Execs question Amelio leadership

Today isn't the first time that Gil Amelio has told thousands of Apple employees that their jobs were finished. Last April, the CEO gave walking

Apple execs question Amelio leadership
	Financial health has a cost go to story
	Productive moves for Apple go to story
	Apple rank and file paralyzed go to story
	Apple faithful won't give up photo essay

papers to 2,800 people, a move announced as part of an effort to reduce costs by outsourcing more manufacturing, cutting assets that weren't producing, and reorganizing everyone that was left. Just like today.

The difference is that last April, Gil Amelio was a CEO still enjoying a honeymoon period with both investors and Apple employees, most of whom looked to him as a white knight that would rescue the company from a fate of financial catastrophe and increasing technological irrelevance. (See timeline.)

With today's announcement that Apple will lay off 2,700 full-time employees and 1,400 temporary and contract workers, Amelio wants to look again like that white knight. But nearly a year later and with $120 million more reported in financial losses, Amelio has lost the confidence of some of the executives who are supposed to execute his rescue plan. With almost 25 percent of the company on its way out, morale is suffering at all levels of the company--some say the most productive activity inside Apple right now is the rewriting of resumes.

But according to NEWS.COM interviews with a half-dozen current and former Apple executives, even some top-level Apple managers are no longer sure if Amelio has a plan that can revive the good old days at Apple.

"There was some momentum through inertia [when Spindler left]. Gil didn't change the momentum," said a senior Apple hardware development and marketing executive. "He would not say, do this and not that. It was more like, do everything, It was frustrating. He didn't set priorities and we didn't have the money to do all things."

Amelio's reputation is also being sullied by executives who recently left the company after a major shakeup announced in February. Several high-level executives, including former chief operating officer Marco Landi, were in effect demoted by the reorganization and several senior managers left within weeks. Some of these former executives say that Amelio's lack of resolve was a factor in their decision to quit.

Amelio was not available for comment. Jeni Johnstone, an Apple spokeswoman, said in response to some of the issues raised by current and former executives, "We don't comment on rumors and speculation."

One executive thinks that Amelio is more comfortable tinkering around with the company's management structure than reshaping its product lineup, which is why today's announcement wasn't made months ago. The disgruntled executives' major complaint about Amelio is that he takes too long to make a decision and isn't projecting the authority expected of a leader in charge of a crisis situation.

Said one former sales executive: "Amelio is a waffler. He has no courage of his convictions."

Others reached the same conclusion. "I thought he had a clear vision, but ultimately, I was wrong," said a former senior corporate marketing manager.

Recent history at Apple
Feb 1996		Dr. Gil Amelio is named the new Apple CEO, after Michael Spindler gets the ax.
June 1996		Amelio announces a reorg where six senior executives report to him, but he pays little attention to cutting the list of Apple products. Executives named include Marco Landi, COO; George Scalise, chief administrative officer; Fred Anderson, CFO; Satjiv Chahil, senior VP, corporate marketing; Dr. Douglas Solomon, VP, strategic planning; and a chief technology officer to be named.
July 1996		Ellen Hancock joins company as chief technology officer.
Sept 1996		Apple conducts merger talks with Be, which would provide Apple a new OS.
Nov 1996		Talks with Be stall over price. Amelio appears unenthusiastic about the deal.
Dec 1996		Apple buys Next Software for $400 million; Steve Jobs returns as "consultant." Jobs objects to spinning off Next's WebObjects for $300 million.
Jan 1997		At Macworld, Amelio refuses to rehearse his keynote. His performance is panned for being winded and unfocused.
Feb 1997		Amelio launches a new management shuffle reverts the company structure back to a plan similar to what was in place when Amelio arrived at Apple. The future of Apple's new OS is handed to a Next exec.
March 1997		1997 Amelio announces the layoff of 2,700 full-time employees and 1,400 temporary and contract workers, but makes only light cuts in the product line.
Photo of Dr. Gil Amelio courtesy of Apple Computer.

When Amelio first moved into the CEO office in February 1996 from the CEO slot at National Semiconductor, the choice surprised many. While he brought with him a reputation for being a turnaround expert, many questioned his ability to conceive a vision for Apple's future. But with the red ink flowing in torrents, Wall Street and even insiders were willing to give him the benefit of the doubt on his vision. Their priority was halting the losses.

Through the end of its fiscal year in October, it looked like Amelio was achieving that. It was his predecessor Michael Spindler, not Amelio, who was the scapegoat for Apple's shocking $740 million loss announced in April.

Wall Street was reassured by a reorganization plan announced in June designed to help assess Apple's operations by creating six distinct profit and loss centers. After the first reorg, Amelio got credit for the $25 million profit posted for the fourth quarter in September.

306K 465K "helvetica"="" size="-1" color="#666666"> Amelio on Apple marketing

But that was the last of the good news.

Of the 6 senior executives brought in to the upper management ranks and 12 vice presidents named during that June reorganization, about half are no longer at Apple. And the $25 million fourth-quarter profit was followed by a $120 million first-quarter loss announced in January.

Some Apple executives blame that loss on Amelio's inexperience in the consumer market and bad advice given by then COO Marco Landi.

During the fall fourth quarter, Landi wanted to stuff the distribution channels with Apple computers in the hopes that they would drive holiday sales. This is a common practice for some consumer product companies, but for Apple, it also drove up costs for the following quarter.

"A lot of executives went to Gil and said don't do this," said an Apple executive who participated in discussions of the distribution plan. "Neither Gil nor Marco were familiar with the consumer market. Once you stuff the channel, you can only make so many moves to push sales?.It reminded us of what happened a year ago," he added, referring to the last Christmas quarter of Spindler's reign.

Spindler made the same mistake the Christmas quarter of 1995; Apple ended up stuck with $388 million in excess inventory. The company was forced to declare an astounding $740 million loss for that quarter.

But Amelio turned a deaf ear. When sales of the Performa line slowed in November, Landi wanted to slash prices to the point where they were selling below cost. "Marco wanted to wrap a dollar around every Performa we sold and Gil approved the action," said the former corporate marketing executive.

The missing Performa sales resulted in the $120 million loss, which Amelio publicly admitted at Macworld Expo in January.

This decision permanently alienated some of Apple's top managers, who felt that Amelio had abandoned many of the strategies he'd walked in with in February and demonstrated poor judgment by deferring to Landi's advice over the objections of other senior managers.

Landi is on vacation and could not be reached for comment.

Even after the news of the $120 million loss, some managers felt that Amelio didn't try hard enough to present an image of a leader in control, within the company or to the public. Staff worked late into the night crafting the program for his widely publicized presentation on January 15 at Macworld Expo in San Francisco and asked Amelio to rehearse his speech the night before. He declined, saying he had a dinner planned with his wife.

"I would have thought he would rehearse in the morning but he didn't," said one former executive who worked on the speech. "Instead, he started making changes to the script a few hours before, saying he wanted to make a few bulleted points and wanted the freedom to ad-lib."

Amelio's speech was later panned for being too long and lacking focus.

Four weeks later, Amelio appeared to have taken charge, announcing a second major reorganization that simplified the management structure and installed several Steve Jobs-recommended managers in key positions. But here again, some insiders say that the announcement was made quickly without much advance planning. "This latest restructuring was done over a weekend," said

Apple execs question Amelio leadership
	Financial health has a cost go to story
	Productive moves for Apple go to story
	Apple rank and file paralyzed go to story
	Apple faithful won't give up photo essay

a former executive.

But for better or for worse, the structure is now in place and soon the layoffs that will mark the next era of Apple's history will be completed. While this may give a boost to the public perception of Amelio as a tough leader who can make the hard decisions, some inside the company are already whispering that it's not Amelio who is in charge, but Jobs.

One executive said, for example, that Amelio routinely reverses decisions reached with the executive committee after discussing it with Jobs. "The committee would meet and say this equals A,B,C. But then Gil would talk to Jobs and return to the committee saying it was now X,Y, Z," said the former corporate marketing executive.