Old-school Apple polisher

Old-school Apple polisher
By Margie Wylie and Richard Hart
Staff Writers, CNET NEWS.COM

Dr. Gilbert Amelio is the kind of guy who reminds you of your father's older brother: stable, reasonable, seasoned, an old-school, no b.s. kind of guy.

He's also the kind of guy investors find very comforting. A 25-year management veteran charged with cleaning house at Apple, he has shown that he knows how to use a broom. Since his appointment to CEO eight months ago, Amelio has reorganized the once near-moribund Apple, trimming costs and tidying up product lines, enough so that the company expects a profit by the end of the second quarter of next year.

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What Amelio isn't, is everything that Apple has been: charismatic, wild, and artistic. His weekly coffee klatches with ordinary employees and a personal Web page that sports the contents of his refrigerator seem like calculated attempts to counter a cold fish image. While Amelio rescued chip-maker National Semiconductor from financial ruin, his critics say he cut out the heart of the corporation in the process, leaving it without the creative energy for future growth and change. Amelio says he's visionary enough to lead Apple to the Next Big Thing, but if that's so, it's not been apparent so far. The Apple CEO has appeared in public rarely, and then only to take cautious baby steps forward like introducing small product enhancements or bundling. Meanwhile, the industry, and Mac addicts everywhere are holding their breaths waiting for a bang among the whimpers emanating from Apple's big turnaround.

CNET Central host Richard Hart interviewed Amelio for NEWS.COM in Apple's Cupertino offices, where the CEO talked about Apple's troubles, Amelio's fixes, and the impact of the Internet.

NEWS.COM: How has the Internet affected Apple?
Amelio: In fairly profound ways, I think. We don't normally think about it, but if you and I are communicating over the Internet, I don't know if you are using a Macintosh or an IBM clone. [The Internet] signals the beginning of what will be many more such environments over time, where the lower part of the computer architecture is sort of invisible. We've decided that the operating systems wars of the '80s are behind us; the browser wars of the '90s are going on now between Netscape and Microsoft. What we want is to go on to the next thing beyond the browser wars, because after you finish browsing, it gets kind of boring.

When computers first came out, they were fun to play with, but it was really a negative productivity, because you really spent more time playing and less time getting things done. Then after about ten years, people really figured out how to get productive. What's happening with the Internet today is it has a negative productivity factor. You can browse, it's lots of fun, but in terms of getting your employees or you as an individual contributor more productive, it's not there. So what we've decided to do is move from browsing to knowledge management. We'd like to be the company that you say, "Well, you know Netscape and Microsoft did the browser thing, but Apple dealt with knowledge management."

Is that primarily a software or a hardware issue? It's mostly software, frankly. On the Internet, you have essentially an infinite source of information. That's both its strength as well as its problem. How do you get access to what you really need, quickly, easily, digestively? That's the problem we're taking on.

NEXT: The pitfalls of creativity

The pitfalls of creativity

One common complaint about Apple has been follow-through. I'm still waiting for an upgrade to my Geoport modem. Seems that Apple can come up great ideas, launch them and make a buzz, but somewhere along the way, it just sort of falls off the edge.
I think that's a fair assessment. I think the reason for it, though, is that in an organizational sense we have a bit of a short attention span. I have a tremendously creative workforce. There's a million ideas and a lot of ships get launched. The deselection process is not done as scientifically as it needs to be. Some things ought to be stopped or discontinued, even if there are a few people who like them. The difficulty is that we go far enough along to get people excited about it, and then it just sort of fizzles away. We're correcting that. That's something that's got to change. What I think we have to acknowledge, and what we have to tell everybody, is that we can't do it all. There are some technologies where we are just going to have to depend on our third-party developers, who do incredibly good work anyway. We've got to stop trying to reinvent every wheel.

For example, the Geoport modem is wonderful technology, but we may not have the resources to do that. We may leave that to the third-party developers.

You've reorganized and simplified the organization into four major categories. It didn't seem you've said much about marketing. Are you happy with Apple marketing?
No. There's a lot of things I'm not happy about in marketing, including one of them: I still think we have too many cooks in the kitchen. We need to get a more focused effort. You have to understand that in a company like Apple and in most high-tech companies, your strength is sometime your weakness. Our ability to be innovative, creative, and all that is great, but it also means that you have a thousand agendas going on in parallel but not necessarily aligned with each other. What I keep telling our employees is we need to find the middle ground between not being so darn organized that we're bureaucratic, but being a little more organized than having chaos, and I think we've been a little bit more toward the chaos end. What I want to do is move it a little bit more towards the center.

In some ways, I think of Apple as someone in the '50s who built a home on a titanium mine, because along comes a new technology and suddenly your desert land is valuable. Now you've got a deal with Sun for QuickTime and Netscape for OpenDoc, and you've got deals with clone makers. When will we see Apple get more revenues from licensing than from shipping boxes?
That's a great question. I don't know when, but I do know one thing. As I described, what's been happening for the last 15 years is that in the beginning, people paid a premium to buy your box, but then over time, hardware became a commodity and prices came down and margins became razor-thin. Then, the basis for competition became which operating system you have. People paid a huge premium for which operating system you had, then over time that started to diminish. The plumbing of a modern OS within five years is all going to be the same. So this commodity swamp, if you will, is going up to the next level. So companies have got to say, "How do we position ourselves to deliver real value to the customer?" Because if you're not doing it, except for a little bit with the hardware, and it you're not doing it with the core OS, what are you doing it with? Our notion is that this next layer of stuff out there, starting with the Internet, but including QuickTime media layer and future iterations of Cyberdog is where this value is going to be. So we're going to have to change our business model over time, not instantly, but gradually migrate it over time so that [we have] revenue streams from those things people value, and we charge less for those things people don't value as much. If you think about it a little, it makes a lot of sense.

One of the divisions you've reorganized Apple into could be called consumer appliances. What does that cover and how is that different from a personal computer, which could accomplish some applications around the house?
What the personal computer industry has been so far is the general purpose computer that is capable of running zillions of applications. For Macintosh, there's something like 10,000 applications. Nobody is going to run 10,000 applications individually, but collectively, that's how many there are. The challenge is that as you go into the future, we're dealing a little bit with the chaos theory. You've got complexity that's going up exponentially. Already our operating system is on a level of complexity comparable to the network management software that runs telephony for the United States, and this is something that you buy for $99. The notion is that you have to deal with that complexity, and one way of dealing with that is to move in the direction of coming out with products that are very task-oriented. We call these "information appliances."

If you want to toast bread, you can go to the oven, turn it on, and use your general purpose device to toast bread, or you can go to your toaster and pop it in. Can you manage without a toaster? Sure you can, but it's a heck of a lot nicer to have one.

NEXT: Gil Amelio

Gil Amelio

How do you gather information? On a day-to-day basis, do you frequently find yourself on the Web? How does Gil Amelio get information about his business? How much of it is from cocktail parties at conferences?
[Through] all of those, plus a few others. I meet regularly with employees who are not managers, who are at the grassroots of the organization, and have roundtable discussions. I call them kaffeeklatsches because we usually do it at 9 or 10 in the morning and have a little coffee served. I want to get their perspectives.

The difficulty of running a large corporation is that the people who work for me are these senior vice presidents or executive vice presidents. They're very talented, very smart, and when they explain what's going on to me, it sounds so wonderful that I almost believe it [laughs]. You have to have an independent way of getting information. So I read maybe a hundred letters a day. I respond to many of those myself. I dare say, except when I'm traveling, I'm probably on the Web some every day. I limit the amount of time for obvious reasons, but I probe and I explore and I discover things. Then I do a fair amount of reading and just thinking.

This is probably the most consumer-oriented company that you've headed up so far. What makes you think you're the guy who can turn Apple around?
I think that just by sheer good fortune I have had a series of experiences that have just put me in the right situation. I have a doctorate in physics, I've been an inventor and a technologist, and so I think I have a reasonably deep appreciation of what technology's all about, the flow of history of technology and so forth. I think you have to have that sense if you are going to understand where the opportunities lie in the future. I've done that pretty well. I did the CCD thing; I did the modem thing, in both of those cases well ahead of my time, but subsequently they were very successful. I think I've got a good track record there. I have run businesses of various sizes. This November is 25 years as a general manager. I've had the chance to make all the mistakes and learn from them, so hopefully that gets my batting average up.

[Apple founder Steve] Jobs's thing was the Mac, and [former president John] Sculley's thing was the Newton. What is Gil Amelio's thing going to be?
I don't know. I'm not sure there is going to be one. In fact, what I'd rather have is not have a favorite child, but I'd rather find a way to integrate them together. What I think we haven't done well enough, and where I think we've missed a heck of an opportunity, is in taking the various technologies we have and blending them together to make a total solution. Newton ought to play seamlessly with the Mac. It doesn't today, but it ought to in the future. That I think is the missed bet, and so my wagon that I'm riding, if you will, is to try and put these things together so that they integrate better.