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A stunning deal capsthe comeback questof a computer whizonce tossed out ofhis own companyBy CATHY BOOTH

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TEVE JOBS IS SITTING IN THE

Apple boardroom. Actually,he is slouched like a teen-ager in one of the cushyleather chairs, his worn jog-ging shoes resting on thedirectors'table. The table isvery long, very impressive-and very empty. Just Jobshere, wearing shorts and an

impish grin. The old board of directors atApple is history, he says. He's about toleave for Boston, where he'll make thatnews public, along with a far more dramat-ic announcement. One more thing, he says,feet still propped up on the executivewoodwork-the company's headquartersin Cupertino, Calif., is history too. Eightstories of corporate excess are about to beabandoned. "I hate this building," saysJobs. "This building has come to symbolizeeverything that went wrong with Apple.It's about corporate hubris. Greed." This isnot a building that can make "insanelygreat" computer products.

The rebel flag is flying over AppleComputer Inc., again, thanks to Jobs. TheSilicon Valley visionary who co-foundedApple in his father's garage in 1976, wholaunched the wildly successful Macintoshonly to be booted by the corporate pin-heads in 1985, is back running his first love.No, he is not the chief executive officer(cso), nor even chairman of the board. Butuntil there's a new boss, Jobs is firmly atApple's helm, and take it from us, thecompany will never be the same. Take ittoo from the 1,600 Macintosh believerswho gave him a standing ovation at theMacworld Expo in Boston last week, thenbooed, hissed and finally sat in shocked si-lence as Jobs announced that Apple's sal-vation would be a strategic alliance withnone other than ... Bill Gates of Microsoft.

Understand, the idea of Jobs returningto Apple is something akin to that of LukeSkywalker returning to fight what, until lastweek, cultists regarded as the evil empire.Gates, by comparison, was perceived as adweeb Darth Vader, the billionaire bad guywho usuroed the idea of the Macintosh's

Photographs for TIME by Diana Walkero -

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lobs reviews a tape ol Oracle boss Larry Ellisonpromoting Apple's new board. Despite runningtwo companies, lobs has changed his life-styleto free up more time at home for wife Laureneand their two children-and his computer

friendly point-and-click operating systemfor his now dominant Microsoft Windows.

Boo, hiss, a strategic alliance indeed. IsJobs crazy? "Madman at the wheel, eh?" hesaid, laughing, as he walked offthe stage inBoston.

American business has had its shareof imaginative entrepreneurs, malevolentbosses, boardroom plotters who hatch late-night coups, strategic decision makers whomake disastrous turns and heroic turn-around artists who restore corporate glorywith breakthrough thinking and messianiczeal. Generally, that would describe morethan one person. But Jobs is a one-manminiseries of capitalism whose ratings arerisingagain. Within hours of the announce-ment, Apple stock soared 33Vo to $26.31.Sipping a celebratory water on the planeride home, Jobs pointed out that people hadbeen so shocked they missed the big news:Microsoft would be paying an undisclosedamount to settle claims that it had usedseminal Apple computer patents. "Three or

four weeks ago," said Jobs, "I called Bill andsaid Microsoft and Apple should work moreclosely together, but we have this issue toresolve, this intellectual-property dispute.Let's resolve it." With Jobs' no-nonsensenegotiating, itwas done quicldy, with Gatesnot only promising to pay off Apple buteven investing $150 million in nonvotingApple stock. The rebels can nowwithdrawto their original "campus" in Cupertino-the one without the fancy boardroom-and live on to fight another day.

HE TALE OF STEVE JOBS HAS LONGbeen a Silicon Valley legend. It was

Jobs who, as a long-haired andbarefoot twentysomething, set inmotion the revolution called the

I personal computer by making it"user friendly" to the masses. Jobs didn'tinvent the machine; his partner SteveWozniak was the real engineer. But Jobsunderstood before anyone else the key totransforming the computer from a geek's

expensive toy into a household appliance.Instead of writing commands in computer-ese. Macintosh owners used a mouse topoint and click on easily identifiable iconson the screen-a trash can and a file folder.Jobs also paired the laser printer withthe computer, thus sparking the desktop-publishing revolution. "We started out toget a computer in the hands of everydaypeople, and we succeeded beyond ourwildest dreams," laughs Jobs.

Jobs is intimidating at first. He has, af-ter all, been portrayed as an abusive mon-ster, and countless colleagues attest to hisarrogance and intolerance. But now, evenduring the week of the highest stress he hasfaced in years, he exudes his other side: theZenlike calm and the impish aura thatmake him so different from his arch friendand arch rival Gates, a man of competitiveintensity and analytical rigor. This Jobs lit-erally lopes into the room, and he keeps us-ing the word golly, So O.K., golly, it's truethat the famed "Reality Distortion Field"-

28 TIME. AUGUST 18. 1997

,ii*ffi,that renowned Jobsian ability to bamboozleand bedazzle-still works, but it's a slowerseduction these days, not a manic pitch. At42,he may have mellowed, but as a moti-vator and marketer he still has no equal.

The adopted son of working-class par-ents, Jobs became a millionaire by age 25,an American icon by age 30 and corporatehistory the same year, all thanls to Apple. Itwould be easy to read his return-l2 yearsafter he was booted by the board-as a mo-ment of sweet revenge. But for Jobs, whogrew up idolizing the Hewlett-Packard ide-al of an egalitarian workplace where ideascame before hierarchy, returning to Appleis something akin to rescuing a son beforehe loses himself to booze and bad company.There has been a literal deathwatch on Ap-ple in recent weela. It had sales of $9.8 bil-lion last year, but revenues have droppedsignificantly in 1997. Losses have mount-ed-more than $1.5 billion over 18 months.Jobs prefers to see hope in the 20 million to25 million users who remain. He even has

Preparations for theblockbuster speechtake place at an oldauditorium calledthe Castle. As heruns through thelancy audio-videosegments, lobstalks turkey withGates. Outside,aides are giddyabout tobstleturning speech

a hard time uttering the D word. "Applehas some tremendous assets, but I believewithout some attention, the companycould, could, could-I'm searching for theright word-could, could ... " He pausesand gives in: "die."

All last week, Jobs allowed Ttvs to fol-low him as he negotiated his d6tente withGates and prepared for the Boston meet-ing, then headed back to California to workat what he calls his "preferred squeeze"-Pixar Animation Studios, the Jobs compa-ny that created the 1995 hit movie ToE Sto-ry, the first animated feature film madeentirely by computer. Pixar representspure creation, a whole new era of enter-tainment that blends good storytellingwithcomputers. "It's so fun at Pixar," he says,reveling in his new role as Hollyrvoodmogul on the make. Apple, on the otherhand, requires heavy lifting. "It's like turn-ing a big tanker. There were a lot of lousydeals that we're undoing."

So why go back to a company that has

ejected cnos like so manybad diskettes? "Iwouldn't be honest if some days I didn'tquestion whether I made the right decisionin getting involved," he says. "But I believelife is an intelligent thing-that thingsaren't random." In other words, there's areason why his path has crossed Apple'sagain. A chance to pay penance? Or per-haps to prove he has grown up.

On Monday, two days before the fate-ful announcement, Jobs has the run of Ap-ple headquarters. Most of the executivesuites are already empty, their inhabitantsgone to Macworld or just plain gone. Ap-ple's management ranks have been thin-ning at an alarming rate. Only Fred Ander-son, the chief financial offrcer, is roamingthe halls as Jobs negotiates with Microsoftby phone and worl<s on a quickie video ofthe new Apple board he virtually hand-picked-naturally to include his buddy, Or-acle chief Lawrence Ellison, who consid-ered his own takeover bid of Apple earlierthis year. "We caught Larry Ellison in the

TIME. AUGUST I8. I997 29

Htg

Preparations for theblockbuster speechtake place at an oldauditorium calledthe Castle. As heruns through thefancy audio-videosegments, lobstalks turkey withGates. Outside,aides are giddyabout Jobstleturning speech

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that renowned Jobsian abilityto bamboozleand bedazzle-still works, but it's a slowerseduction these days, not a manic pitch, At42,he may have mellowed, but as a moti-vator and marketer he still has no equal.

The adopted son ofworking-class par-ents, Jobs became a millionaire by age 25,an American icon by age 30 and corporatehistory the same year, all thanks to Apple. Itwould be easy to read his return-l2 yearsafter he was booted by the board-as a mo-ment of sweet revenge. But for Jobs, whogrew up idolizing the Hewlett-Packard ide-al of an egalitarian workplace where ideascame before hierarchy, returning to Appleis something akin to rescuing a son beforehe loses himself to booze and bad company.There has been a literal deathwatch on Ap-ple in recent weeks. It had sales of $9.8 bil-lion last year, but revenues have droppedsignificantly in 1997. Losses have mount-ed-more than $1.5 billion over 18 months.Jobs prefers to see hope in the 20 million to25 million users who remain. He even has

a hard time uttering the D word. "Applehas some tremendous assets, but I believewithout some attention, the companycould, could, could-I'm searching for theright word-could, could ... " He pausesand gives in: "die."

All last week, Jobs allowed Ttun to fol-Iow him as he negotiated his d6tente withGates and prepared for the Boston meet-ing, then headed back to California to workat what he calls his "preferred squeeze"-Pixar Animation Studios, the Jobs compa-ny that created the 1995 hit movie Toy Sto-ry, the first animated feature film madeentirely by computer. Pixar representspure creation, a whole new era of enter-tainment that blends good storytelling withcomputers, "It's so fun at Pixar," he says,reveling in his new role as Hollywoodmogul on the make. Apple, on the otherhand, requires heavy lifting, "It's like turn-ing a big tanker. There were a lot of lousydeals that we're undoing."

So why go back to a company that has

ejected cnos like so many bad diskettes? "Iwouldn't be honest if some days I didn'tquestion whether I made the right decisionin getting involved," he says. "But I believelife is an intelligent thing-that thingsaren't random." In other words, there's areason why his path has crossed Apple'sagain. A chance to pay penance? Or per-haps to prove he has grown up.

On Monday, two days before the fate-ful announcement, Jobs has the run of Ap-ple headquarters. Most of the executivesuites are already empty, their inhabitantsgone to Macworld or just plain gone. Ap-ple's management ranks have been thin-ning at an alarming rate. Only Fred Ander-son, the chief financial officer, is roamingthe halls as Jobs negotiates with Microsoftby phone and works on a quickie video ofthe new Apple board he virtually hand-picked-naturally to include his buddy, Or-acle chief Lawrence Ellison. who consid-ered his own takeover bid ofApple earlierthis year. "We caught Larry Ellison in the

TIME. AUGUST 18. 1997 29

EUSINESS

San Jose airport last Friday before he leftfor vacation," says Jobs, chuckling, as hewatches raw video footage in the board-room. "Apple is the only life-style brand inthe computer industry," Ellison is sayingonscreen. "It's the only company peoplefeel passionate about. My company, Ora-cle, is huge; IBM is huge; Microsoft ishuge; but no one has incredible emotionswith our companies." Jobs is pleased.

All day long, the de facto helmsmanraces in and out, trying out bits of hisWednesday speech. He is aware of thenaysaying, that Apple, with its single-digitmarket share, is doomed to fall before theGoliath of Microsoft. At Macworld, he willstress instead Apple's domination of edu-cation and desktop publishing. He fiddleswith a paper clip as he thinks out loud.

"What ifApple didn't exist? Think aboutit. TIvn wouldn't get published next week.Some 70Vo of the newspapers in the U.S.wouldn't publish tomorrow morning. Some60Vo of the kids wouldn't have computers;64Vo of the teachers wouldn't have comput-ers. More than half the Websites created onMacs wouldn't exist," he says. "So there'ssomething worth saving here. See?"

Painful as it is for a founding father, hekeeps up daily with the rumbles about Ap-ple on the Internet, the world's most ex-tensive gossip mill. The chatter is of proryfights and takeovers, the frustrations vent-ed by clonemakers and Mac users alike. Heunderstands; he really does. He gave up onApple himself just two months ago and un-Ioaded the 1.5 million shares he got as partof the $424 million Apple paid him forNeXT Software Inc. last December. "Yes, Isold the shares," he says. "I pretty muchhad given up hope that the Apple boardwas going to do anything. I didn't think thestock was going up." He ruefully notes thathe sold them in June when the price wasaround $15 a share, about $16 million lessthan they'd be worth now. Today he holdsa symbolic one share of Apple-and is un-apologetic about not holding more. "Ifthat upsets employees," he says, "I'm per-fectly happy to go home to Pixar."

Within weeks of his sale. of course. theboard ousted cno Gilbert Amelio after 17months on the job. Jobs says the board cameto him and offered him both the cro's andchairman's job. "I thought about it," he ad-mits, "but decided it wasn't what I wantedto do with my life." Tahng the chairman'sjob, in particular, he said would "scareaway" any real candidate for the cuo's job,given Jobs' penchant for down-your-throatmanagement. Yet it may not be much betterfor the new cEo to have him sitting on theboard, especially the reconstituted activistboard of Jobs allies that he hopes will keepApple on the right path. "I've agreed to be

a board member, and that's all I can give.I have another life now."

HE STEVE JOBS WHO IS CURRENTLYrunning two sophisticated compa-nies lives in a turn-of-the-centuryEnglish-style country house inPalo Alto with his wife Laurene,33, their two young children and

his l9-year-old daughter Lisa, home fromcollege for the summer. The house is runwith a distinct 1960s flavor. Laurene hasplanted a garden of wildflowers, herbs andvegetables all around. The rooms aresparsely decorated, the only extravagancesbeing Ansel Adams photographs. We dineas the Jobses always do: both are strict ve-gans, eating no meat products. Dinner ispasta with raw tomatoes, fresh raw cornfrom the garden, steamed cauliflower anda salad of raw shredded carrots. While theadults eat, their six-year-old son picks

lemon verbena and other herbs in the gar-den for the after-dinner tea. His reward isa tickle and being tucked into bed by Dad.

Over dinner, Jobs tells how Laureneoverloaded his circuits eight years agowhile he was speaking at nearby StanfordUniversity. "I couldn't take my eyes offher," he says of the brainy blond businessschool graduate. He "bagged" a businessdinner to be with her, he says, and they'vebeen together ever since. Conversation is amix of politics, Laurene's work setting up amentor group for a nearby high school andtales of a presidential visit last year whenBill Clinton rang up and invited himself todinner so he could meet with Silicon Valleyexecutives. "We had to rent a Dumoster toclean out the house before they came!"says Jobs, whose prenuptial housing stylewas "spare," if that's the term for lackingfurniture. The couple giggle over theirsearch for cheap wine glasses to serve the

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30 TIME, AUGUST I8, 1997

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President. The menu was, naturally, vegan.Tuesday Jobs heads for Boston, travel-

ing commercial, albeit first class. Oncethere, he surveys the Castle, a puny down-town venue chosen months ago for whatwas expected to be a snoozer ofa speech toMac enthusiasts by Amelio. Jobs has as-sembled an army of showmen to orches-trate his-and Apple's-return to competi-tion. There is theatrical lighting and aconcert-quality sound system. He stares atthe mega columns with the Apple logo cutinto them, grimaces at their "Hitlerish" ap-pearance, but decides it's too late to doanything about them. Then he sets to workon his slide-show presentation-run froman IBM ThinkPad. The software, thankheaven, is from his old company, NeXT.

Less than 12 hours before his big an-nouncement, nobody here knows yetabout the bombshell to come. In fact, Jobsis still negotiating it here at the Castle-on

a cell phone. "Hi, Bill," you hear him say inthe echo chamber of the old hall. Then hisvoice drops, and for nearly an hour hepaces the stage, running through last-minute details with Gates. All the while, heIeans over his computer, paces, lies downon the stage, paces, lurks in dark corners,paces and talks, paces and talks.

This is the fateful call for the boy ti-tans of the personal-computer revolution,meant to settle the war. At one point, talk-ing about Apple, Jobs says, "There are a lotof good things, happily-and a lot ofscrewed-up things." Then, to his crew, heyells, "Have we got satellite contact withthe other slde?" Assured this has been tak-en care of, he answers a question fromGates about what to wear on the morrow("I'm just going to wear a white shirt," he as-sures him), and he finally ends the conver-sation with a heartfelt "Thank you for yoursupport of this company. I think the world's

a better place for it." And so that's howApple and Microsoft, Steve Jobs and BillGates, finally seal it-on a cell-phone call.

HE DEAL IS VINTAGE JOBS. AMELIO

began the process of repairing re-lations between the two longtimerivals. But once he was out thedoor at Apple, Jobs contactedGates to try to get talks started

again. Gates dispatched his chieffinancialofficer, Gregory Maffei, who met Jobs athis home. Jobs suggested they go for awalk. Grabbing a couple of bottles of min-eral water from the fridge, the two took offfor a stroll around Palo Alto. Jobs was bare-foot. "It was an interesting scene," Maffeirecalls. "It was a pretty radical change forthe relations between the two companies."The two walked for nearly an hour,through Palo Alto's green university area,as they pounded out the details ofa poten-tial deal. Jobs, Maffei says, was "expansiveand charming. He said, 'These are thingsthat we care about and that matter.'Andthat let us cut down the list. We had spenta lot of time with Amelio, and they had a lotof ideas that were nonstarters. Jobs had alot more ability. He didn't ask for 23,000terms. He looked at the whole picture, fig-ured about what he needed. And we fig-ured he had the credibility to bring theApple people around and sell the deal."

That credibility would be tested as Jobsdelivered the speech to the faithful. Andthen he was there, on the giant screen.Gates appeared, amid boos and hisses, toannounce that Microsoft would invest inand cooperate with Apple. Jobs is disap-pointed by the "childish behavior" of thosewho booed. "I'm sure some people want tocling to old identities. I was a little disap-pointed at the unprofessional reaction. Onthe one hand, people are dying to get thelatest release of Microsoft Office on theirMacs, and on the other hand, they're boo-ing the cno of the company that puts it out.It seems really stupid to me." He adds, "Ap-ple has to move beyond the point of viewthat for Apple to win, Microsoft has to lose."

Until a new cEo is on board, Jobs isup to his trim 89-cm-waist jeans in deter-mining Apple's future. "I'm here almostevery day," he said, sitting in the board-room last week, "but just for the nextfew months. I'm really clear on it." Hisposition is fairly critical to the company'ssuccess, according to Edgar Woolard Jr.,chairman of E.I. DuPont and one of onlytwo board members who survived the lat-est assault. "It's conceivable Apple couldturn around without Steve, but theprobability goes up significantly withSteve. Steve is noted for his intellect andvision, but he can also bring a spirit of en-

TIME, AUGUST 18, 1997 31

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thusiasm to users and employees alike."He can also buy that spirit. To restore

morale,Jobs says, he wentto the matwith theold board to lower the price of incentivestock options, which had become virtuallyworthless as the share price sagged. In Sili-con Valley, where job opportunities are ascommon as Porsches, stock options are cru-cial to retain employees. When the boardmembers resisted, he pushed for their resig-nations. Jobs repriced the option at $13.25.Apple employees have already made 1007o.

There is not one area of Apple thatdoesn't bear Jobs' fingerprints. Take productdevelopment. "We've reviewed the roadmapofnewproductsandaxedmore rthanTIVo ofthe projects, keepingthe 30Vo that were gems. Plus we'readding new ones that are a wholenew paradigm of looking at comput-ers," he says. "The product teams atApple are very excited. There's somuch low-hanging fruit, it's easy toturn around."

EXT ON THE L IST IS AP-

ple's fuzzy marketingmessage. (Quick: Canyou think of it?) Jobsdismissed Apple's adagency and held a "bake-

off' for the account among threefirms. The winner was TBWAChiaVDay, the company that creat-ed Apple's legendary 1984 SuperBowl ad (only to be fired). Jobs iswildly enthusiastic about the newad. which features the theme"Think Differently," but when heplays it for his inner team at theCastle Tuesday night, the groupnixes it as not ready for prime time.Look for it soon. however. "There'sa germ of a brilliant idea there,"Jobs rhapsodizes.

The key, Jobs believes, is to takeadvantage ofthe Apple brand itself."What are the great brands? Levis,Coke, Disney, Nike. Most peoplewould put Apple in that category,"he says. "You could spend billions ofdollars building a brand not as goodas Apple. Yet Apple hasn't been do-ing anything with this incredible

off. Eleven years ago, he clicked his mouseon the Hollywood icon and bought Pixarfrom StarWars director George Lucas. Hehas dumped upwards of $55 million of hisown money into the venture and fairly bur-bles with that famed charisma over his newmission: marrying Silicon Valley technolo-gy to Hollyvvood's creative genius. His stu-dio became the first-besides Disney-tohit it big with an animated movie, ToESiorg, which cleared a respectable $37million for the fledgling studio. Jobs owns60Vo of Pixar, which is valued at any-where from $700 million to $800 million.

Just entering the door at Pixar's head-

computer biz and the animation biz, Jobsnotes, "Look, you work on a technicalproduct, and ifyou're really lucky, it ships.If you're really, really lucky, it's a hit andlasts a year. If you're in the pantheon ofproducts it lasts a decade, then it rapidlybecomes a sediment layer on which thenext layer of technology is built. I don'tthink you'll be able to boot up any comput-er today in 20 years."

On the other hand, animated filmshave an infinite life cycle. "SnotoWhitehassold 28 million copies, and it's a 60-year-oldproduction,"Jobs points out. "People don'tread Herodotus or Homer to their kids

anymore, but everybody watchesmovies. These are our myths to-day. Disney puts those myths intoour culture, and hopefully Pixarwill too. At Pixar we're just gettingstarted, and it's very magical. It'slike the computer industry was inthe early days."

Jobs is working hard to makePixar a brand name as powerful asDisney's. Michael Eisner, head ofDisney, says he doesn't even thinkof the fwo companies as separateanymore. "We are joined at thehip, at the computer and at thesoul," he told TIvn. "Pixar's suc-cess is not a fluke. One thing I al-ways think is essential is enthusi-asm, and Steve Jobs is massivelyenthusiastic. Jobs'bravado is hischarm. He's a serious business-man. but he's out there with hischarisma. It's fun to be with him."

Unlike Apple, Pixar is expand-ing, having gone from 175 people

to 375 this year alone. The original Rich-mond studio now has an outpost workingbusily on a direct-to-video sequel to ToyStory, andthere's a mysterious third majorproject in the works too. Jobs has plans fora new studio, to sprawl on 6 hectares in in-dustrial Emeryville, near Berkeley. Interi-or plans have been carefully drawn-be-fore the exterior-to ensure a cross-pollination of ideas. And of course, hesays, all the offices will be the same size.

For the next few months, however,Steve Jobs'main job will be Apple. The Mi-crosoft Death Star may be rotating in friend-ly orbit, butJobs must still find a new leaderfor the Mac troops. Then he can resume be-ing a Hollywood mogul and a model dad,right? Even after this amazing week, Jobsinsists he will pass the diskette to a new gen-eration and then stand aside to let it run theprogram. But Apple is his first child, and youknow how hard it is to let the first child go.Watch for the sequel here. -with rcportin1hy David 5. JacksonlSan Francisco and ValerieMarchant/New York

The ironic momentarrives: Gates, infull Orwellianspecter, announcesthat Microsoft willinvest $15O millionin Apple. Thecrowd boos him

quarters in the San Fran-cisco suburb of Richmondtells you all you need toknow about the difference incultures between Pixar andApple. Pixar is what Appleusedto be: cool. Everybody'soffice here is the same size,even Jobs'. He's in shorts; sois everybody else.

During our visit, ToyStory's Academy Award-winning director, John Las-

asset, What is Apple, after all? Apple isabout people who think'outside the box,'people who want to use computers to helpthem change the world, to help them cre-ate things that make a difference, and notjust to get a job done."

Although many computer wonks stillthink Apple is too tempting for Jobs to re-sist, the truth is that he's been much betterat building new companies than runningexisting ones. Pixar, his latest love, is taking

seter, is excited about a"bug cam" the size of a matchbook. It wasdesigned on a lark by Pixar engineers tophotograph real bugs for A Bug's Life, thefirst in Pixar's five-picture deal with Dis-ney. The hallways are crawling with pic-tures of exotic bugs and plants that willeventually populate the movie. "It's waycool working here," says Lasseter. "Theatmosphere is fun. We respect creativepeople and make them feel satisfied."

Musins on the differences between the

32 TIME. AUGUST 18. 1997

IF Y(lUGAII'TBEATrEMrrrWill Bill Gates' bailoutsave Apple-or juststrengthen Microsoftthand in the Web wars?By M|GI{AEL IGANTZ

HEYD BEEN DUELING FOR MORE

than a decade, the binary won-ders of the computer age: SteveJobs, the flower-child dreamerwhose Apple Computer broughtthe world the Mac's cheerfuldesktop icons, and Bill Gates,the brilliant and ruthless com-

petitor whose Microsoft tamed the worldwith Windows after sneaking in behindthose scary columns of oos code. Theirbattle for control of the home computersuggested'60s barricades re-erected forthe corporate'80s: Yin vs. Yang. Luke vs.Vader. Kennedy vs. Nixon. Jeans vs, Pin-stripes. Art vs. Commerce. '

And the winner is? We're so condi-tioned to Hollywood's underdog victoriesthat it came as a shock last week for Com-merce to whip Art, hands down and for-evermore. The end came at the MacWorldExpo in Boston, with what will surely godown as one of our era's iconic images:Gates'tousle-haired grin looming from agiant video screen over the tiny figure ofApple "adviser" Jobs, who stood on thepodium watching his strange bedfellowconfirm Microsoft's decision to bail outthe seminal Silicon Valley start-up.

The lesson? Art may cast a brighterlight in the short term, but Commerce

generally wins big in the final tally. Thehigh-tech world had spent the past monthwondering which Apple-preserving rabbitJobs would pull from his hat during hisMacWorld speech. Now we know: theplan is to backstab Apple's friends by em-bracing their mutual enemy in one nakedgrasp for survival. The era of "competitionbetween Apple and Microsoft is over,"Jobs told the stunned conclave, announc-ing Microsoft's $150 million investment

and software promises. They could all justget along.

Then Gates'smug smile blossomed onthat vast Orwellian screen (a Stalinesqueedifice uncannily resembling the one thatgot shattered in the famous first Mac ad in1984), and the Microsoft leader regaled theApple masses with his boundless affectionfor the operating system (OS) whose com-mercial viability he had spent much of hisadult life systematically undermining. "We

ITIME, AUGUST 18, T997 33

I

think Apple makes a huge contribution tothe computer industry," Gates assured theroom, respectfully observing the tabooagainst speaking ill of the dead-or, ahem,the gravely ailing. Let's put it this way: youdidn't hear the man extolling the wondersof Apple a few years ago, when the Mac stillhad market relevance. Gates celebratingApple today is like the U.S. Department ofthe Interior celebrating the spotted owl byfencing in its nesting grounds and tryingnot to let the last ones die.

The faithful's reaction to the Gates-Jobs duet was pretty much what anyoneconversant with the Apple cult would haveexpected. "Mass suicide planned tonight inSilicon Valley," read a typical posting to thenewsgroup alt.dastroy.microsoft. And theMacWorld crowd booed Gates'image evenmore than Jobs' turncoat words. But therewere cheers too. "Everybody was booingMicrosoft," says attendee Mark Lilback,24,"and then they were like,'Oh, Bill Gates islistening to this,' and they started to ap-plaud." Who could blame them? They knewthe truth: they were a conquered king-dom's starving partisans. Booing Gatesmeant biting the only hand left with thewherewithal to feed them.

Wall Street, by contrast, showed littleconcern over Apple's dire predicament,bumping the company's stock up by morethan half in the days following Jobs' cannycapitulation. What change in Apple's cir-cumstances justified this startling re-evalu-ation? Besides bulng stock, Microsoft prop-ped up the tottering Macintosh platformby pledging three years'worth of Mac ver-sions of its office software and cooperationuith Apple on upcoming products. Apple's

DECEMBER 1980Apple goes public,sell ing 4.6 mill ionshares. More than 40employees and investorsbecome mill ionaires

Jobs with the Apple ll

SEPTEMBER 198I

richest boon, though, may be psychological;by promising to publish Mac software intothe next century, Microsoft lets Mac cus-tomers and developers alike trust the plat-form to exist that long. And Apple cultistsdon't need much encouragement to staypsyched. "Macintosh customers haveproved to be incredibly stubborn," saysRoger McNamee, co-founder of the high-tech investment firm Interval Partners."and where there are sfubborn customers,there is hope." Sales of the recently re-leased Mac OS 8, for instance, the first ma-jor Mac update in a decade, have been fourtimes Apple's expectations. And the com-pany can still point to considerable leads inthe education and graphics arenas.

UT THE WIDE-ANGLE YIEW IS GRIM.A decade ofbungled opportunitiesand misguided investments hasIeft Apple in an intractable nega-tive spiral: lower market sharemeans fewer developers, which

means less software, which means fewercustomers. which means still lower marketshare. Not pretty. Even the belated decisionto license the Mac OS to clonemakers onlydrained Apple of hardware revenue.

What now? Microsoft's bear hug buysApple a few months' breathing room, and re-placing most of the company's reviled boardof directors with techies like Oracle's LarryEllison and Intuit's Bill Campbell was a nec-essary-and possibly helpful-houseclean-ing. Now Jobs must recruit some dynamicmarketing-minded luminary as chief execu-tive to get the company moving forward.

Regaining traction will require whatJobs last week called "a new paradigm." Just

what this might consist of, though, is un-clear. Build low-cost network computers?Split up into hardware and software sib-lings? Orjust rely on next yeafs expected re-lease of the post-Mac operating system,Rhapsody, based on Jobs'NeXT technolory,whichApple shelled out $424 million for lastDecember? True believers call Rhapsodythe greatest OS ever andApple's savior (TimBerners-Lee did inventtheWeb on it); skep-tics call NeXT a marketplace failure and analbatross Apple should have left aroundSteve Jobs'neck. Regardless, it's hard-very,very hard-to see any OS other than Win-dows-probably the powerful NT version-flourishing under digital network' naturaltendency toward monopoly.

That ]ast word still obsesses the U.S.Justice Department's antitrust warriors,whose raison d'6tre lies in putting asunderthat which the free market hath joined.Industry wags swiftly dubbed Microsoft'sApple alliance "antitrust insurance," andwith good reason: spending millions to en-sure his rival's very survival should stymiethe government's urge to halt Gates'longmarch toward market dominance.

But that's just the most obvious illustra-tion of Gates'unequaled strategic genius,His $150 million has also won him severalsubtler victories. Saving the Mac maintainshis $300 million share of the 20 million-strong Mac-user base while increasing Ap-ple's reliance on Microsoft software to keepthe public hooked on its computers. Thedeal, says Mike Homer, a Netscape execu-tive vice president, "puts the whole applica-tion base in Microsoft's hands. And if theycontrol that, they control the Macintosh."

And there's plenty about Macintosh

Apple's share of rsonal computer sales in the U.S.: grfu

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- APRIL 1983JobspersuadesJohn Sculley,president ofPepsi, to runApple

JANUARY 1985Apple unveilsthe [aserWriter,a laser orinter forMacs, fueling a boom indesktop publishing

ocToBER 1987- Microsoft ships

Windows 2.0

DEC.12,1980:

$22

SEPTEMBER 1985Apple posts its firstquarterly loss; Jobsleaves Aoole afterfailins to oustSculley

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!Z NOVEMBER 1985Microsoft shipsWindows 1.0

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Sources: AP: Chronology of Events in lhe History of Microcomputers, Ken Polsson; Datastream; Computer Intelligence

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that's worth controlling. Gates' richest prizemay be Apple's intellectual property, both sil-icon-and carbon-based. The graphic design-ers, software gurus and other artsy types whoconstitute the Mac's most fervent cadresare a disproportionately influential marketniche. Some two-thirds of all Websites arethought to have been created on Macs. "It'svery athactive to Microsoft to have access tocutting-edge Mac developers," says KurtKing, an analyst with San Francisco-basedMontgomery Securities, "particularly in areaslike video streaming and other graphicstechnologies that represent the likely futureof Internet content." Ditto Apple's technol-ogy patents, which under the new cross-licensing agreement will go from causingendless litigation. (the Mac faithfirl will sure-ly consider Microsoffs undisclosed paymenttoApple to settle infringement claims de fac-to proof that Gates knows he stole their OS)to tecoming weapons for Microsoft codersto wield when the time comes.

And the time is now; the turf is theWeb; and the enemy is Netscape, whosebrowser market share still dwarfs Micro-soft's. The Apple deal makes Microsoft'sInternet Exolorer the default browser forall future Mics, yet another coup for Gates,who is painfully aware what a threat theWeb poses to the OS standards whose im-placable rigidity led to Microsoft's rise inthe first place. Gates spent the Web's firsttwo years pretending it didn't matter andthe next two frantically refocusing his com-pany on the Net and snapping up anythingthat might further that goal (see chart).

The direst threatto Windows hegemo-ny may be Java, the

$68

Bill Gates has spent lhe past fewyears buying anything that mighthelp his company rule the lnternet

WEBTV April '97, $425 million.Puts the Web on home TV screens

PROGRESSIVE NETWORKSluly '97, 10% stake. Live audioand video delivered over the Web

COMCAST lune'97, $1 billioninvested. Speedy Web access viacable lines

MSNBC Dec.'95. 24-hourcable/online news venture with itgc

Web-minded programming language creat-ed at Sun Microsystems in the early'90s.Java's great strength is its "portability"; in aJava-centric future, developers could writeprograms not for one OS at a time but for theJavaVirtual Machine, the software that couldrun numerous next-wave computers: PCs,smart cell phones, stripped-down networkcomputers and so on. "What should Apple donext?" asks Sun chief executive and Javaevangelist Scott McNealy. "Put I00Vo en-ergy behind Java. Innovate, compete andadd value. That's so obvious to me that Ican't pretend there's another strategy."

McNealy will need all the allies he canget. Last week"s deal, which commits Appleto developing a Java pladorm with Microsoft

JUNE1993MichaelSpindleris namedcE0

(Apple is also free to parbner elsewhere), wasan attack on the SunL/Netscape/Apple al-liance that would use Java to fight Microsoftfor control of the Web. Gates wants a propri-etary Java pladorm optimized for Windows.This deal moves him closer to that goalwhile nudging his rivals further from theirown. "Netscape could have shored up theMacintosh situation," says Dave Winer, anearly Mac developer. "Same with Sun. Theycould have given Apple $150 million.They just weren't playrng strategically. Mi-crosoft was."

Microsoft always is, and that's why Mi-crosoft almost always wins. Whether Jobscan flourish by bargaining with the masteris very much open to question. Can Applesurvive? Sure, and the spotted owl willprobably hang in there too. The Mac re-mains the most usable, intuitive operatingsystem around (this writer still loyally toteshis ultralight Powerbook Duo on any tripthat's going to strand him overnight withincrouching distance of a phone jack), and itwill never disappear entirely. As long asthere are wild-eyed digital artists and ide-alistic undergrads whose Macs mean tothem what the Beatles'Abbey Road did totheir parents, there will be a place-albeit asmall one-for the companv from Cuperti-no, Calif. Still, it must be a comedofn forJobs and his old pals to slip from visionarychampions to fringy cultists in a meredecade. Oh, well. As shooting stars fromMadonna to Newt Gingrich could tell you,that's the coolest thing about being a cul-tural icon: by the time the market goessouth on you, you've already changed theworld. -With reportingby Daniel Eisenbe6lNew York and tanice MaloneylSan Francisco

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MARCH 1988Apple sues Microsoft forcopyright infringement

MAY 1990Microsoft shipsWindows 3.0 asan increasingnumber of PCclones enter themarketplace

AUGUST 1995Microsoft releasesWindows 95. One mill ion

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Amelioresigns;Jobs incontrol

ocroBER 1991Apple launchesthe PowerBook,an instant success

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LY*.,,,,0Apple unveils the PowerMacintosh. Parts shortagescause $1 bill ion in back orders

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Apple buys Jobs'computel company; hereturns as an adviser

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[*'i-JANUARY 1993Apple unveils thehandheld Newton,an instant floo

_JANUARY 1994Apple finally permits Mac

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TIME Chart by Joe Zetf