For Apple, a Sun deal offers a lifeline when it is becoming increasingly clear that the company otherwise could be headed down the tubes. But Sun might clean house at Apple, adding to layoffs of 8 percent that Apple itself announced last week. Analysts have suggested that Sun might sell Apple’s hardware division to Asian cloners or other buyers.
The Macintosh faithful, a devoted bunch, need not necessarily fear an acquisition of Apple. A takeover would bail out the maker of their beloved machines. Moreover, if Sun’s strategy for Java succeeds, Apple users would get more software more quickly. Currently, most developers write for Windows first and then for Apple as an afterthought.
Sun definitely has pockets deep enough to handle an Apple acquisition. It has been booming lately, reporting net income of $126 million, or 65 cents a share, in the second fiscal quarter ended Dec. 31. Revenue rose 19 percent to $1.75 billion. Its stock has been surging, although it took a hit Tuesday, as the stocks of companies planning acquisitions often do.
But there are perils for Sun because Apple’s problems are so messy - falling market share, large losses still to come, cratering morale, delays in important new software. “Sun can’t afford to get bogged down in Apple’s zantine politics,” says John McCarthy, an analyst at Forrester Research of Cambridge, Mass.
Questions arise about how well Sun, which has repeatedly experimented with the personal-computer business but never seriously taken the plunge, can manage a larger company in that very business. “They have never successfully gotten into the PC business, which is a very different culture and point of view,” notes Stewart Alsop, of InfoWorld Publishing Co.
Then there is the issue of whether Sun has the expertise to manage the combined company. Its management, though more focused and effective than Apple’s has been, may not be broad or deep enough to turn around another company while executing its own daring expansion into the network software and Internet business from its mainstay workstation business. “Who are they going to hire to run Apple?” Mr. Alsop asks.
There is also a risk that the two companies’ cultures will clash and undermine the promised benefits, as has happened in other technology combinations such as Novell Inc.’s acquisition of WordPerfect Corp. Sun’s hard-driving chief executive, Scott McNealy, who plays ice hockey for kicks, may have the ideal temperament to bring order to Apple, but the job would be by far the toughest he has faced. Mr. McNealy, who named his recently born son Maverick, is known for insulting both employees and customers he deems not to be catching on to his ideas quickly enough. He has frequently admonished his staff to “kick butt” in video pep talks.
Mr. Spindler, by contrast, is often ill at ease in public gatherings, to the point of breaking out in a sweat during speeches. Some Apple employees say he has such difficulty communicating his ideas to subordinates that they sometimes walk out of a meeting befuddled.
Both men are known for having short fuses - but differing strategies on dissent. While Mr. Spindler brooks none from his executive staff, Mr. McNealy encourages internal debate and has been known to laugh off his own senior staff’s public insults about his bad temper. “Scott isn’t known for his adult behavior,” James Gosling, a top Sun software programmer and the main inventor of Java, said in a recent interview. When a Sun public-relations official implored Mr. Gosling to retract the comment, he refused, saying he has said the same thing to Mr. McNealy’s face.
And, of course, Apple and Sun are used to selling to different markets. Apple is in consumer products, while Sun focuses on more-complex computing systems for corporate customers. “It’s like integrating Honda with Porsche,” says George Zachary, a partner in Mohr Davidow Ventures, a Menlo Park, Calif., venture-capital firm.
At the annual meeting Tuesday, Mr. Spindler bore the brunt of shareholders’ fury over Apple’s long slide, which culminated last week in an announcement of a net loss of $69 million in the fiscal first quarter ended Dec. 29. Richard Ash, a shareholder from Philadelphia, declared “We want new leadership!” The audience erupted in applause.
But in fact, Mr. Spindler is far from the only one with responsibility for Apple’s troubles. Each of the three CEOs Apple has had helped sow the seeds of today’s predicament. Its first CEO, co-founder Steve Jobs, had a towering ego, refused to listen to advisers who said he was losing grip on the company’s growth and eventually was ousted by John Sculley, the PepsiCo Inc. marketeer Mr. Jobs had hired to help lend stability to the company.
Mr. Sculley did stabilize Apple at first, but later showed he didn’t understand technological directions. His worst mistake was licensing the copyrights protecting the “look and feel” of the Mac operating system to Microsoft in 1985, in order to get Microsoft to write more applications for the Mac. The license allowed Microsoft to launch its hugely successful Windows operating system - and to defend it against a lawsuit brought by Apple alleging Windows was so similar to the Mac that it violated Apple’s copyrights. As Windows began to swamp the Mac, Mr. Sculley was faulted for refusing to license Apple’s operating system to cloners as a defensive measure, and he wasted a lot of Apple’s resources on the ill-fated hand-held Newton computer.
Mr. Spindler finally did license the Mac’s operating system about a year ago, but the delay ensured that Apple could never compete on price with the hundreds of manufacturers that make PCs based on Microsoft software and Intel chips.
Mr. Spindler has done some things right at Apple. He masterfully managed the Mac’s transition to the new, speedier processor, the PowerPC chip. But he has made big mistakes. One was refusing IBM’s buyout offer at $40 a share in 1994. Mr. Spindler and Mr. Markkula thought the price was too low by at least $20 a share; they embarked on a plan they thought would raise profits and Apple’s stock price so the company could command a higher price from a suitor later on.
“I think Spindler was trying to get Apple in shape, and that backfired,” says one person close to Apple’s board. “He wanted to be a hero on the price.”
Mr. Spindler is no hero. His strategy failed because he didn’t cut prices quickly enough and constantly misgauged demand, sometimes overestimating, sometimes underestimating. While other computer makers were enjoying boom times, Apple’s market share slid, from 9.4 percent when he took over in 1993 to 8.6 percent as of the quarter ended Sept. 30. Apple now expects unspecified operating losses in its current fiscal quarter, on top of at least $125 million in charges related to yet another of Mr. Spindler’s restructuring efforts.