Chapter 8

Bozos, Bastards, and Keepers

Thanks to the unlikely, dizzying success of Toy Story and the Pixar IPO, Steve was back in the limelight. He got more than his fair share of the attention, but neither Ed Catmull nor John Lasseter cared too much about that. Now that Pixar was on solid financial footing, they were both ecstatic to be developing their next movie, A Bug’s Life, without having to worry about the fate of their company. To the outside world, it seemed that Jobs had rediscovered his pixie dust. The success of Toy Story had given the myth of Steve Jobs a rather nice touch-up.

The question now was whether Steve’s Pixar triumph was a one-shot anomaly. For a man whose name eventually would become synonymous with great American second acts, the Steve Jobs of 1996 had had remarkably little success with his own sequels. The Apple II had been followed by the Apple III and the Lisa, both of which had been failures. The Mac became a success only in the more robust versions introduced by John Sculley. His most grandiose sequel of all, NeXT, the company he’d created to be an idealized version of Apple, had proved utterly anticlimactic.

Pixar had provided some redemption. But Steve, of course, had been on top of the world before. The question was whether he’d handle it any better than he had in the past. Would he repeat the same mistakes? Or—to put it in the language of Pixar—would he make like Woody in Toy Story and take to heart what he learned in exile? Could he temper his ego, play well with others, defeat his enemies, and emerge a true hero?

THE LAST FOUR years of NeXT, following the demise of the IBM deal in 1992, were something of a tragicomedy. Steve tried so many different strategies that the company meandered without direction. He created a cheaper, pizza-box-shaped computer called the NeXTstation, but it never gained any traction. He and his team decided to design another model, based on a new microprocessor called the PowerPC chip—the same one that Apple’s newer Macs would be using. But eventually they decided there was no real market for the machine—not a single one was ever manufactured.

Mike Slade, who was head of marketing for a time, would occasionally think fondly of his old employer, Microsoft, “which was like the Yankees,” he remembers. “Going to work for NeXT was like being a starting pitcher on the 1998 Florida Marlins, a team that won, like, what—fifty games? In those days, Steve was kind of a forgotten guy. He was like Brian Wilson [after he had walked out on the Beach Boys], someone who had faded, a has-been. He became a pretty irrelevant guy in the high-tech world. Steve was in the wrong business now. He was put on this earth to sell to consumers, not corporate IT managers.”

Steve had great marketing instincts, but they were wasted at a company that had not created a competitive product. One day he told Slade that he wanted to “pick a fight” with Sun. So he had Slade ask two programmers to create a fairly basic database application, one using a NeXT computer armed with the company’s software, the other using a Sun workstation and Solaris, Sun’s implementation of Unix. Slade had their work videotaped. The NeXT programmer completed his task so much earlier than his counterpart on the Sun workstation that he had time to play a bunch of computer games. The video that they eventually released showed the Sun programmer muttering, as time ran out, “Um, I’ve just got a couple more things to work on.” NeXT followed up with eight spread advertisements in the Wall Street Journal, spending the company’s entire marketing budget for that year in one swoop. The result? “A shit storm of publicity, just as Steve had predicted,” Slade recalls, with a suppressed guffaw. Sun’s Scott McNealy went public, whining about NeXT’s “immature” marketing. “What people didn’t understand,” says Slade, “is that Steve could be just as brilliant when he had to think small. I came up with this elaborate marketing strategy, and he said, ‘Nope. The only thing that counts is picking a fight.’ And he was right.”

If he was brilliant at moments, he was still confounded by the ins and outs of running the company. His series of managerial miscues reached its climax when he hired a garrulous Brit named Peter van Cuylenburg to run the company’s day-to-day operations. The tale of PVC, as he was called, speaks to how unfocused Steve could be. Having impulsively decided that he really had to hire a president, Steve ran through a series of barely vetted candidates before turning to van Cuylenburg, a veteran of Xerox and Texas Instruments, who had rejected by fax a previous job offer. Steve professed adoration. “If I was about to get run over at a crosswalk,” he told the New York Times, “I would feel good about leaving [Peter] in charge of NeXT.”

Eventually it was van Cuylenburg who got run over, figuratively speaking. He had promised to give NeXT a clear strategy, but that’s not what happened. Zeroing in on details, van Cuylenburg found resistance from some employees who felt he was more interested in process than products. Worse yet, he and Steve seemed to often be at odds. Investors like Canon (that had invested $100 million in 1989) would complain that they didn’t know who was running the company—Steve or van Cuylenburg. The staff, too, got mixed signals—at least a couple of top executives believed van Cuylenburg tried to sell the company to Sun Microsystems without telling Steve. Van Cuylenburg denies this, and Sun’s CEO at the time, Scott McNealy, denies that the two companies ever came close to a deal. But there’s no doubt that the two did not make a successful management team. PVC was not at NeXT for long.

Shortly after he left, Steve, the ultimate “hardware guy,” made the painful decision to end production of the NeXT computer. The physical design of computers engaged him more than anything else, and he took great pride in the beauty and functionality of the machines he oversaw. But the sleek NeXT computers weren’t selling. Steve reluctantly shut down the hardware division, fired half the staff, and shunted the remaining hardware and factory assets off to Canon in a deal overseen by Jon Rubinstein. The Fremont factory building itself was put on the market to be leased out or sold as what it had been before—basic warehouse space. The original dream—that NeXT would create the world’s next great computer—was over. “We got lost in the technology,” Steve would later tell me.

There was no hiding NeXT’s failure, and there was no hiding the fact that NeXT’s failure was primarily Steve’s doing. This was the low point of Steve’s career. He was distraught over having failed, and, uncharacteristically, he let his disappointment show. One day, Ed Catmull read a NeXT press release about, he says, “how NeXT is really happy to be selling software to control government information servers, or data centers, or something mundane like that. I read this and thought, Oh, shoot, this has got to be killing Steve. So I called him up. We met at a Japanese restaurant in Palo Alto, and I said, ‘This isn’t you, Steve.’ And he went, ‘Ohhhhh, I know! I hate this so much. I mean, CIOs are nice guys, but God is this awful!’ ”

In public, Steve tried to portray this shift as a bold bet on the company’s software, especially its NeXTSTEP operating system, which had, he said, “no competitors.” But this time his sophistry was recognized as such by the media—and by those competitors, like Microsoft, who supposedly did not exist.

Steve did not shut down the entire company. Just as he had never given up on Pixar, he never quite gave up on NeXT. And just as he had at Pixar, he decided to play out two separate end strategies. He halfheartedly pitched the company to Sun (again), Hewlett-Packard, and even Larry Ellison’s Oracle, but nothing ever came through. At the same time, he kept pushing Avie Tevanian and his software team hard. Steve genuinely believed he had the sharpest team of operating system software engineers in the business, and he still hoped that the workstation world might embrace the NeXTSTEP operating system. So the software engineers kept beating the bugs out of it, and porting it to other microprocessor architectures, such as Intel’s Pentium family, or the PowerPC chip from IBM and Motorola. Steve worried deeply about finding a way to repay his investors, who had provided nearly $350 million in working capital. Not making them whole would have mortally wounded his credibility as an entrepreneur if he ever tried to start another computer company. So Steve waited to see where NeXTSTEP—and Avie’s crack team of engineers—would lead him.

By 1996, it began to seem as if their efforts might pay off in at least a modest way. Avie’s team had developed another software product that was drawing accolades. WebObjects was a tool for building commercial websites and other online applications out of modules of prebuilt code, called “objects,” that sped the development process and allowed the reuse of standardized components. This capability was especially helpful in building online stores, and the World Wide Web was now teeming with independent software developers and corporate coders building interactive websites with a commercial component. Business had grown so quickly that sales of WebObjects licenses now generated more revenue than NeXTSTEP. Finally, NeXT could truly say it was generating a small operating profit. Steve even lined up Merrill Lynch to back a potential IPO. Once again, a company of Steve’s had found its footing by transforming into something other than what he had intended.

AROUND THAT TIME—on April Fools’ Day 1996, to be precise—a former air force captain named Fred Anderson showed up at Apple Computer headquarters at 1 Infinite Loop in Cupertino for his first day of work as the chief financial officer. What he found there was a disaster.

“It was a house on fire,” he remembers.

Anderson, who was then fifty-two years old, had held a similar position at a computer services company called ADP, based in Roseland, New Jersey. ADP was a well-oiled machine. But its business—providing data management services to other large corporations—was about as prosaic as they come in the world of high tech. Anderson had been there four years and had already fixed whatever needed his special skills and attention. He was bored. Yet he and his wife, Marilyn, had spent years renovating and expanding their traditional Tudor home in Essex Falls, New Jersey, and he was just getting settled into the suburban life of a typical East Coast corporate big shot. He wasn’t looking for a new job. But then an executive search firm for Apple Computer came calling. The Cupertino company began aggressively wooing him shortly after CEO Michael Spindler abruptly fired the company’s previous CFO in November 1995.

Apple Computer had always meant something special to Anderson and his wife. Judging from his appearance, you wouldn’t suspect that Fred Anderson was what people now would call an Apple “fanboy.” He looked the part of a wonky, corporate CFO: tall, even-tempered, well coiffed, and partial to dress slacks and crisply pressed, monogrammed shirts or, when slumming it, to khakis and a polo shirt. But both he and his wife were avid Macintosh users and had always felt a special, almost romantic affection for the company since its very founding. Fred originally hailed from Southern California, and Marilyn had graduated from Stanford University, smack-dab in the middle of Silicon Valley. They had always hankered to move back to the West Coast.

So Anderson listened to what Apple had to say. As with all things Apple at the time, his recruitment had its own drama. Company officials didn’t bother to tell Anderson that, even as they were pursuing him, the company was secretly trying to hammer out a merger with Sun Microsystems. Anderson probably should have sensed that something was not right when one of his early phone conversations with Spindler, a gruff German nicknamed “the Diesel,” came while the executive was convalescing in the hospital for a health condition brought on by extreme stress. Spindler would be fired in the weeks ahead, after which Anderson found himself being courted as the first big hire of Apple’s next CEO, Gil Amelio, a former semiconductor executive who had been a member of the Apple board of directors for less than a year.

Ultimately, it wasn’t the sales pitch from Spindler or Amelio that swayed him. It was more as if Anderson sold himself on the Apple job, using the same logic Steve Jobs had used on John Sculley when wooing him with that famous taunt, “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?” Anderson liked the idea that he might help save a great American success story from oblivion. “There was a part of me that said, ‘You know, I’d hate to see that company die,’ ” he remembers. “That’s reason number one. I knew how passionate my wife and I were about their products, and I believed that there was this loyal, passionate customer base that didn’t want Apple to die. What I hoped was that it also translated into a passionate employee base that would fight to save the company, too. But to be honest, I didn’t know that for sure. When I told my wife I’d like to take the Apple job, she looked at me and said, ‘Are you crazy?! You already have a fantastic job.’ ”

Apple’s troubles were deep indeed and had worsened over many years. John Sculley’s “market-driven” strategy failed to produce any significant technological breakthroughs. Apple’s efforts to do so were only made worse by the CEO’s desire to prove himself to be as much of an innovator as Steve. Most costly of all his misguided efforts was his attempt to carve out a brand-new category of personal computing with a handheld device called the Newton, which was met with widespread ridicule after its highly touted handwriting recognition feature turned out to be prone to absurd malapropisms. It was an expensive failure, made worse by the fact that Sculley decided to open a bunch of Apple retail stores to sell the doomed new device. Sculley’s nurturing of the Macintosh did provide some financial cover for the company. But Apple’s share of the PC market eroded as Windows steadily improved.

The Apple board grew disenchanted with Sculley’s misfires and abruptly dismissed him in 1993. They replaced him with Spindler, the German sales executive whose idea of a strategy was for Apple to ape Bill Gates and license the Macintosh operating system to other manufacturers in a belated attempt to fend off Windows. But this strategy too failed, and the availability of cheap clones tarnished Apple’s mystique as a maker of premium hardware. Spindler, who preserved Sculley’s old “market-driven” approach to product development, also allowed Apple’s product line to swell uncontrollably, as engineers experimented with different bells and whistles in order to target potential markets that they thought warranted entirely new and distinct Macintosh models.

But Apple’s biggest problem was Microsoft. Bill Gates’s company had become a juggernaut, and with the release of Microsoft’s Windows 95 it formally seized the initiative for driving PC innovation from Apple. It even outdid Apple in over-the-top marketing. Gates introduced this landmark version of his industry-standard operating system with a tightly orchestrated, worldwide rollout emceed by Jay Leno from a big white circus tent on the Microsoft campus and beamed by satellite to gatherings in forty-three cities around the world. The fanfare prompted tens of millions of PC users to line up for hours or even days in order to be among the first to be able to buy the software and install it on their machines when it went on sale at midnight on August 24. The Rolling Stones’ “Start Me Up” was the official promotional anthem.

Apple’s own attempts over the previous eight years to modernize the architecture of its computer operating system had failed again and again. Projects with code names like Pink, Gershwin, and Copland fell by the wayside, and a couple of awkward joint ventures also went nowhere, including one with IBM curiously named Patriot Partners. The problem was that there were so many things Windows 95 could do that Apple’s aging Macintosh System 7 simply couldn’t begin to match. The list included nerdy-sounding features like preemptive multitasking, which allowed several applications to operate simultaneously without interfering with one another, automatic document saving, and most important, much greater speed, stability, and reliability. Microsoft went so far as to hire the graphic designer for the original Macintosh onscreen icons to spiff up Windows’ look and feel. Windows 95 also introduced the “Start” button, which made it much easier for users to deduce how to launch programs and otherwise manage files in a PC. Overnight, Apple’s sales tanked, and inventories of unsold Apple machines and unused components began to pile up. Worse, Apple seemed to have instantly and visibly lost whatever mojo it was that had made it seem cool for nearly two decades. After Windows 95, Apple wouldn’t post consecutive years of sales growth again until 2002.

By the time Spindler was bounced in the spring of 1996 and replaced by Amelio, Apple had become an undisciplined and unmitigated mess in just about every way imaginable, with sales shriveling at a truly alarming rate. No longer a growth company, the cash-strapped outfit was beginning to hemorrhage money. It had far more manufacturing capacity, inventory, and, of course, employees than it needed or could afford. There were no promising new products in the pipeline, much less over the horizon. No wonder Spindler had been so stressed out, and no wonder he was fired. No wonder Amelio and longtime Apple director Mike Markkula immediately redoubled their efforts to find a buyer, like Sun Microsystems or the old AT&T or even IBM. No wonder they had to consider filing for bankruptcy. No wonder they needed a great CFO.

Anderson gave his notice to ADP in March, and spent a month consulting for Apple before he and his wife moved west. He knew the situation was getting desperate, but it wasn’t until he arrived at corporate headquarters that he began to get a sense of just how bad things were in Cupertino. Nothing in his career had prepared him for anything quite like this. ADP had posted thirty-five consecutive years of double-digit earnings. His employer before that, a minicomputer maker called MAI Basic Four, had been through some rough patches, but nothing comparable to Apple’s quagmire. In the previous six months, Apple had swooned from being marginally profitable to posting a loss of nearly three-quarters of a billion dollars in the first calendar quarter of 1996. The company soon would be technically in default on hundreds of millions of dollars of bank loans. On his very first day at Apple, Anderson was shocked to learn that Amelio had already asked bankruptcy counsel to stand by. What Fortune 500 CFO in his right mind would want to step into this mess?

STEVE OBSERVED APPLE’S dire straits from a safe distance, fretting and muttering under his breath and off the record, like an embittered and estranged parent, that the famous company he cofounded might collapse of its own ineptitude. After ten years in exile, he still harbored a strong sense of attachment to his firstborn company and many of its employees. “He loved Apple,” says John Lasseter. “I mean, he loved Apple the whole time. It was painful for him to watch what was happening to it.” Indeed, the reason Steve had held on to one share of Apple stock for the previous decade was to be able to keep getting shareholder information materials and, if the spirit moved him, to be able to attend the annual shareholders meeting. He hadn’t cut the cord completely.

In 1995, his billionaire friend Larry Ellison had suggested the idea of making a hostile bid to buy the company outright so they could take it private and run it as they saw fit. Ellison had even offered to raise the bulk of the money, so Steve wouldn’t have to risk his own resources (Pixar hadn’t yet gone public). “Steve’s the only one who can save Apple,” he told me. “We’ve talked about it very seriously many, many times, and I’m ready to help him the minute he says the word. I could raise the money in a week.” But Steve had nixed the effort. Despite the allure of Apple, he had made a pragmatic decision. He was in the middle of Pixar’s most critical year, when it released Toy Story and went public. He was trying to salvage NeXT. And Laurene was pregnant with their second child. It had all seemed like too much.

In retrospect, deflecting Ellison’s offer was the first of a series of practical, well-considered, and mature decisions that Steve would make on the road back to Apple. Opportunism, intuition, and manipulation would all come to play a role in his return to the company he loved most. But by also employing a newfound patience and maturity, Steve would return a better businessman.

FRED ANDERSON’S FIRST official duty was to announce that Apple had lost $750 million in the quarter that had ended the day before he arrived. He had indeed walked right into a house on fire.

The grisly loss triggered bank agreement covenants that called on Apple to immediately pay back some debt. But if Apple did so, the company would quickly find itself in what is euphemistically called a “liquidity crisis”; in plain English, Apple would not have enough cash on hand or in the bank to make those required payments and to pay its other bills and employee salaries. So Anderson knew he would have to move quickly to persuade Apple’s banks in the United States, Japan, and Europe to forgo calling their loans for a time. Then he would have to get cracking to accomplish two things that might keep the banks at bay: work out a recapitalization plan to raise more money in the public bond markets, and set in place a restructuring plan that would drastically reduce the company’s operating expenses. The word restructuring is a euphemism, of course. The very best way to reduce expenses in a hurry is to lay off employees. Lots and lots of employees.

Before April was out, Anderson had personally visited all of Apple’s major bank lenders to ask for leniency, and to present his intentions for restructuring and recapitalization. He also went to Apple’s lead investment bankers—Goldman Sachs, Morgan Stanley, and Deutsche Bank—to put together plans for a “commercial paper” offering designed to raise $661 million, which the company would use in part to pay its bank lenders and to help fund ongoing operations. It was basically yet another loan, this time from investors and at a somewhat higher rate of interest, but it bought Apple time to put its house in order and to trim its head count. The goal of the restructuring was to eventually eliminate fully half of its eleven thousand full-time employees, so that the company would be able to break even with sales of around $5.5 billion, or half of its annual sales in 1985. In other words, Anderson believed that half of the company would have to disappear before things would bottom out. The layoffs would come in three waves over the next two years.

The restructuring and recapitalization plan bought CEO Gil Amelio more time and flexibility to find a way to address Apple’s other big problem—its technological stasis. He needed to go shopping for an existing advanced operating system that Apple could adapt to the Macintosh to help it keep pace with Microsoft’s new, improved Windows 95. Doing so would be an open admission of Apple’s inability to create competitive technology on its own, but at least it would offer a glimmer of hope that the company had other options than a merger or bankruptcy.

To find a shortcut to developing a more advanced version of the Macintosh OS, Amelio looked for companies that had built a working version of Unix that ran on familiar microprocessors. Sun and several other companies, including IBM, Apollo (by now part of Digital Equipment Corporation), NeXT, and an obscure Silicon Valley startup called Be Inc., all had developed their own implementations of BSD Unix—a version developed by Sun cofounder Bill Joy—and had managed to “port” them to machines employing chips from the very same family of microprocessors that Apple used in its Lisa and Macintosh. The pure software companies were most interesting because they were cheap enough to buy outright, and small enough to absorb. NeXT was one possibility, but because it was run by Steve Jobs, a man many on the Apple board still considered to be persona non grata, that didn’t seem a likely match. But Be Inc. seemed like an intriguing possibility. That’s because Be was headed by Jean-Louis Gassée, the former head of advanced product development for Apple, who had left in late 1990 after clashing with Sculley.

JEAN-LOUIS GASSÉE WAS the Apple sales and marketing guy who had warned John Sculley that Steve was planning to challenge his authority in the spring of 1985, prompting the CEO to cancel his trip to China and impose a corporate reorganization that all but marginalized the young cofounder. That sealed Gassée’s fate in Steve’s eye: from then on, he always thought of the Frenchman as a backstabber. Their enmity was hardly surprising. Gassée shared some of Steve’s most cagey characteristics: he was glib and charismatic and a master of hyperbole who passed himself off as a technical expert when in fact he had no more background as a software or hardware engineer than Steve did. Like Steve, he prompted strong feelings. “If there’s anyone who’s a prickly bastard in this world, if there’s one guy who actually competes in the prickly bastard game quite effectively,” says one industry veteran who worked with both men, “it’s the guy who learned at the hand of the master.”

They had other similarities. Shortly after quitting Apple, Gassée started his own computer company in a huff, bringing along several key Apple employees. His business strategy was reminiscent of Steve’s approach at NeXT. Be Inc. set out to design an entirely new software and hardware architecture for a computer Gassée called the BeBox, which would incorporate an operating system—BeOS—that shared some key attributes of Unix. What made the BeOS and the BeBox computer unique, however, was that they were designed to also be able to use the existing Macintosh OS, and thus operate like a Mac “clone.” The intent, essentially, was to build a computer that could be two machines in one.

Much like NeXT, however, Be hadn’t been able to build much of a market for its hardware, selling only two thousand machines before shutting down that part of its business in 1996, to focus on selling its software as an alternative operating system for Apple’s Macs and clones built by other manufacturers. Gassée felt that becoming a software-only company would position Be to other hardware manufacturers as a potentially attractive acquisition. There seemed to be several potential suitors out there among the seven companies that made Macintosh clones, including Motorola and PowerHouse Systems, which employed Steve’s former head of hardware engineering at NeXT, Jon Rubinstein.

When Gassée learned that Amelio had decided to go shopping for an operating system, he was shocked. It was almost as if the stars had aligned for him to sell his company to Apple, even though he would have to deal with some new faces at the company. “I was looking for an exit sign,” Gassée recalls, “and here came Amelio.” But Gassée made a serious tactical mistake by trying to milk the situation for all it was worth. Amelio offered to buy Be Inc. for about $100 million, which was a reasonable price for a company with its limited track record. But Gassée overreached, rebuffing Amelio’s offer, as well as a counteroffer of $120 million.

I ran into Gassée one weeknight in late October 1996 at what was an unlikely haunt for him—the Buffalo Grill, a steakhouse (since closed) in a shopping mall in San Mateo, fifteen miles north of his hometown of Palo Alto. The location was out of the way, and not the kind of place where you would go to ogle Silicon Valley notables. That was precisely why Gassée had chosen the restaurant.

My wife was with me, so I nudged her on toward our table while I hung back to say hello to Jean-Louis, whom I knew socially as well as professionally; our daughters were classmates at a school in Palo Alto. He was clearly embroiled in serious conversation; he hadn’t noticed me yet, so I slapped him on the back and asked him something like “What are you doing up this way? Don’t you have any good restaurants in Palo Alto?” Gassée recoiled as if I were a ghost. That’s when I looked around the table and recognized the others. Seated with him were Ellen Hancock, a former IBMer who was now Apple’s executive VP for R&D and chief technology officer; Douglas Solomon, Apple’s senior VP of strategic planning and corporate development; and venture capitalist David Marquardt (who also sat on the Microsoft board of directors). Marquardt, I knew, was Be’s primary adviser for financial dealings, and his firm was also Be’s biggest investor. I realized that the very last thing this group wanted was to be seen by a business journalist. Never before had I seen the voluble Gassée at such a loss for words.

When I rejoined Lorna at our table, I told her how awkward the encounter had seemed. My first reaction was that it was some sort of powwow about bringing Gassée back into Apple’s management team. But if that were the case, why would Ellen Hancock, who was so new to Apple, be there instead of Gil Amelio? “Well, what do you think Steve would make of it?” Lorna asked. So, when we got home, I called Steve at his home.

It was a rather short conversation. When I asked Steve what he thought might be going on, he immediately shifted into petulant mode. “Jean-Louis Gassée is evil,” he snapped. “I don’t say that about many people, but he is evil.” Then he made some comment to the effect that whatever Apple had planned, the company should have nothing to do with Gassée or his technology. “We’ve been at this for ten years at NeXT, and the BeOS is shit. It has to be. Operating systems get better with age and the BeOS isn’t old enough or tested enough to be any good.” That didn’t really answer my question, but it sure showed I had gotten his dander up. I asked him to be sure to let me know if he heard anything interesting. Not surprisingly, he didn’t; I didn’t talk to him again until December, when I called to see if I could get some comment from him for a story about Apple’s surprise purchase of NeXT for cash and stock totaling $429 million.

STEVE HAD SWUNG into action long before my phone call. Earlier that fall, Avie Tevanian had alerted him to the fact that Apple was looking for an operating system, and Steve immediately met with his investment bankers to determine if it made any sense to try to sell NeXT to Apple. “We felt that we were a generation ahead of everyone else, and now we might have the chance to make that work in a mass-market world,” says Tevanian. While it was public knowledge that the NeXTSTEP OS had been ported to Intel’s PC microprocessors, it wasn’t widely known that Avie and his team had also gotten it running on computers using the PowerPC chip. Avie and his team knew their way around all the major nonproprietary microprocessors, which is more than could be said for Be’s programmers. Steve had told Avie to drop the PowerPC effort a few months earlier; now Avie had his team revive it and double down to make sure the OS was ready to present to Apple.

Steve was playing three games at once as he approached Apple. First, he really wanted to torpedo Gassée. “Steve was bitter that I chose to side with Sculley,” Gassée remembers. “He said I stabbed him in the back, and whatnot.” One evening, as Steve was leaving the Palo Alto restaurant Il Fornaio, he passed a table of software execs that included Gassée. “So I hear you’re going to save Apple, Jean-Louis,” he said, before heading out the door. Gassée had no idea that NeXT was even being considered by Apple. He thought he had the deal sewn up.

Second, Steve wanted to protect and pay back his investors. Third, he wanted to find suitable next acts for the key people who had stuck with him at NeXT. As Susan Barnes once told me, “If you weren’t good at your job, he owed it to the rest of the team to get rid of you. But if you were good, he owed you his loyalty.” So while the price was important, so was what the acquiring company intended to do with the NeXT technology, and how they would embrace the technologists who built it. Steve knew he had to convince Amelio that the real jewels that Apple would be acquiring were NeXT’s people.

Amelio was an easy mark, and Steve knew it. He saw him as a stuffed shirt who enjoyed the fruits of being CEO but knew little about selling personal computers. So Steve was at his flattering best as he wooed Amelio. In a crisp presentation to the CEO and Ellen Hancock on December 2, he explained that he was willing to do whatever it took to make the deal work, and that he was confident that their good judgment would lead them to NeXT. On December 10, he and Avie made what Amelio himself described as a “dazzling” presentation of the NeXT operating system, during a bake-off against Be at the Garden Court Hotel in Palo Alto.

Just ten days later, Steve had a deal, one that was sealed in Steve’s kitchen and got him out of NeXT with more than he could ever have imagined. Avie was guaranteed a central role in the development of Apple’s system software strategy and a spot on Amelio’s senior executive staff. The price was rich, thanks largely to the recent success of WebObjects, and especially compared to what Amelio had offered Gassée: Steve and his investors would get $429 million in cash and Apple stock. “It wasn’t about the money,” says Gassée, who concedes that he asked too much for Be. “It was about bringing Steve back. He had a choice between bringing Steve back or not bringing Steve back, and he made the right choice. They could do things we couldn’t do.”

Most of the Apple shares went to Steve, who agreed to sign on as special adviser to Amelio. The annual MacWorld trade show in San Francisco was coming up in a few weeks, so he offered to make one of his trademark stage presentations after Amelio’s keynote address to publicly underscore his “return” to the company he helped hatch.

On a Saturday in late December, Steve invited me over to his house. He was already working on his remarks for MacWorld, and he wanted to see what lines would resonate. But he also wanted to talk about Amelio. “You wouldn’t believe what a bozo Amelio is,” he hissed. What most galled him was that Amelio, he felt, had no clue about selling to walking, breathing people. “All he knows is the chip business, where you can count your customers on one hand,” Steve groused. “They aren’t people, they’re companies, and they buy chips by the tens of thousands.”

I reminded Steve that just a few months earlier he had told me about how he and Larry Ellison had briefly mulled the possibility of a hostile takeover of Apple. “If he’s such a bozo, why are you sticking around? Couldn’t you take your share of the money and just walk?”

“I can’t just walk away from Avie and the others, and say ‘So long, nice knowing you!’ Plus,” he continued, “I can tell that there are still a lot of other really good people at Apple. I just don’t think Amelio is the right guy to lead them.”

“Well then, what about you?” I said, asking the question on everyone’s mind. Steve hemmed and hawed. He seemed as unsure of himself as I’d ever seen him.

THERE ARE SOME people who have always believed that Steve did everything he could to engineer a triumphant return to the top job at Apple, that he was executing some grand master plan all along. Gil Amelio is one of them; Bill Gates is another.

The truth is more subtle. Over the previous decade, Steve had learned to act less impulsively. In the past, he had overreached time and again. Now he was willing to walk slowly down a path, and if following his nose led him somewhere better than where he thought he was headed, that’s where he would go. In the months after the sale of NeXT, as he studied Amelio and understood more about the current state of Apple, Steve displayed the more deliberate approach he would bring to the company when he was in charge.

The two men whom Steve trusted the most at Apple during the period following the sale of NeXT agree that Steve did not intend to become Apple’s CEO. Avie Tevanian was now Amelio’s chief of software engineering, while Jon “Ruby” Rubinstein had been brought in at Steve’s suggestion to run the hardware division. “We didn’t think we were coming to Apple to work for Steve,” says Tevanian. “He just didn’t seem that interested.” Steve repeatedly told them he was reluctant to take on the job, much less lobby for it.

Coming to Apple wasn’t exactly a dream come true for either Avie or Ruby. A few weeks after the NeXT deal closed and the two were settling into their new roles, Apple revealed that it had lost $120 million during the quarter ending December 31, 1996. “I asked Steve, ‘What have we gotten ourselves into here?’ ” remembers Tevanian. “Because it was clear that Apple was the company that was broken, not NeXT. You could look at the two of us as Steve wanting to get his own people in, but he did it because it was the right thing. He knew these other people. They were the reason Apple was screwed up.”

“I don’t believe any of the Machiavellian stuff,” adds Ruby, a native New Yorker with the svelte looks of a long-distance runner. “When I got there, I took a look around and thought, Oh my God. What did I just get myself into?”

In the weeks after our December chat, Steve and I met a few more times over his kitchen table for a series of off-the-record discussions. Steve described what he was finding at Apple, in the hope that I would push ahead with a story about the sorry state of things in Cupertino. He spoke freely, although he insisted that I disguise any quotes I wanted to use. At one point he rhetorically asked: “Why do I feel like it’s my fiduciary responsibility to see a negative story about my own company?”

The main answer was that the more he got to know Amelio, the more he realized that Dr. Gil—and his team—could never lead Apple back to any kind of prominence. He was dismayed by so much at the company, and he blamed the board of directors as much as Amelio. He couldn’t believe that any board could ever have envisioned the dour Michael Spindler, “the Diesel,” as an inspirational leader, just as he was dumbfounded that the board had then hired someone like Amelio. He believed that Amelio, who ascended to the CEO position after just one year on the board, had maneuvered himself into the gig by positioning himself as a turnaround expert. “But how can he be a turnaround expert,” Steve asked me, “when he eats his lunch alone in his office, with food served to him on china that looks like it came from Versailles?”

Amelio did himself no favors. Rather than adapt to Apple, he seemed to try to get the company to take on his personality. He had surrounded himself with top executives drawn mostly from the semiconductor industry he knew so well, and he was never effective in public situations. Once, while talking to a group at a dinner party that included Larry Ellison, Amelio tried to put his company’s problems in perspective for the other guests. “Apple is a boat,” he said. “There’s a hole in the boat, and it’s taking on water. But there’s also a treasure on board. And the problem is, everyone on board is rowing in different directions, so the boat is just standing still. My job is to get everyone rowing in the same direction.” After Amelio walked away, Ellison turned to the person standing next to him and asked, “But what about the hole?” That was one story Steve never got tired of telling.

Steve was unfair to Amelio. Although he did once tell Amelio that arranging the $661 million in new financing was a good move, he gave him little credit for anything else, even though it was Amelio who signed off on the critical restructuring that Anderson was managing. And when Steve did acknowledge that there was some good work going on inside the company, he credited this to employees who had the true “Apple spirit”—the one that he and Woz had instilled years before—and not at all to Amelio.

But Steve was also right about Amelio, as I discovered when I did finally report and write a story about Apple for Fortune in early 1997. In dire need of strong leadership, Apple was in the hands of a bumbling CEO. It had almost two dozen separate marketing teams, which didn’t communicate with one another. Its product line was metastasizing. The Mac clone licensing program made no sense. And Amelio was letting the problems get out of hand.

His lack of leadership went on public display at the annual MacWorld trade show in San Francisco, on January 7, 1987. Amelio’s opening speech was a meandering disaster. Back then, Apple held four annual MacWorlds, with the others coming later in the year at Tokyo, Paris, and Boston. The keynote speeches had become Apple’s primary showcases for introducing new products, and for rallying software developers and customers. Amelio, a barrel-chested, stiffly moving introvert, tried his best to appear a little more hip by ditching his usual uniform of wingtips and a pin-striped suit for a brownish shirt with a banded collar, a sport jacket, and loafers. The highlight of his talk was supposed to be the formal announcement of the acquisition of NeXT and of Steve’s return as an adviser. Steve, who had dressed up more than usual, sporting tailored, pleated black pants, a matching Eisenhower jacket, and a white shirt buttoned tight at the collar, waited in the wings as Amelio droned on and on. Gripping the podium at an odd angle, the CEO rambled for more than an hour through a scripted pitch that made little mention of the company’s continuing financial predicament. Even though he relied on a Teleprompter, he lost his place. At one point, in a display of pseudo-casualness, he removed his jacket, and you could see large dark circles of perspiration emanating from his armpits, like the actor Albert Brooks in the famous scene from Broadcast News.

Steve was greeted with rapturous applause when Amelio finally got around to introducing him. It had been six long years since he had made a corporate strategy presentation to an audience of any meaningful size, and he seized the moment. In contrast to Amelio, he kept his remarks short, cool, and crisp. He promised to “help Gil in any way he asks me to,” and vowed to help make Apple’s products exciting again. Speaking without notes, he calmly worked the front of the stage so people could get a good look at him. He was encouraging and forceful, yet purposefully vague. He didn’t want to make any specific promises; after all, he still wasn’t sure he really wanted to have anything to do with Apple.

“Initially,” Anderson remembers of those early days, “Steve simply didn’t engage. Amelio always had these formal staff meetings, and Steve attended one shortly after MacWorld. It was kind of boring, and Steve didn’t like how it was going. So in the middle of the meeting he just got up and walked out. I know what he was thinking—this guy is a bozo.”

That’s exactly what Steve told me again a couple of weeks after MacWorld. “I know I’ve said it before, but Amelio is a total bozo,” he said. “He is the absolute wrong person to be leading Apple. I don’t know who the right person is, but it definitely is not him.”

LIKE RUBINSTEIN AND Tevanian at NeXT, Lasseter and Catmull were “keepers.” So, early in 1997, during the very months when he was studying the hapless Amelio, Steve decided he wanted to safeguard their future by renegotiating Pixar’s distribution contract with Disney CEO Michael Eisner—the only man other than Jean-Louis Gassée whom Steve ever described to me as “evil.” (This was several years later, when relations between Disney and Pixar reached an all-time low.)

Toy Story had become the undisputed blockbuster of the 1995–1996 holiday season, eventually garnering $361 million in worldwide box-office receipts. Some $45 million of that went to Pixar. That was a lot of revenue for a first movie, but meager fare when compared to what Disney pocketed for financing and distributing the film. Furthermore, Pixar had no share of the video rights, which of course would be substantial for a family film this popular.

With work well under way on Pixar’s next movie, A Bug’s Life, Steve decided to right this wrong. With $130 million of IPO cash in hand, Pixar didn’t need Disney to finance its films. And if it could pay for its own productions, why should it earn a mere 12.5 percent of box-office receipts? Steve decided he wanted to tear up the very deal that had saved the company just five years earlier.

“Nobody in Hollywood wants to take any risk,” he told me a year later. He truly was proud that he and Lawrence Levy had studied Hollywood closely, and had learned enough to understand how Pixar could cut a great deal in an industry that thrived on plundering the “dumb money” of starstruck outsiders. “You can’t go to the library and find a book titled The Business Model for Animation,” Steve explained. “The reason you can’t is because there’s only been one company [Disney] that’s ever done it well, and they were not interested in telling the world how lucrative it was.”

Steve put in a call to Eisner, and headed to Hollywood to renegotiate. “What we wanted to do with our new deal was far beyond what anybody else [other than Disney] had ever done,” he crowed. “And far more sophisticated, because in Hollywood, there are very few relationships between companies. There are relationships between companies and individuals, like between a major studio and Steven Spielberg, or a small production company like an Amblin and a studio. But there are very few relationships between peer companies. But that’s how we wanted to think about ourselves. In terms of producing animated films, we wanted to think of ourselves as a peer of Disney’s own animation business.”

On the surface, his entreaty seemed arrogant, quixotic, and ungrateful. It had barely been a year since the debut of Toy Story, a film that had been made possible only by the endorsement and support of the world’s most successful animation company. But as was true so often when Steve negotiated, the audacity of his demand was matched by his cool and accurate appraisal of the landscape. Six years earlier, when Katzenberg was running animation and Disney had held all the power, Steve had quickly agreed to their terms. But now Eisner was at war with Katzenberg, who was building up DreamWorks Animation with the intent of besting Disney Animation. His new studio had set off a talent war, leading to, among other things, a series of escalating offers to Lasseter from both Disney and DreamWorks.

Steve saw the opportunity and calmly made the most of it. The IPO and Toy Story had changed everything about the relationship: Pixar held a lot more of the power now, and there was nothing Eisner could do. Steve’s underlying threat to Eisner was simple: give Pixar a new deal now, or the company would walk after its existing three-movie deal expired. Losing Lasseter and Pixar to Katzenberg or another studio would have been disastrous for Disney. In the end, however, the negotiation wasn’t as fraught as it might have been. “For us to go in there and say we’d finance half of our films, well, they hadn’t heard that very often,” Steve told me. “Michael appreciated that, and all of a sudden we were no longer a production company, we were a co-financier.” Eisner was offended by Jobs’s temerity, but the terms of the new deal were fair, giving each side half of all profits. On February 24, 1997, a new, five-movie deal was signed. Strand by strand, Steve was wrapping up the remaining loose ends of his decade in the wilderness.

THE STORY I published in Fortune in March 1997 infuriated nearly everyone at Apple. Titled “Something’s Rotten in Cupertino,” it portrayed a company in utter disarray. It included several unflattering anecdotes about Amelio, and was equally critical of his two predecessors, Sculley and Spindler, and of the Apple board of directors. Amelio would call me a “literary ax-murderer” in his memoir, On the Firing Line: My 500 Days at Apple.

The story, along with some other critical press around the same time, added to the public beating Amelio had started taking after MacWorld. Its indictment of the Apple board put more pressure on the directors. By that time, the director with the most credibility and authority was its chairman, Edgar S. Woolard Jr., who was CEO of DuPont, the chemical giant. The more Woolard learned about Apple’s woes, the more he knew that Amelio didn’t have the right stuff to save the company. “Ed started asking questions, like ‘How’s morale, Fred?’ ” Anderson remembers. “And I’d say, ‘It sucks, Ed.’ ” Anderson hid nothing from the chairman; the strategy was ill-conceived, the company was not going to hit its targets, and Anderson was planning to leave if Amelio stayed on.

Meanwhile, Steve had decided to undermine Amelio. He made that crystal clear on June 26, when, after the expiration of the six-month waiting period Amelio had insisted on, he dumped all but one of the shares he’d gotten for selling NeXT, without bothering to tell anyone at Apple. Once again, he held on to a single share so he would be eligible to attend Apple’s annual meeting. It was not an exercise in profit-taking. The value of those 1.5 million shares had dropped $13 million during those six months. But the sale was a high-decibel vote of no confidence. Amelio felt stabbed in the back, and he had been. On July Fourth, Ed Woolard called Amelio at his vacation home at Lake Tahoe to tell him he was fired. Then the chairman called Steve to see if he would be willing to come back as CEO.

Steve had cut Amelio’s legs right out from under him. He’d had no qualms about that once he’d decided that the Doctor was a bozo. (In private, he would also call him a “doperino.”) But that didn’t mean he himself was ready to take on the job of running Apple. According to his wife, Laurene, he was still torn about whether to go back. The two of them debated the matter endlessly. She felt that he was the only person who could save the company, and she knew he still loved Apple. She knew, too, that her husband was most fulfilled when he was tackling something gripping and important. But Steve wasn’t sure. The long, drawn-out experiences of salvaging NeXT and Pixar had chastened him. Pixar was on the way up. The frustrations of NeXT could now be tossed into the dustbin of history. But did he really want to try to ride to the rescue of Apple when it hardly resembled the company he had tried to build? Was he even convinced it had the people and resources to become competitive? Did he want to work that hard, now that he had a young family? Did he want to risk what was left of his reputation by tilting at windmills? These questions were all on his mind. He had to become convinced that enough of the “true” Apple remained before he would ever consider taking ultimate responsibility for it.

Steve didn’t know it at the time, but his indecisiveness was actually a kind of breakthrough. Steve was developing a more nuanced, measured approach to decision making. Steve had grown more comfortable with waiting—not always patiently—to see what developed, rather than jumping impulsively into some new venture where he thought he could once again astound the world. When he needed to—as when the opportunity arose to sell NeXT to Apple—he could strike quickly. But from now on he would act with a piquant combination of quick, committed actions and careful deliberation.

He told Woolard he did not want the job, at least for now, and he offered to help him recruit someone else. Unable to sleep that night, Steve called his friend and confidant Andy Grove at 2 a.m. Steve told Grove that he was torn about whether or not to return as Apple’s CEO, and wound his way through his tortured deliberations. As the conversation dragged on, Grove, who wanted to get back to sleep, broke in and growled, “Steve, look. I don’t give a shit about Apple. Just make up your mind.”

AFTER STEVE REJECTED Woolard’s offer, the board announced that Fred Anderson would be in charge of operations, effectively making him the acting CEO. Anderson didn’t want the permanent job, but unlike Steve he was certain that there was still much worth saving at Apple. For one thing, he’d been able to move the company out of its financial crisis. More important, in his fifteen months there he had gotten to know all the key players, including a few who felt comfortable complaining to him about Amelio. One of those was Apple’s young design chief, a Brit by the name of Jonathan “Jony” Ive, who felt that he was wasting his talent at Apple. He invited Anderson to come by the industrial design lab, which Amelio had not visited. “There was incredible stuff going on there,” remembers Anderson. “That was a big part of how I had come to worry about Amelio and his lack of leadership.” Anderson knew that he himself was not the answer. “I was really good at business and, I’d say, finance and operations, but I wasn’t a product guy. I’m not an engineer,” he says. Like Woolard, Anderson had enjoyed his crash course in Steve Jobs—even though their relationship had gotten off to a rocky start. “I started dealing with him during the period when we were acquiring NeXT,” says Anderson. “One night during the negotiation he called me at home at one a.m., irate and cussing and ranting and raving. I was in bed with my wife, and I’m thinking, This is crazy. So when he wouldn’t calm down, I said, ‘I’m sorry, Steve, it’s one o’clock in the morning, so I’m hanging up.’ And I hung up.” As was so often the case, Steve respected the pushback. He and Anderson developed such a mutual respect that the CFO would become a key member of the team that would revive Apple. “Even though Steve was not an engineer,” Anderson recalls, “he had this great aesthetic taste and he was a visionary, and he had the power of personality to rally the troops. I came to the conclusion that the only person who could truly lead Apple back to prominence was Steve. He understood the soul of Apple. We needed a spiritual leader that could bring Apple back as a great product and marketing company. And nobody else great, who had those skills, was going to take on Apple at that time. So we had to have Steve.”

When Woolard announced Anderson’s appointment, he also noted that Steve was coming on as “an adviser leading the team.” The terminology was odd, but it proved to be accurate. “Now he really rolled up his sleeves,” says Anderson. The core of the new Apple—Anderson, Tevanian, Rubinstein, Jobs, and Woolard, who led a real search for a new CEO—felt under intense pressure, in large part because MacWorld Expo in Boston was exactly just one month away, on August 6. By then the company would have to be in a position to present some kind of clear strategy to its developers, or else the feeling that Apple was forever in chaos might replace the feelings of goodwill engendered by Steve’s return. And given Steve’s history, empty promises and airy visions wouldn’t be enough. Thanks to all the hot air that had wafted out of NeXT over the years, Steve had lost much of his credibility. This time he needed to show the capacity to make smart, sensible, surgical moves quickly; if not, the market, the press, the developers, and Apple’s customers might collectively respond with a sneering sense of déjà vu.

Steve understood this. His first move was to insist that the board reprice all employee stock options to $13.81—the closing price on July 7, the day Amelio’s firing was made public. Steve’s signature, not Anderson’s, was at the bottom of the “all hands” memo from management announcing the change. It was a dramatic gesture, because most employees’ options had sunk so deeply underwater that there seemed no hope that they would ever have any value. Overnight, the prospect of someday achieving actual wealth resurfaced for many of the eight thousand Apple employees who had survived the first two rounds of layoffs. (The move did nothing financially for Steve, who had no options.)

Steve’s second big move was to convince Woolard to allow him to replace virtually the entire board of directors—the same one that had just ousted Amelio and brought Steve in to play a big role. Steve felt no gratitude. He was convinced that the group was as much to blame as Amelio for Apple’s woes. He wanted a board that would give him the backing he needed to start making some real changes at Apple. Originally he sought the resignations of everyone except Woolard, but Woolard persuaded him to also keep Gareth Chang, the CEO of Hughes Electronics. The others would be replaced by Oracle founder Larry Ellison, former IBM and Chrysler CFO Jerry York, Intuit CEO Bill Campbell, and Steve himself. Steve kept these changes under wraps, however. He wanted to announce the move during the MacWorld keynote speech in Boston, where he’d be able to put his own distinctive spin on the news.

While he worked with the team on new product planning and yet another round of restructuring, Steve also took on a unique project he’d been handed by Anderson: to convince Bill Gates to continue to support the Macintosh with new versions of the company’s productivity applications, like Excel and Word, which Microsoft would soon begin to bundle into a suite of productivity programs to be called Office.

Earlier in 1997, Gates had said that he couldn’t guarantee that Microsoft would build a new version of Office for the Mac. His reluctance made sense. With Macintosh sales in a tailspin following the introduction of Windows 95, it was more difficult for Gates to justify the expense of supporting the Mac. Microsoft made good money from its Macintosh software, but as Mac sales tanked, so too did Gates’s enthusiasm for supporting Apple.

“Reaching an agreement with Microsoft was absolutely critical to laying the foundation for Apple to be saved,” recalls Anderson. “But Amelio couldn’t get it done.” If Gates said no to Steve, Apple could have found itself in the same position as NeXT had been back in 1988. Without Microsoft’s applications, which had become the de facto standard tools used in most businesses, Apple, like NeXT, might cease to be relevant.

Apple did bring a stick to the negotiations. The company had a long-standing patent suit against Microsoft alleging that Windows, which largely replicated the conventions of the Mac’s graphical user interface, infringed on Apple’s own intellectual property. Many observers thought Apple had a good case, and Gates really wanted it settled. But Amelio had insisted on a variety of ancillary agreements and never could close the deal.

When Steve called on Gates, he kept things simple. He explained that he would be willing to drop the patent litigation, but for a price. Not only did he want Microsoft to publicly announce a five-year commitment to provide Office for the Mac; he also wanted his powerful rival to publicly, and financially, make clear that this was an endorsement of Apple’s new direction by purchasing $150 million in nonvoting shares. In other words, Steve wasn’t asking for a loan, he was asking Bill to put his money where his mouth was.

“It was classic,” remembers Gates. “I’d been negotiating this deal with Amelio, and Gil wanted six things, most of which were not important. Gil was complicated, and I’d be calling him on the phone, faxing him stuff over the holidays. And then when Steve comes in, he looks at the deal and says, ‘Here are the two things I want, and here’s what you clearly want from us.’ And we had that deal done very quickly.”

The deal closed at quite literally the eleventh hour of the night before Steve gave his MacWorld keynote address in a downtown Boston theater called the Castle. By Steve’s standards, this speech was on the short side, clocking in at just about thirty minutes. He had no products to introduce or demo. Instead, he presented the corporate equivalent of a State of the Union address. Pacing the stage like a caged tiger, Steve was visibly tense. He wore a white, long-sleeved T-shirt underneath a black sweater vest that was buttoned up in a lopsided way—the lowest button didn’t have a free buttonhole, so one side of the vest hung lower than the other. A couple of times he had trouble getting the remote control to advance the slides projected on the enormous screen behind him. But once he got rolling, his presentation was one of his most concise, and a clear signal that things would change—for the better—at Apple.

Much of his talk was more of a lecture than a presentation, in which he outlined his thinking about what it would take to bring Apple back. He dismissed some of the popular criticisms of Apple, namely that its technology wasn’t relevant, that it couldn’t execute well, and that the company was so disorganized that it couldn’t be managed. “Apple is executing wonderfully well, just on the wrong things,” he quipped. The reason the company seemed in such disarray was that it hadn’t had any real leadership for years. The biggest immediate problem, he added, was that the company’s sales were shrinking. To address that, Apple would need to sharpen its market focus, reassert its brand, and shore up partnerships. “And the place to start is at the top.” That’s when he introduced the new board, describing the strengths of each new director and only then mentioning that he too would join it. He said there would be no chairman named until a new, permanent CEO was hired.

After about twenty minutes he turned to partnerships. What he really wanted to talk about was one business relationship—the one with Microsoft. His first mention of Bill Gates’s company drew only tepid applause, and a few hoots. But in short order, he laid out a five-point deal that would prove to the world that “Microsoft will be part of the game with us,” and later adding that “we have to let go of … this notion that for Apple to win, Microsoft must lose.” Once it all sank in, however, the crowd warmed to the idea, booing only at the mention of Internet Explorer becoming the default browser on future Macs. When Steve introduced Bill, who appeared via a live video feed from Seattle, the audience forced the Microsoft CEO to wait while it applauded before he could make his short statement.

The moment turned out to be Steve’s worst case of stage management ever. Bill’s face, with his familiar smile that can border on a smirk, was about six feet tall on the massive screen above and behind Steve. He looked down on Steve as if to say, “I’m sorry, little people, while I enjoy gracing you with my presence, I can’t be bothered to fly down to your little campfire singalong.” The comparisons with Apple’s old “Big Brother” ad were inevitable.

Overlooked in the ensuing news coverage was the quiet unveiling at the end of the show of a new slogan. One of the themes Steve came back to at several points in the program was how important it can be to try to look at things from another perspective, just to test your assumptions. In other words, he was urging people to “Think Different.” Ads sporting that tagline wouldn’t appear for another few months. But Steve was already sold on the concept as a rallying cry for the new Apple. In fact, he also was already sold on coming back to Apple full-time.

“I watched Bob Dylan as I was growing up, and I watched him never stand still,” Steve would tell me about a year later, in a circuitous attempt to explain why he finally dived back into Apple. “If you look at true artists, if they get really good at something, it occurs to them that they can do this for the rest of their lives, and they can be really successful at it to the outside world, but not really successful to themselves. That’s the moment that an artist really decides who he or she is. If they keep on risking failure they’re still artists. Dylan and Picasso were always risking failure.

“This Apple thing is that way for me. I don’t want to fail, of course. When I was going in I didn’t know how bad it really was, but I still had a lot to think about. I had to consider the implications for Pixar, and for my family, and for my reputation, and all sorts of things. And I finally decided, I don’t really care, this is what I want to do. And if I try my best and fail, well, I tried my best.”

Steve waited till September to announce that he would formally take the reins. Even then, he agreed only to become Apple’s “interim” CEO, or iCEO, as he liked to say, because he still was unsure where the gig would take him. “It was amazing,” remembers Gates. “NeXT the hardware company disappears. NeXT the software company is going absolutely nowhere. But then the Apple board of directors hands the keys over to Steve, even as they’re all thinking, ‘It’s too bad all the normal ways of saving a company didn’t work. Holy smokes, what are we doing here? This is our only chance, but whoa! Here we go!’ ”