key relationships with national political campaigns and organizations with a focus on driving revenue, platform adoption, advertiser education, and advertiser satisfaction,” the posting on Facebook's website says.
How much money is in politics for Facebook? That's hard to say. But with the rise of the Super PAC, campaign spending on advertising will likely reach record-breaking levels this year. A growing percentage of that is moving online, in part because fewer people are watching live TV than during previous election years, according to the global ad agency WPP. The Hill reports that the Obama campaign alone is on track to spend $35 million on total online advertising this year, up from $16 million in 2008.
Unlike other advertisers that have questioned the value of Facebook this week, both the Romney and Obama presidential campaigns are likely to appreciate Facebook's importance. It had 40 million U.S. users in 2008 compared with 160 million today—almost the entire American voting public, according toThe Guardian.
So, yes, we’ll be seeing a lot more politics in and next to our News Feeds over the next few months, targeted based on our activity and our friends' activity on the network. Whether the lifting of corporate spending limits on political campaigns, a result of a Supreme Court decision in 2010, will actually be a meaningful boost Facebook’s bottom line this year is unknown. The company’s total advertising revenue worldwide was about $3 billion in 2011.
“I may have one later,” quips Tan on opening an account but he will be counting the windfall from the 3.5 million shares his company, MOL Global Bhd, owns in Facebook once the company is listed on either the New York Stock Exchange or Nasdaq.
Based on an assumption that Facebook shares start trading at US$40 post-initial public offering, Tan’s MOL Global stands to pocket RM420mil for its shares.
Speaking to StarBizWeek, Tan recollects how he came about getting his hands on a tiny but valuable stake in Facebook.
Tan: ‘We don’t want to hold them for too long.’
Friendster was among the first social networking websites. It preceded MySpace and Facebook. Starting operations in 2003, Friendster found the going tough and lost money for years.
The company continued to raise but spent money aggressively. In running up losses, Friendster had, nonetheless, built up a base of 140 million registered users, of which 40 million were active.
Tan said the losses then stemmed from Friendster not monetising its user base. Finding it hard to make money from its users, it was losing an average of US$10mil a year.
Eventually, the patience of the owners and investors in Friendster wore thin and they wanted to exit the business. Friendster then called for a process to sell the business and now Friendster CEO, Ganesh Kumar Bangah, who was then working with Tan, informed him that Friendster was for sale.
“I asked for the numbers and found that 140 million registered users and 40 million active users was interesting. If we could make them spend some money, maybe Friendster would be a good investment. Of course, the downside was the business will continue to lose US$10mil a year,” he said.
Tan said the owners of Friendster initially wanted US$100mil for the business but with losses mounting, he knew no one would pay that much for the company. “At that time, Facebook wanted to buy Friendster’s patents but Facebook was willing to pay US$10mil cash and later increased it to US$20mil cash.”
Tan was made to understand then that the owners felt that taking US$20mil only to lose US$10mil a year will soon see that cash vanish and then decided to accept US$40mil for Friendster but wanted a quick sale. “They gave the potential buyers about a week to decide. Many people were looking, including large firms from China and Japan, at Friendster.
“They were much larger than MOL but with the owners of Friendster needing a fast sale, I told Ganesh to do a quick due diligence on Friendster.
“We took two days for the due diligence and made a bid. We said since Friendster owed people US$2mil, we offered US$38mil.
“With other potential buyers doing their due diligence, I told them that if they accepted US$38mil, we will do the deal right away. They accepted our proposal,” said Tan.
After buying Friendster in 2008, Tan then turned his attention to Facebook, which remained interested in Friendster’s patents and whose offer of US$20mil cash for the technology rights was still on the table. “We had a conference call with the people at Facebook. I accepted their price but I wanted shares.”
Facebook officials told him that Mark Zuckerberg, the boss of Facebook, did not want to dilute the shares in the company but Tan stood firm and said “if there was no shares, forget it”.
Tan insisted on getting shares in Facebook because he felt the company will be big in the future. Finally, Zuckerberg agreed to a share exchange for the patents and Tan got his 700,000 shares. His shares have grown to 3.5 million following a 5-for-1 split in Facebook’s shares before the IPO process.
Tan did not leave Friendster to languish but devised a plan to get the social networking website to breakeven point. He closed the US, Singapore and Australia offices to cut cost and began rebuilding the company.
This year, Friendster has stopped the bleeding and Tan felt the company has become “quite valuable”.
“The number of active users on Friendster has fallen from 40 million to four million but these four million spend money with us. We put games and all kind of things on the website and they spend money. If they didn’t, we cannot monetise the business,” he said.
Potentially, Tan values his Internet business at around RM1bil. It does business in Malaysia, Singapore, Thailand, the Philippines, Indonesia and India and is trying to get into Vietnam and many other countries.
MOL makes money from points people buy to play online games. It is also a payments gateway and is a payment partner for Facebook and Zynga, which is the creator of the hugely popular Farmville.
Tan said business models employed by companies such as Zynga, instead of relying on advertising revenue, was how large sums of money can be made from the Internet.
“People play and buy cows and tractors for their game. It’s amazing why people pay so much for that and I cannot imagine it.
“I tell my kids ‘you don’t play Farmville. If you want to farm, you can go to Bukit Tinggi. I will give you a real farm’,” he laughs.
Will he hold or sell his Facebook shares?
“We will see where it goes,” said Tan. “We will probably sell them for our business. We don’t want to hold them for too long but will see where the shares go after the IPO.”
At any price, the Facebook shares Tan owns has been hugely rewarding and the profit from the shares means the Friendster acquisition was paid for plus a lot extra profit on the side. “We were lucky,” he said.
So where does this investment rank among the many that Tan has executed in his corporate life?
“It’s one of the good ones but none can beat DiGi,” he said. “DiGi was my best investment and I should have stayed with it. I sold when DiGi had a market capitalisation of RM5bil to RM6bil. Today, the company is worth some RM31bil.
“That’s the big one that got away,” he lamented.
Vincent Tan awaits Facebook IPO windfall
By CHOONG EN HAN han@thestar.com.my
His stake in the social networking service company may be worth RM420m
PETALING JAYA: Tan Sri Vincent Tan is definitely going to “like” the much anticipated Facebook Inc initial public offering (IPO) as his stake in the world's largest social networking service company could be worth as much as RM420mil.
MOL Global Bhd, which is controlled by Tan, is said to have 3.5 million shares in Facebook and assuming the IPO price is set at US$40 a piece, this would translate to US$140mil (RM420mil), and even more after the listing. sources said.
However, the amount is still an estimated value as Facebook has yet to reveal its share price information and its valuation is still speculative.
Facebook has been discussing raising as much as US$10bil, making the IPO the biggest Internet or technology IPO the market has ever seen.
“With the outstanding shares of Facebook of about 1.88 billion, the stake of MOL does not even come close to 1%,” said the source.
Given the share base of Facebook, MOL Global's stake represents about 0.19% of the social networking service.
MOL Global is currently the payment partner for Facebook, as well as with game developer Zynga, which made its name through popular social games such as Farmville.
MOL Global first got its hands on the stake in Facebook in 2010 when it sold off the patents of Friendster, the world's first social networking site, to Facebook.
As part of the deal, it received 700,000 shares in Facebook which subsequently increased to 3.5 million shares last year after Facebook initiated a 5-for-1 split of the company's shares.
MOL Global made global headlines when it acquired Friendster for US$39mil in 2008, after winning the bid in an open tender against Chinese game and instant messaging company Tencent and other bidders.
According to regulatory filings for the US IPO, Facebook founder Mark Zuckerberg currently has a 28.4% stake in his company, with about 533.8 million shares.
The company said it conducted its own valuation of its stock at the end of each quarter, and as of Dec 31, it had determined its shares to be worth US$29.73 a piece.
In 2011, Facebook pocketed about US$1bil on a revenue of US$3.7bil with over 845 million monthly active users. In 2010, it made US$606mil.
The company's main revenue are derived from advertising, while another US$557mil came from payments, with most of the non-advertising funds coming from social-gaming partner Zynga.
M'sians to benefit from facebook IPO windfall
A FEW weeks ago, the fortunes of 70 households in an isolated farming village in Spain changed forever. Initially the residents of Sodeto wanted to give Spain's huge Christmas lottery, known as El Gordo, a miss, because they were facing tough times due to the economic downturn and a severe drought.
But they bought tickets anyway out of loyalty to the homemakers' association and they hit the jackpot. Some of the farmers and unemployed people became instant millionaires.
Everyone in town had a share except for one man, who was apparently overlooked. Sadly, he will never find out what it takes to make a bet.
Facebook is a social networking company that has changed the lives of many, and perhaps, destroyed some too. But who would have thought that Mark Zuckerberg and his college roommates could have created such a company way back in 2004 that could be raking revenues of more than US$3.7bil today.
Facebook started as a site that allowed students to interact via the Web, but later made accessible to everyone, thereby intensifying competition with sites such as MySpace and Friendster, founded two years before.
Going public: A ‘like’ sign is seen at the main entrance of Facebook’s headquarters in Menlo Park, California. Zuckerberg (inset) says the scale of the technology and infrastructure that must be built is unprecedented — AFP
Eight years later, it is going for a listing on the New York Stock Exchange or Nasdaq. The company is considering a valuation of US$75bil to US$100bil. Going forward, its biggest challenge is about keeping the advertising momentum because advertising is its key source of revenue.
Today, Facebook has over 800 million users and the numbers are growing every day because Facebook has created enough buzz that even a seven-year-old or a 60-year-old wants to get connected on Facebook.
Out of all this buzz, who would have thought that a Malaysian company MOL Global Ltd would have something to cheer about as Facebook goes for listing.
This smallish company is making headlines like never before.
Tan is a well-known billionaire who has made a lot of bets, some have made him richer, others just fizzled out. Today, his empire spans across several sectors and several countries and he continues to make more bets to expand it further.
The story of MOL Global began in 2000, during the dot.com era.
He bought over his brother Tan Sri Danny Tan's company, Dijaya Corp, and renamed it MOL.Com Bhd. Like a venture capitalist, he invested in over 30 Internet companies, including Bangah's MOL Access. Of the 30, perhaps two or three grew.
MOL Access is involved in online games and was subsequently listed on the Mesdaq board in 2003, but privatised in 2008.
In late 2009, MOL.Com bought over Friendster for US$39mil and, in the same year, MOL Global was set up in Singapore. Today MOL Global owns Friendster and the MOL Access Portal.
In July 2010, Facebook forged a partnership with MOL Global for the patents of Friendster. For that, MOL Global received 700,000 shares in Facebook stock and that explains why it has a stake in Facebook.
Today, MOL Global's stake could be potentially worth US$140mil on assumption that Facebook may be valued at US$40 a share but any gain can only be realised if the shares are sold and there is a capital repayment or dividend payout.
Analysts are comparing Google's valuation with that of Facebook. The world's favourite search engine went public in 2004 and Google's shares were priced at US$85 at issue but are now at US$583. Can Facebook reach that level?
That aside, a question to ponder is, had Tan pushed the growth of Friendster, would Friendster's position be like Facebook today?
Whatever, only Tan knows if this was his best bet ever. Who will ever know? Deputy news editor B.K. Sidhu hopes Zuckerberg will know how to reward the 845 million Facebook users who have helped him get his biggest break in his life and if he needs lessons on goodwill, then he should read up how Maxis Bhd rewarded some of its users when the company was listed and re-listed.
The news of Steve Job’s death caught the social media world by storm late Wednesday, with an outpour of people thanking the tech visionary for changing the way they live their lives.
Apple announced in a statement posted to its company site that its founder and former CEO died after his long battle with pancreatic cancer. In 2004, Jobs received a liver transplant and took several medical leaves of absences in recent years before finally resigning as CEO of Apple this summer.
“You inspired millions and changed the way we look at technology,” Facebook CEO Mark Zuckerberg wrote on his Facebook page. “No yardstick of quality could measure your actions.”
At press time, nearly 65,000 people “liked” Zuckerberg’s status, with many adding their own condolences to the message.
“My condolences, Steve, on the passing of your business partner and friend,” wrote Bruce Ansley from Baltimore, Maryland. “Together you helped usher in a new era and countless lives have been enhanced because of your efforts and that of Steve Jobs, may he rest in peace.” Microsoft Chairman Bill Gates wrote a message on Facebook to address the news: “Steve and I first met nearly 30 years ago, and have been colleagues, competitors and friends over the course of more than half our lives. The world rarely sees someone who has had the profound impact Steve has had, the effects of which will be felt for many generations to come,” Gates wrote."I will miss Steve immensely."
President Barack Obama also released a statement on WhiteHouse.gov: “Michelle and I are saddened to learn of the passing of Steve Jobs. Steve was among the greatest of American innovators - brave enough to think differently, bold enough to believe he could change the world, and talented enough to do it,” Obama said.
“By building one of the planet’s most successful companies from his garage, he exemplified the spirit of American ingenuity,” Obama said. “By making computers personal and putting the internet in our pockets, he made the information revolution not only accessible, but intuitive and fun.”
Meanwhile, phrases such as “ThankYouSteve,” “RIP Steve Jobs” and “iSad” immediately began to trend on Twitter following the news. “Pixar” also shot up to the top of the trending list, as many remembered Jobs’s role as former Pixar chief and Disney executive.
Those in the tech industry weren’t the only ones to share words of sympathy on social networking sites: “Steve lived the California Dream every day of his life and he changed the world and inspired all of us,” Arnold Swarzenegger wrote on Twitter.
News of Jobs’ death comes one day after the company unveiled the fifth generation of the iPhone, the iPhone 4S, which Jobs played in integral role in developing.
“I have always said that if there ever came a day when I could no longer meet my duties and expectations as Apple’s CEO, I would be the first to let you know,” Jobs wrote in a letter released by the company when he left. “Unfortunately, that day has come.”
Highlights from the life of pioneering inventor and Apple co-founder who has died aged 56
David Batty
guardian.co.uk,
From left to right: Steve Jobs, John Sculley and Steve Wozniak unveil the Apple IIc computer in San Francisco in 1984. Photograph: Sal Veder/AP
1955Steve Jobs is born in San Francisco on 24 February 1955, and adopted by Paul and Clara Jobs of Mountain View, California.
1974 He takes a job at videogame company Atari Inc but resigns after a few months to travel to India.
1975 Jobs and his friend Steve Wozniak build a prototype computer in the garage of Jobs' parents.
1976Jobs and Wozniak co-found Apple Computer to sell their machines, staring with the Apple I.
1977 The Apple II is launched. The first successful mass-market computer, it remains in production for 16 years.
1980 The company's second computer, the Apple III, is launched but proves a commercial failure, plagued by faulty construction.
1983 Apple launches the Lisa, the first personal computer controlled by on-screen icons activated at the click of a mouse. But it also proves unsuccessful.
1984 Apple launches the Macintosh computer, which wins rave reviews but suffers disappointing sales.
1985 Apple closes half its six factories, sheds 1,200 employees (a fifth of its staff) and declares its first quarterly loss. Jobs loses a boardroom battle against John Sculley and is forced out of the company.
1986 Jobs buys the computer graphics division of Lucasfilm Ltd, the company owned by Star Wars director George Lucas, and founds what would become Pixar Animation Studios.
1987 Macintosh II is launched in 1987. 1988 Jobs founds NeXT Computer, but it was not a financial success, selling only 50,000 computers.
1995 With Jobs as its chief executive, Pixar releases Toy Story, the first full-length computer animated film, which is a worldwide box office smash.
1996 Apple buys NeXT for $429m (£277m) and uses Jobs' technology to build the next generation of its own software.
1997 Jobs becomes Apple's interim chief executive.
1998 The iMac is launched, a self-contained computer and monitor. Its design eclipses the clunky build of Apple's competitors.
2001 The first iPod goes on sale in October and proves a huge success.
2003 The iTunes music store is launched in April.
2007 The first iPhone is launched. Jobs decides to drop the computer part of Apple's name.
2010 The iPad is launched in April and 3m of the devices are sold in 80 days. Nearly 15m iPads are sold worldwide by the end of the year. Apple's annual sales reach $65bn – a huge rise from $8bn in 2000.
2011 Apple continues to roll out new products to great demand including the iPad 2 and iPhone 4.
By Rik Myslewski in San Francisco • Get more from this author
When sober, F. Scott Fitzgerald may have been devastatingly intelligent, but he got it dead wrong when he wrote "there are no second acts in American lives."
Think Elvis, for example. Or lefty sinkerballer Tommy John of the eponymous surgery. Or, for that matter, Grover Cleveland, whose two acts as US president were separated by a four-year intermission.
In the business world, however, second acts are rare. In the corporate rat race, if you slip in Act I, you're trampled by your fellow rodents – there's no "Tomorrow, and tomorrow, and tomorrow" on that unforgiving stage.
Except for Steve Jobs.
The career of Apple's cofounder and savior not only had a second act, but a long and successful third act that ranged from his return to Apple in 1997 to his resignation this August.
And to further give the lie to Mr. Fitzgerald, Jobs' second act held true to the dramaturgical dictum that as the curtain closes on Act II, our protagonist should be at the end of his rope, facing seemingly insurmountable odds.
Think The Empire Strikes Back, Act II of the original Star Wars trilogy. Think the Red Sox being down three games to zip against the Yankees in 2004. Think Steve Jobs at the end of 1993, with NeXT's hardware business sold at fire-sale prices and Disney stopping the development of Pixar's salvation, Toy Story.
Steve Jobs in April 2010
The end of Jobs' redemptive and triumphant Act III, his death on Wednesday, could be thought to have turned his drama into a tragedy – but possibly more from our points of view than from his. By all accounts, he retained throughout his life the sense of light mortality that he gained when studying eastern philosophies in his youth.
"We're born, we live for a brief instant, and we die." he told Wired in 1996. "It's been happening for a long time."
Speaking at Stanford University in 2005, he said, "No one wants to die. Even people who want to go to heaven don't want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life's change agent."
And in 2008 he told Fortune, "We don't get a chance to do that many things, and every one should be really excellent. Because this is our life.
"Life is brief, and then you die, you know? So this is what we've chosen to do with our life."
And so here's a recounting of the life that Steve Jobs chose – and the life that chose him.
The early years
Jobs was born in San Francisco on February 24, 1955. Shortly thereafter he was adopted by Paul and Clara Jobs of the same city, who had married in 1946 but had been unable to have a child of their own. They named their new son Steven Paul Jobs.
Jobs' biological parents were Joanne Schieble of Green Bay, Wisconson, and Syrian-born Abdulfattah Jandali, unmarried, both 23, and both students at the University of Wisconsin in Madison. It being the straight-laced mid-1950s, for the birth they secretly travelled to San Francisco, a few miles north of a sleepy, orchard-filled patch of Northern California that Jobs would one day help transform into Silicon Valley.
Adoptive father Paul, described by son Steve as "a sort of genius with his hands" in a 1985 Playboy interview, "used to get me things I could take apart and put back together."
Just as, in his later years, he took apart and put back together the company he founded, Apple Computer, when he returned to it in 1997 after a palace coup in 1985 had forced him out of the company that he had founded on April Fools' Day 1976 with Steve Wozniak and Ronald Wayne.
But we're getting ahead of ourselves.
Steve Jobs as a boy
The Jobs family moved to 2066 Crist Drive in Los Altos in the heart of pre-silicon Silicon Valley when Steve was five years old. As a kid, Jobs admitted, he was "a little terror." Today he might have been diagnosed as showing symptoms of ADHD – attention deficit hyperactivity disorder – and have been Adderalled or Ritalinned into submission.
"You should have seen us in third grade," Jobs described himself and his pint-sized co-revolutionaries. "We basically destroyed our teacher. We would let snakes loose in the classroom and explode bombs."
The 1950s may not have been enlightened enough to have accepted Schieble and Jandali's out-of-wedlock child, but neither was it a time when exploding bombs in a public school would call down the wrath of the Department of Homeland Security. In those days, Jobs' behavior was merely part of the "boys will be boys" ethos.
A fourth-grade teacher, Imogene Hill, who Jobs described as "one of the saints in my life," helped tame his rambunctiousness – partially by bribing him with cash if he'd finish his work, according to Anthony Imbimbo's biography written for young adults, Steve Jobs: The Brilliant Mind Behind Apple.
Steve Jobs, front and center. Already
At age 12, Jobs met his first computer. HP engineer and neighbor Larry Lang took Jobs under his wing and, according to Jobs, "... spent a lot of time with me, teaching me stuff." Lang took Jobs and other kids to HP for lectures. "They showed us one of their new desktop computers and let us play on it. I wanted one badly."
When in junior high, Jobs hung out with his friend and fellow geek Bill Fernandez, who – fortunately for the future of personal computing – lived across the street from the Wozniak family, whose son Steven was an inveterate electronics tinkerer.
Steve Wozniak was born in August 1950, making him five years older than Jobs. Despite their age difference, they bonded over their shared love of both electronics and pranks.
In 2007, when giving a Macworld Expo presentation, Jobs' slide-changing clicker malfunctioned. To fill time, he told his audience about one prank that he and Wozniak played when the older prankster was a student at the University of California at Berkeley:
When he was in his mid-teens, Jobs and Wozniak met the famous – infamous? – phone phreaker John Draper (aka Cap'n Crunch, so named after he discovered that a whistle given away in the eponymous cereal could phool fool AT&T's phone system). Inspired by the good Cap'n's success, Wozniak built what was then called a "blue box" – an electronic device that enabled him and friend Jobs to make free phone calls worldwide.
"The famous story about the boxes is when Woz called the Vatican and told them he was Henry Kissinger," Jobs told Playboy. "They had someone going to wake the Pope up in the middle of the night before they figured out it wasn't really Kissinger."
The blue box was Wozniak and Jobs' first commercial product, and established the relationship that would eventually result in the creation of Apple Computer: Wozniak would design, and Jobs would sell.
After high school – and after he had abandoned the blue-box business – Jobs headed off to Reed College in Portland, Oregon, then a notorious hippie haven, well-suited to increasingly hippified Jobs.
He lasted one semester, but continued to live on-campus – not a problem at Reed, nor for that matter at any number of schools during the laid-back early 1970s.
Don't laugh – you went to high school, too
After returning to his family home in 1974, Jobs talked himself into a job at Atari, the pioneering videogame firm that was rolling in cash due to the wild success of its pioneering arcade game, Pong.
His position at Atari got him a tech-troubleshooting trip to Germany, which he extended into a classic hippie pilgrimage to India, where he wandered as an alms-begging mendicant, and famously had his head shaved by a highly amused Indian holy man.
After returning to California – shaved head and all – Jobs was rehired by Atari, and hooked back up with Wozniak. At that point, Wozniak was working at HP, but he would visit Jobs at night at Atari to play that company's Gran Track game for free.
"Woz was a Gran Track addict," Jobs told Playboy. "He would put great quantities of quarters into these games to play them, so I would just let him in at night and let him onto the production floor and he would play Gran Track all night long." But Jobs wasn't being merely magnanimous: "When I came up against a stumbling block on a project, I would get Woz to take a break from his road rally for ten minutes and come and help me."
Jobs also used Wozniak's smarts to design that company's Breakout game. According to Jeffrey Young and William Simon is their unauthorized biography, iCon Steve Jobs, along with other sources, Jobs took credit for the design and snookered Wozniak out of his rightful share of the pay and bonus that Jobs was given for "his" work.
The "Good Steve" versus "Bad Steve" dynamic that would mark Jobs' persona for the rest of his life was already in place.
Shortly after that epoch-making event, a group of electronics enthusiasts formed the Homebrew Computer Club. In addition to Jobs and Wozniak, members included such soon-to-be-luminaries as George Morrow, Adam Osborne, and Lee Felsenstein. It was among that heady company that Wozniak developed the first prototypes of what was to become the Apple I.
Steve Jobs and Steve Wozniak in 1975
Where Wozniak saw a diverting intellectual challenge, Jobs saw a business opportunity. After the debut of the Altair, "microcomputer" kits were appearing right and left, and Jobs believed that Wozniak's designs – one for a color-capable computer, no less – could find a market.
After some cajoling, Wozniak agreed to Jobs' suggestion that they form a company, and that the company should be named Apple Computer. Although the true source of the name remains cloudy – was it that apples were grown on a commune that Jobs had recently visited, the fact that "Apple" would appear ahead of "Atari" in the phone book (remember phone books?), a tribute to The Beatles? – it was Jobs' idea and Wozniak agreed to it.
Apple's original logo (click to enlarge)
On April 1, 1976, Jobs, Wozniak, and Ronald Wayne – a friend of Jobs from Atari who dropped out of the new company less than two weeks later (and who recently published an autobiography) – signed the paperwork that created Apple Computer. With an order for 50 fully assembled Apple I computers from a tiny Mountain View, California, geek emporium called the Byte Shop, and with the proceeds of the sale of Wozniak's HP-65 calculator and Jobs' VW van, the company was up and running.
The Apple I was less than a rip-roaring success, selling around 200 units, total. Jobs reportedly wanted to sell it for $777.77, but Wozniak thought that was too expensive, so the price was dropped to $666.66 – around $2,500 in today's dollars.
Wozniak's next creation, the Apple II, was a different animal entirely. Wozniak said it should have expansion slots, so it had expansion slots. Jobs said i shoul run without a fan, so they hired someone to invent the smaller, cooler, switching power supply.
By far more important, however, was a decision by Jobs and Wozniak that would affect all of Apple's future product development: the Apple II would be a complete system designed for ease of use, simple operation, and consumer friendliness. Industrial design was also on Jobs' mind: no screws disturbed the Apple II's plastic exterior – they all were on the bottom of its all-plastic case.
A fully tricked-out Apple II – every geek's object of lust (source: oldcomputers.net
Jobs made one more key move at this time: he landed a key investor and business adviser, Mike Markkula, who got the two founders to incorporate Apple in January 1977. Markkula also introduced the duo to Mike Scott, and convinced them to hire him as president of the fledgling outfit. Scott and Jobs clashed almost immediately, the first of many such battles that would lead to Jobs' eventual ouster.
On April 17, 1977, the Apple II debuted at the West Coast Computer Faire, and – as each and every Apple press releases noted for many years afterwards – "ignited the personal computer revolution."
The Macintosh
In 1979, Jobs made his now-famous visit to Xerox PARC (Palo Alto Research Center), a drop-in that – at the risk of hyperbole – changed him, Apple, and personal computing forever:
"They showed me really three things," he said in an interview in the PBS series "Triumph of the Nerds" in 1996. "But I was so blinded by the first one I didn't even really see the other two" – those two being the object-oriented programming language SmallTalk, created by Alan Kay and others, and a fully network collection of over 100 Xerox Alto computers hooked up over Bob Metcalfe's Ethernet.
"I was so blinded by the first thing they showed me which was the graphical user interface," Jobs recalled. "I thought it was the best thing I'd ever seen in my life." He left Xerox PARC determined that Apple would bring GUI-based computing to the masses.
Apple's Lisa – this one with the notorious "Twiggy" drive upgraded to a Sony 400KB "microfloppy" (click to enlarge)
Apple's first effort – largely created without Jobs, who was soon frozen out of the project – was the $10,000 dinosaur-with-a-lousy-floppy-drive-named-"Twiggy" known as the Lisa, which Jobs inexplicably named after the daughter he had conceived in 1977 with then-girlfriend Chris-Ann Brennan but had never formally acknowledged (although Apple insisted that Lisa was actually an acronym for Local Integrated Software Architecture).
After being booted from the Lisa project, Jobs' next chance came thanks to Jef Raskin, an Apple employee who was interested in building an inexpensive computer suitable for the mass market. Raskin had developed a prototype in late 1979 that he dubbed the Macintosh. It wasn't a GUI-equipped device – that came later.
Jobs essentially hijacked Raskin's Macintosh project in 1981, after it had been joined by such now-famous Apple names as Burrell Smith and Bud Tribble. Jobs shortly snagged programmers Andy Hertzfeld, Bill Atkinson, and others. Job's autocratic managment style was soon identified by the team as his "reality distortion field".
The original Macintosh, saying "hello" thanks to MacPaint and a steady hand (click to enlarge)
The development of the Macintosh continued with the team ensconced in a building over which flew a pirate flag, inspired by a quote attributed to Jobs in multiple wordings, but which essentially could be summarized as "Why join the navy if you can be a pirate?"
The Lisa beat the Macintosh to market by a year. When attending the New York rollout, Jobs held a meeting with then-Pepsi president John Sculley, with the goal of enticing him to take the reins at Apple, Mike Scott having been forced out by Markkula the previous year.
At that meeting, Jobs challenged Sculley with the now-famous quote: "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?", as recounted by the Pepsi prez in his 1987 book, Odyssey. Sculley accepted Apple's offer.
It was a masterful sales job by Jobs – but one that he'd live to regret.
But before that miscalculation would come back to haunt him, Jobs had one major triumph to enjoy. On January 22, 1984, during the third quarter of Super Bowl XVIII, while the LA Raiders were busy trouncing the hapless Washington Redskins, Ridley Scott's celebrated 1984 ad told viewers: "On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like '1984'."
Although that showing is popularly known as the one and only time that the ad was televised, it wasn't. Jobs & Co had pulled off another bit of manipulative chicanery. 1984 had been televised once before: on December 15, 1983 at 1am in Twin Falls, Idaho, a town of about 55,000 souls at the time – a ruse that enabled 1984 to be considered for 1983 advertising awards.
Soon after its showy introduction, it bacame apparent that the Macintosh was not going to be the instant hit that Jobs had predicted. Plagued by a 128KB memory allotment – low even for that time – plus a lack of expanability, no hard drive, and other limitations, it failed to attract a critical mass of software developers.
It didn't help, either, that the Mac's graphical user interface was unfamiliar to the developer community – although there was one young, up-and-coming developer who thought the Mac was worth investing in: Bill Gates.
Mac sales tanked. Jobs reportedly blamed everyone but himself – including Sculley – for the seeming failure of his pet project.
He also made the strategic error of alienating both his once-friend Steve Wozniak and the company's Apple II team – still responsible for the bulk of the company's revenue – by ignoring the company's one successful product during an annual meeting.
Wozniak quit Apple - loudly. According to iCon, Wozniak tore into Jobs and his supporters during his resignation, saying: "We had a shareholders' meeting last week and the words 'Apple II' were not mentioned once." Jobs was running out of friends at Apple.
Jobs then made another strategic error by attempting to work behind Sculley's back to get him fired. The machinations involved in his struggle with Sculley and his supporters were complex and many-layered – and the stuff of legend – but in the end Sculley won.
At the end of May 1985, Sculley convinced Apple's board of directors to remove Jobs as general manager of the Macintosh division and deny him any day-to-day operating role in the company – although he was allowed to retain his position as board chairman. Jobs described Sculley's withdrawl of support as being like when "somebody punch[es] you in the stomach and it knocks the wind out of you and you can't breathe."
Jobs and John Sculley – presumably when they were still speaking with one another
On June 1, in an article entitled "Apple Co-Founder Jobs Demoted", the San Jose Mercury News reported that Apple said Jobs would take on "a more global role in product innovations and strategies." After being "demoted," Jobs spent some time in Europe, and when he returned to Cupertino he was asked to move out of his office to a separate building he nicknamed "Siberia", where he pondered his next move. Pun intended.
"I went for a lot of long walks in the woods and didn't really talk to a lot of people," Jobs said about the period ofter his exile to Siberia. But then he began to quietly put together a team of Apple senior engineers to launch the company that eventually became known as NeXT.
On August 15, 1985, Apple's stock was at its lowest point in its history, before or since, closing – when adjusted for three splits since – at $1.8125. In September 1985, after another bout of internecine warfare with Apple management, Jobs tendered his resignation.
In early 1986, Jobs finished selling off all but one of his shares of Apple stock. He kept that single share, he is said to have commented, in order to keep receiving the company's annual reports.
The same Merc article that reported his ouster also said: "As of January, Jobs still owned 11.3 percent of Apple stock, a block that was worth about $120 million Friday, when Apple closed at 17 3/8, down 1/4." As of January 2011, when Apple's market capitalization was hovering around $315bn, 11.3 per cent of Apple stock was worth approximately $35.6bn.
In an interview with Bloomberg Businessweek on October 20, 2010, John Sculley said: "Looking back, it was a big mistake that I was ever hired as [Apple's] CEO."
Jobs' NeXT step
In an interview with Newsweek in late September 1985, Jobs mused about his post-Apple plans: "I personally, man, I want to build things. I'm 30. I'm not ready to be an industry pundit."
Jobs' desire to "build things" led to him gathering the five senior Apple engineers he had been courting and hiring them as the core of his next computing effort, which eventually became known as NeXT.
Apple management, to put it mildly, wasn't pleased, and started legal action against Jobs for a "nefarious scheme" in which, they alleged, he was not only poaching senior staff, but also planning to use proprietary Apple technology and confidential information.
That lawsuit was eventually dropped, but not before Jobs fired back in the press, saying in the same Newsweek interview: "There is nothing ... that says Apple can't compete with us if they think what we're doing is such a great idea. It is hard to think that a $2 billion company with 4,300-plus people couldn't compete with six people in blue jeans."
Jobs soon had a great stroke of luck: billionaire entrepreneur and eventual presidential candidate H. Ross "giant sucking sound" Perot became NeXT's principle investor, as well as – as BusinessWeek put it in an October 1988 cover story – its "head cheerleader".
Salesman Steve and the original NeXT Computer – Jobs' first "Cube"
The workstation line that NeXT created was aimed at scientific and academic users who needed brawny computing power on their desks. It was inarguably elegant, but sold poorly. However, one of those workstations' supported operating systems, Next System (which morphed into NeXTStep), was eventualy key to Jobs returning to Apple in late 1996.
A quick side note. There were at least five different ways of writing NeXTStep, with four being official usages that depended upon exactly what parts or version of it you were referring to: NeXTStep, NeXTStep, NeXTSTEP, and NEXTSTEP – the fifth, which NeXT acknowledged but didn't use, was NextStep. For the sake of sanity, we're going to consistently use NeXTStep. The same goes for the related API definition, OpenStep/OPENSTEP, aka NEXTSTEP 4.0.
The original NeXT Computer seemed to be Jobs' attempt to one-up Apple's Macintosh. It was powered by a Motorola 68030 processor, 68882 FPU, and DSP56001 digital signal processor, all running at 25MHz. When the NeXT Computer debuted in prototype form on October 12, 1988, the top-end Mac of the time – the IIfx – had a 16MHz 68030 and 68882, and no DSP.
Other better-than-Mac features of the NeXT Computer included Display PostScript and built-in Ethernet. The full NeXT system included a 17-inch monochrome 1120-by-832 Megapixel Display – Apple's 1152-by-870 Two-Page Monochrome Display wasn't released until March of 1989. NeXT also offered a 400-dpi laser printer that, since the computer itself included Display PostScript, cost just $2,000 – a steal compared with Apple's 300-dpi LaserWriter IINTX, which had a built-in PostScript interpreter that helped boost its list price to $6,999.
Jobs also added a typical 'I know what's best" touch: rather than a hard drive and/or floppy drive, the NeXT Computer included a 256MB magneto-optical drive – an relatively unusual item in those days – which the original NeXT brochure described as being "bound to become the standard technology of the '90s."
There was, however, a bay inside the NeXT Computer for a hard drive, should you choose to install one. As the brochure pointed out: "Its possible configure [sic] your NeXT system to allow access to truly enormous amounts of storage - approaching one gigabyte and more."
The NeXT Computer was a cubical black box, which led to it often being called the NeXT Cube. That name was then officially applied to the company's next product, 1990's 40MHz 68040–equipped NeXTcube, which appeared along with the color-capable NeXTdimension. The final NeXT line, the NeXTstation, flattend out the cube into a more-standard "pizza-box" shape and added a floppy drive.
But none of NeXT's nifty hardware offerings sold well – although some boxes are still in use. No official total-sales number is available, but it's generally accepted to be in the range of 50,000 – from the debut of the original NeXT Computer in 1988 to the demise of the black beauties in 1993.
NeXT's Interface Builder, which eventually found its way into Mac OS X's Xcode (click to enlarge)
There's one possibly apocryphal anecdote about Jobs' difficulty – and naiveté – in selling NeXT boxes that bears retelling. According to Alan Deutschman's The Second Coming of Steve Jobs, Jobs presented both black and white and color versions of his workstation to a group of Disney execs, hoping to convince them to put in a large order.
In his audience was Jeffrey Katzenberg, head of Disney's feature-film division. After Jobs said that the color NeXT box would put image-making power in the hands of ordinary people, Katzenberg interrupted him. The bare-knuckles exec complimented the black-and-white unit, but he had a different opinion of the color version
"'This is art,' Jeffrey said," according to Deutschman. "'I own animation, and nobody's going to get it.' His voice was fierce and intimidating and commanding. 'It's as if someone comes to date my daughter. I have a shotgun. If someone tries to take this away, I'll blow his balls off.'"
Jobs' reality-distortion field was breached.
Although the NeXT hardware had its fans, sales were skimpy. However, NeXT's Unix-based operating system and its set of libraries, services, and APIs eventually known as OpenStep, attracted many programmers as devoted fans.
Tim Berners-Lee, for example, wrote the first browser, WorldWideWeb, on a NeXT. "This had the advantage that there were some great tools available," he wrote. "[I]t was a great computing environment in general. In fact, I could do in a couple of months what would take more like a year on other platforms, because on the NeXT, a lot of it was done for me already."
The NeXT System's application-development prowess would eventually change Steve Jobs' life – but not before NeXT's hardware business imploded.
The accidental movie mogul
Shortly after Jobs left Apple Computer, he made a $10m investment that would save his bacon after NeXT tanked – an investment made possible in part by a duck by the name of Howard.
George Lucas – of American Graffiti and Star Wars fame – had divorced in 1983 and split his wealth with his wife, as required by California law. He needed cash, in part to finish his next film, Howard the Duck. Lucas' company, Lucasfilm, had a small division that had created computer-generated imagery before it was even called CGI – the "Genesis Effect" sequence in 1982's Star Trek II: The Wrath of Khan is an early example of its groundbreaking work.
At first, Pixar was essentially yet another computer company, albeit one that focused on a narrow niche: high-end computer graphics. The company's Pixar Image Computer was Steve Jobs' Next Computer bumped up by an order of magnitude – or more.
Designed for weather, engineering, science, and medical imaging purposes – check out the 1987 demo reel – the first Pixar Image Computer cost $135,000, needed a $35,000 Sun or SGI workstation to run it, and sold poorly. The price dropped to $30,000 when a second stripped-down version, the P-II, was released. A much more powerful follow-on called the PII-9, however, was also much more expensive – its 3GB RAID array alone cost $300,000.
By all reports, although Jobs kept his eye on Pixar's hardware division, he didn't micromanage Pixar's animation creatives. One Pixar exec, Ralph Guggenheim, told Deutschman that Jobs visited Pixar's offices "no more than five times between 1986 and 1992, no exaggeration."
The Pixar Image Computer: a NeXT box on steroids – lots of steroids
Jobs did, however, throw trendous amounts of cash at Pixar – but to sell the Pixar Image Computer, not to develop the animation output. It didn't work. Like Jobs' NeXT boxes, the Pixar Image Computer never caught on. Fewer than 300 were ever sold, and the business was sold to Vicom in 1990 for $2m. Vicom was bankrupt in a year.
Although Jobs reportedly tried to shut down Pixar's tiny animation group in 1987 and 1988, it started to become a profit center, producing commercials for the California Lottery, Lifesavers, Volkswagen, and others. Eventually, it became the saving grace of the company – along with the fact that Disney Studios was one of the Image Computer's main customers.
After the head-turning success of Pixar's computer-animated short Luxo Jr. and the Academy Award–winning Tin Toy, Jobs tried to salvage Pixar by selling a mass-market commercial version of the 3D software that had been used to create them and the animation group's money-making ads, RenderMan.
Luxo Jr. – the little lamp that (eventually) helped make Steve Jobs a billionaire
That effort was unsuccessful, due in part to RenderMan's complexity. Soon Jobs had two companies – NeXT and Pixar – both on the ropes. Jobs continued to fund the ailing Pixar through a line of credit he had set up, but forced all employees to return their shares in the company, making him the sole owner.
However, in the fall of 1990, a few of Pixar's top creative began discussions with Disney Studios about using their software and expertise to create the first full-length, computer-generated feature film. In 1991 Jobs joined the negotiations, and by May 1991 Pixar had a a three-movie contract with Disney, to begin with Toy Story.
Although Jobs may not have known it at the time, that deal and the fact that he was the company's sole owner was soon to make him very, very rich – but not before his career his rock bottom.
Crash landing
The year 1993 was perhaps the lowest point in Steve Jobs' career. No, scratch that – 1993 was the lowest point in Steve Jobs' career.
An article in Fortune in February of that year makes clear the ambivalence that the industry felt for Jobs at the time. "Sometimes it's hard to tell whether Steve Jobs is a snake-oil salesman or a bona fide visionary," it reads, "a promoter who got lucky or the epitome of the intrepid entrepreneur."
The article goes on to describe Jobs' last-ditch efforts to save NeXT by porting its NeXTStep operating system to run on Intel 486 processors – NeXT boxes ran on Motorola 68030s and 68040s – then licensing it to other companies. The port, to be called NeXTStep 486, had been announced the previous January at NeXTworld Expo, but it hadn't yet appeared.
"It's always taken me twice to get it right," Jobs is quoted as saying. "You never heard of the Apple I."
At the time, Jobs considered Microsoft's Cairo project and Apple and IBM's Taligent effort to be NextStep's prime competitors – and he wasn't too worried about the latter. "Apple has a thousand software engineers," he told Fortune, "who have realized that Taligent is their enemy." IBM, he said, "can't evangelize its way out of a paper bag."
In this NeXTStep demo, Jobs takes some jabs at the computer he helped design in the early 1980s
By this point, most of NeXT's senior execs had bailed or been tossed: cofounders Bud Tribble, Rich Page, and Susan Barnes – software and hardware leads and CFO, respectively – marketing VP Mike Slade, sales VP Todd Rulon-Miller, and marketing manager Jeff Spirer. "Sometimes the people you hired five years ago aren't the right ones to take it forward," Jobs said. "It's nothing personal."
The previous year, Jobs had courted and won a hard-nosed Brit, Peter van Cuylenburg, to be NeXT's president and COO – and to please NeXT's 17.9 per cent investor, Canon. His tenure proved brief. After crowding out long-term NeXTers – "I've put pressure on the company, and not everyone was willing or able to accept it," he told Fortune – van Cuylenburg announced that he was leaving NeXT in March 1993, either fired, resigning. Or a bit of both.
As van Cuylenburg told InfoWorld: "Steve [Jobs] wanted to regain control of the company. There wasn't a meaningful job for me to do."
There are unconfirmed reports that before van Cuylenburg left NeXT, he went behind Jobs' back and called Scott McNealy at Sun, asking him to buy NeXT and install him as CEO. True or not, Sun didn't bail out NeXT.
Jobs paid $100,000 for the NeXT logo ...
The same day that the Fortune article appeared in which Jobs discussed both hardware and software plans for NeXT, InfoWorld ran a front-page article that began: "Next Computer will transform itself into a software company, ceasing production of its workstation line and laying off a large number of employees, sources said."
On February 10, Jobs confirmed the rumor. Canon bought the hardware business for an undisclosed amount after having invested $120 in cash and $55m in debt. Of NeXT's 530 remaining employees, 230 were laid off, and another 100 went to Canon. The remaining 200 stayed with Next Software.
Jobs tried to put a positive spin on leaving the hardware business. "We understand we could work really hard for the next few years and emerge as a good second-tier hardware company," he told The New York Times. "But ... we have a chance to be a first-tier software company."
In the InfoWorld article that leaked Jobs' plan to dump hardware and focus only on NeXT software, one analyst was quoted as saying "This is probably the first really smart business decision Jobs has ever made." He proved to be correct, though in ways he could never have imagined.
... but the NeXTStep logo cost substantially less
NeXTStep Release 3.1, shipped on May 25 at NextWorld Expo in San Francisco, included support for both Motorola and Intel instruction sets, combined in what NeXT called a Multiple Architecture Binary. The Intel-centric install became known as Release 3.1 for Intel Processors, renamed from NeXTStep 486 due to added support for Pentiums.
As upbeat as Jobs attempted to appear in public, however, his heart was in hardware – and he had ploughed millions of dollars of his now-dwindling fortune into NeXT, trying to prove that his tenure as Apple's founder was not a fluke.
When Canon held a now-famous auction on September 15, selling off NeXT's office furniture, manufacturing robots, cafeteria equipment, and unsold NeXT computers at fire-sale prices, Jobs' hardware days seemed over for good.
The next month, Jobs received another blow: after Pixar's creatives held a disasterous screening of their progress on Toy Story for Disney brass on November 19, Disney headman Jeffrey Katzenberg stopped development of the film that Jobs presumably hoped would save Pixar.
"Guys, no matter how much you try to fix it," Disney animation chief Peter Schneider told them, citing the unpleasant personalities of the film's two lead characters as presented in the screening, "it just isn't working."
For Steve Jobs, Christmas 1993 could not have been jolly.
From babysitter to billionaire
Nineteen ninety-four began as a lost year for Steve Jobs – though not for two-year-old Reed Paul Jobs nor, presumably, for Laurene Powell Jobs, Steve's wife of three years. According to numerous sources, Jobs spent a lot of time at home during that period – especially during the beginning of the year.
In February, however, he received good news. After Disney halted the Toy Story project in its tracks, Pixar's creative genius John Lasseter and his staff had taken Katzenberg's criticism to heart, and had rewritten the script. When they took it back to Disney, Katzenberg green-lighted it. Pixar was back in the movie-making business.
At first, Jobs was less than excited about the project, and tried to peddle Pixar to a few potential buyers, including Microsoft.
The turnaround of Jobs' opinion of Pixar came when he attended a lavish Disney event in New York's Central Park in January of 1995 to showcase clips from two of that year's blockbuster animations: Pocahontas, scheduled for summer, and Toy Story, scheduled for the lucrative Thanksgiving time slot.
The three men who made Steve Jobs a billionaire: Buzz Lightyear, Toy Story writer/director John Lasseter, and Woody
Ralph Guggenheim, Toy Story's coproducer, told Alan Deutschman that "Steve went bonkers" at the attention that the Pixar film received at the event, which was attended not only by Disney's top execs, including CEO Michael Eisner, but also New York mayor and celeb Rudi Guliani, plus assorted other VIPs.
"This was the moment when Steve realized the Disney deal would materialize into something much bigger than he had ever imaginied," Guggenheim recalled, "and that Pixar was the way out of his morass with NeXT."
After that event, Jobs became more involved with the day-to-day workings of Pixar. In February, he hired away EFI's CFO Lawrence Levy to take the same position at Pixar, with the goal of taking the company public – and, audaciously, to schedule the IPO for immediately after the Thanksgiving debut of Toy Story.
If the movie were to be a success, the buzz surrounding it would fluff the IPO. If it flopped, so would the IPO. Toy Story debuted on November 22; the IPO was held on November 29. Toy Story was the number one movie in the US on its opening weekend, and went on to be number one for its first three weekends, then number one again during the Christmas/New Years holiday break.
And the IPO? Shares of Pixar – a company that had lost money each year beginning in 1992 – had been pegged to be offered at $12 to $14 in a preparatory SEC filing, but opened at $22 during the first day of trading on the NASDAQ exchange. Shares rose as high as $49.50 during that day before settling back to $39.
Specimen Pixar IPO certificate with Steve Jobs' signature (source: Scripophily.com)
Jobs held 80.2 per cent of Pixar's shares. The IPO made him a very wealthy man. As David Price put it in The Pixar Touch, "Following the IPO, his shares of Pixar were valued at more than $1.1 billion – and the rounding error on that figure was almost as much as the entire value of his Apple holdings when he left Apple a decade earlier."
Back to Cupertino
After the success of Toy Story, Jobs may have been rich, but his wealth came from an industry with which he was unfamiliar. Since he was a 12-year-old, fiddling about with stuff his neighbor HP engineer Larry Lang showed him, his first love was hardware.
And he missed Apple. "It was like the first adult love of your life," he told a New York Times reporter in November 1996, "something that is always special to you, no matter how it turns out."
Fortunately for Jobs, Apple was in the crapper. The much-ridiculed Newton hadn't taken off, Apple was hemorrhaging money from a poorly thought-through OS-licensing scheme, and thanks to its success with Windows 95, Microsoft was eating its lunch.
Ellen Hancock
The Mac's operating system was creaky and unreliable, and efforts to replace it were going nowhere. Apple's "Pink" OS skunkworks had been merged with IBM to form Taligent, which eventually produced the IBM-only CommonPoint, which soon vaporized. Apple next – no pun intended this time – new-OS effort, Copland, was going nowhere fast.
Apple's new, no-nonsense CTO Ellen Hancock decided that Copland was a lost cause, killed it, and in 1996 started shopping around for a third-party operating system to replace the Mac's operating system, at that time System 7.5.
Apple first made an offer to Jean-Louis Gassée, the man John Sculley had picked to replace Jobs as head of Apple's hardware division, to buy his company, Be, and its still-unfinished BeOS, which was slated to power the company's BeBox hardware. Gassée deemed the offer too low, however, and was holding out for $200m – an amount that Apple chairman and CEO Gil Amelio termed "outrageous".
Apple's discussions with Gassée were hardly a well-kept secret, and so – having an operating system of his own to peddle – Jobs called Cupertino. Amelio was out of the country, so Jobs left a message for Hancock.
Jean-Louis Gassée
"I was startled to see Steve Jobs had called," she recalled to the NYT, "but I returned it immediately."
During the ensuing conversation, Jobs was reported to have not made a sales pitch for NeXTStep/OpenStep but only to have discussed operating systems in general – and, likely, Gassée and Be in particular. But it can only be assumed that Hancock, being nobody's fool, knew what was what.
A few days later, a couple of NeXT managers called Apple on their own, and Apple engineers met with them. Soon Jobs himself was invited to Cupertino to talk with Amelio, Hancock, and Apple strategist Doug Solomon. "It was the first time I had set foot on the Apple campus since I left in 1985," Jobs told the NYT.
A week later, NeXT and Be met separately with top Apple execs at a Palo Alto hotel frequented by the Silicon Valley geekerati, and the word was out: Jobs and Apple were courting one another.
And it wasn't only Jobs' operating system that Apple was interested in. "We always talked about him being on the inside," Hancock said at the time. "We're hoping he can show us where to go from here in emerging markets and technologies."
On December 20, 1996, Amelio announced the acquisition of NeXT Software. "We chose Plan A instead of Plan Be," the sooner-be-ex-Apple-CEO is reported to have quipped.
Apple's then-chairman and CEO Gil Amelio on stage with Steve Jobs at Macworld Expo 1997
Then, on January 7, 1997, Amelio gave what many observers ridiculed as the most discombobulated, rambling keynote speech imaginable at Macworld Expo in San Francisco – one that your reporter once described as having "a lack of focus matched only by Apple's product line, which was lumbered with ill-performing Performas and other humdrum machines."
As Amelio mercifully brought his talk to an end, he invited Jobs on stage to demo what Apple had just bought: NeXTStep and its cutting-edge OpenStep development environment. After enduring well over an hour of Amelio's stultifying speechifying, the crowd went wild when Jobs bounded onto the stage, strutting and beaming as he showed off his slick software. His adoring fans bruised their palms with applause, and a new era – both for Jobs and for Apple – began.
And Hancock? The person who did more to return Steve to his "first adult love" than anyone else at Apple? Word soon began to circulate among Apple managers that, behind her back, Jobs dismissed her as a "bozo".
Of the $427 million in cash and stock that Apple paid for NeXT, Jobs took $100 million for himself and kept all 1.5 million shares of Apple stock that were part of the deal. No NeXT staffer got as much as a share.
Good Steve. Bad Steve.
Jobs takes over
When Jobs landed at Apple in early 1996, he came without a title any more specific than "adviser" and without any duties more-defined than "advising" – a minister without portfolio, as it were. But that didn't stop him from remaking Apple into a company more to his liking.
However, despite all the buzz of a "palace coup", the lack of faith in Amelio by many Apple staffers, and the desire by many throughout Silicon Valley for him to take over, a BusinessWeek article from that period quotes Jobs as saying: "People keep trying to suck me in. They want me to be some kind of Superman. But I have no desire to run Apple Computer. I deny it at every turn, but nobody believes me."
Technically, Jobs may not have been running Apple, but he was certainly influential. He convinced Amelio to starve Sculley's pet project, the Newton. He talked Amelio into revamping his executive staff, and in 11 weeks, half of the eight were Jobs' recommendations, including Jon Rubinstein running hardware and Avie Tevanian running software – both of whom had worked with Jobs at NeXT.
Jobs lobbied for the demotion of Apple COO Marco Landi, Amelio agreed, Landi quit. Jobs lobbied against CTO Ellen "bozo" Hancock, and Amelio took R&D away from her. Jobs lobbied for cutting advanced R&D, and Amelio made plans to cut that department's budget by 50 per cent. Jobs lobbied for getting rid of poorly performing products and product-development efforts, and Amelio pulled the plug on the Performa line of consumer Macs, and stopped development of OpenDoc and its web-tool collection, CyberDog.
Then on July 9, Apple's board of directors showed Gil Amelio the door, a move that The New York Times called an "abrupt ouster" that "casts doubt on whether the company that pioneered the personal computer industry can be revived." Hancock resigned along with him.
When making their announcement, the Apple board said that Jobs would take a larger role. They had offered him the position of CEO, which he declined, saying that he already was a CEO – at Pixar – and that one CEO position was enough. He did, however, agree to join the Apple board.
Jim McCluney, Apple's operations chief, told BusinessWeek of Amelio's good-bye and Jobs' hello. McCluney said he was called to a meeting with Amelio and Apple's top execs. "Well, I'm sad to report that it's time for me to move on," Amelio said. "Take care." And with that, after being Apple CEO for merely 17 months, Amelio left the room.
Jobs entered, McCluney recalls, and asked the execs, "OK, tell me what's wrong with this place." After a few timid replies, Jobs countered that what was wrong was Apple's products. And he had a firm opinion of what was wrong with them: "The products suck! There's no sex in them anymore!"
Soon afterwards, Jobs revealed what most observers had surmised when 1.5 million shares of Apple stock hit the market in June: those were the shares that Jobs had been given in the NeXT deal – he had sold them immediately after the six months for which he had agreed to hold them.
"Yes, I pretty much had given up hope that the Apple board was going to do anything. I didn't think the stock was going up," Jobs told Time magazine. "If that upsets employees," he added, "I'm perfectly happy to go home to Pixar."
That sale, however, turned out to be not the wisest financial move. Apple's stock shot up in August after Jobs made his most important announcement by far during his short tenure at Apple: a partnership with Microsoft.
On August 6, Jobs took the stage at Macworld Expo in Boston, and told the crowd of Apple fans that Apple and Microsoft had settled their long-running "look-and-feel" patent dispute, that Redmond had purchased $150 million in non-voting Apple stock and agreed not to sell it for a minimum of three years, and most importantly, Gates & Co. had promised to continue support for Microsoft Office on the Mac for five years.
At the time, fanatical Apple fanbois considered Microsoft the Evil Empire and Bill Gates the Great Satan. And Jobs hadn't exactly done his best to quell that sentiment. For example, in the 1996 documentary Triumph of the Nerds, he had said: "The only problem with Microsoft is they just have no taste. I don't mean that in a small way. I mean that in a big way, in the sense that they don't think of original ideas and they don't bring much culture into their products."
Jobs was not alone in that belief, and so after he announced the Microsoft deal at his Macworld keynote there were more than a few boos when Bill Gates appeared on a giant screen behind Jobs in a satellite feed – but those boos were drowned out by the applause of the more-rational Mac lovers in attendance who understood that an endorsement by mighty Microsoft was exactly what Apple needed.
Jobs chided the boo-birds. "We have to let go of this notion that for Apple to win Microsoft has to lose," he said. "We have to embrace a notion that for Apple to win, Apple has to do a really good job. And if others are going to help us, that's great, because we need all the help we can get."
Jobs also noted that "if we screw up and we don't do a good job, it's not somebody else's fault. It's our fault."
And he told a reporter from Time magazine that screwing up was very much on his mind. "Apple has some tremendous assets," he said, "but I believe without some attention, the company could, could, could – I'm searching for the right word – could, could..." Pause. "Die."
Jobs wasn't alone in his worries. Michael Dell, when asked what he'd do if he were running Apple, famously told an ITxpo97 crowd in October of 1997: "What would I do? I'd shut it down and give the money back to the shareholders."
The iMac enters the matrix
Even before Michael Dell's dismissive comment, Jobs had already began taking decisive steps to remake the company he had cofounded.
In the summer of 1997 he swiftly terminated Apple's misguided operating-system licensing program, which was pulling sales away from Cupertino without increasing the Mac operating system's market share.
First, he refused to extend the same licensing deals that clonemakers had for System 7 to the new System 8, which was released on July 26. Then on August 30 he eliminated cloners participation in the Mac OS Up-To-Date program, which provided low-cost operating system updates for purchasers of new Macs. And finally, on September 2 he announced that Apple had purchased the preeminent clone-making licensee, Power Computing, for $100 million in Apple stock.
To be sure, there were clonemakers other than Power Computing – DayStar, Motorola, Pioneer, APS, MacTell, Akia, and MaxxBoxx – but they all soon got out of the business. UMAX lastest the longest, staying at the low end of the market, but finally gave up on May 27, 1998.
Power Computing took a decidedly more aggressive approach to branding than did Apple
Soon after the purchase of Power Computing – on September 16, to be exact – Jobs announced that he was now Apple's "interim CEO".
As interim top dog, Jobs quickly instituted what he referred to as his "Loose lips sink ships" policy, named after those ubiquitous World War II posters that warned Americans to keep their mouths shut in case an enemy might be listening. Apple had previously allowed journalists access to engineers, and had preannounced its products to us ink-stained wretches under nondisclosure agreements. But upon Jobs' arrival the company clammed up – a policy that continues to this day.
In addition to killing the clone dragon and pulled up the drawbridge, Jobs looked inside the Cupertinian castle and saw a disorganized morass of often-duplicative and hardly category-leading products.
As Jobs explained it to the assembled developers at 1998's Worldwide Developers Conference, "What I found when I got here was a zillion and one products" – well, to be more accurate, there were 15 different Mac platforms, plus servers, monitors, scanners, and printers.
"And I started to ask people," he continued, "why would I recommend a 3400 over a 4400? Or when should somebody jump up to a 6500, but not a 7300? And after three weeks, I couldn't figure this out. And I figured if I can't figure it out working inside Apple with all these experts telling me in three weeks, how are customers ever going to figure this out?"
Jobs' solution was to drastically cut the number of platforms that Apple produced from 15 to four, which he described in a product matrix of consumer and pro platforms on the x axis and portable and desktop platforms on the y axis.
That matrix had no place for either the hardware or software aspects of the Newton program. On February 27, 1998, Apple announced that it was ending all Newton development, which meant the end of Apple's two Newton-platform products of the time, the stylus-operated MessagePad 2100 and the keyboard-equipped eMate 300.
Apple's Newton-with-a-keyboard was intended for the education market. Didn't happen
The Newton had been John Sculley's baby, and when asked if Jobs killed the Newton out of revenge for being maneuvered out of Apple in 1985, Sculley replied: "Probably. He won't talk to me, so I don't know."
The two "pro" boxes in Jobs' matrix were already filled by the Power Mac G3 and PowerBook G3 were introduced in November 1997. They, however, were outgrowths of Apple's older design language: the original Power Mac G3 was a traditional beige box, and the PowerBook G3 was essentially a refinement of previous PowerBooks.
It was the consumer desktop that Jobs introduced on May 6, 1998, that was the turning point in Apple's design thinking. Many have also argued that it was also the end of Apple's death spiral and the beginning of Jobs' meteoric ascent.
Apple's last beige box: the Power Mac G3 (source: Mac-History.net – click to enlarge)
That consumer desktop was the iMac. While Jobs is widely credited for its creation, its basic design had been kicking around Apple for some time, designed by the man who since 1996 has been Apple's lead designer: Jonathon Ive.
Ive had been hired at Apple in 1992, but his design sense – he was a devotee of Braun designer Dieter Rams – hadn't been appreciated in Apple's corner offices. As a former colleague of Ive's told The Observer, "There is a rumour Apple had designed the iMac years earlier but the existing boss was not interested, so they put it away. When Jobs returned and asked what ideas they had, Jonathan brought it out and the rest is history."
Jobs is also often credited with having the foresight to add USB and drop the floppy drive from the iMac, but credit for those decisions should at least be shared by Jon Rubinstein, Apple's hardware-engineering lead who had left NeXT a few years before that company's acquisition by Apple, and whom Jobs introduced to Amelio and suggested he hire.
It was Rubenstein who managed the breakneck pace of the iMac's development that enabled it to make it to its May 1988 coming-out party. That event, not coincidentally, was held in the same Flint Center auditorium in Cupertino where the original Mac made its debut in 1984. Also not coincidentally, when Jobs introduced the iMac it gave the audience the same greeting, in the same script font, that the orginal Mac had 14 years earlier: "Hello" – but with the addition of "(again)".
One other person deserves mention: Ken Segall of Apple's ad firm TBWA\Chiat\Day, who gave the iMac its name. Segall told The Cult of Mac in 2009 that Jobs had suggested another name that Segall considered so bad it would "curdle your blood" – though he wouldn't divulge Jobs' suggestion. Jobs originally hated the name "iMac", Segall says, but eventually warmed to it.
Jobs certainly presented the iMac at its introduction with warmth and affection. After enumerating the shortcomings of contemporary consumer computer, he dismissed their desgn by saying "these things are uggggly. The iMac, on the other hand, was a whole new design ball game. "The whole thing is translucent – you can see into it," Jobs enthused. "It's so cool!"
Jobs also touted the iMac's "coolest mouse on the planet" – an evaluation that many disagreed with – and the iMac's 360-degree design. "The back of this thing looks better than the front of the other guys'," Jobs said. "It looks like it's from another planet – and a good planet. A planet with better designers."
Jobs + Ive + Rubinstein + Segall = iMac (click to enlarge)
Inside its translucent Bondi-blue-and-white shell, the original iMac had decent specs for a consumer-level computer of its time: a 233MHz G3 processor with 0.5MB backside cache, 32MB RAM expandable to 128MB, 100Mbps Ethernet, 33Kbps modem, 4Mbps iRDA, 4GB hard drive, and a tray-loading 24x CD-ROM drive.
But what sold the iMac wasn't its specs, it was its looks and its plug-and-play simplicity. It can be argued that the iMac represented an inflection point in consumer-computer sales: prospective buyer no longer asked their computer-savvy friends to interpret megahertz and gigabytes for them, they simply saw what they liked and bought it.
On the consumer side, Jobs went on to follow that "Keep it simple, stupid" philosophy with the iPod, the iPhone, and the iPad, and rode it all the way to the bank. On the day that the iMac was first introduced – three months before it shipped on August 15 – Apple's stock was selling for $7.58 per share. Hmmm... Let's check what it's going for today.
It seems that Jobs was onto something.
The life and times of Steven Paul Jobs, Part Two
Empire-building inspirational visionary, or megalomaniacal swine?
Specimen Pixar IPO certificate with Steve Jobs' signature (source: Scripophily.com)
