Jobs move seen as necessary step

news analysis

What goes around, comes around. And in that spirit, Apple Computer (AAPL) today named cofounder and board member Steve Jobs interim CEO, raising new questions about the potential of his expanding role and the search for a replacement to ousted chief executive Gilbert Amelio.

Today's announcement delivers news that many Apple faithful have hoped for--that Jobs will become the permanent chief executive.
Others, however, said this was a necessary step to attract a permanent CEO.

"This is what you call 'corporate hygiene,'" said Lou Mazzucchelli, an analyst with Gerard Klauer Mattison. "Steve has been acting the part [of CEO] anyway. This just cleans up the organizational chart."

The ups and downs of this computer maker have captured the attention of Macintosh users, financial analysts, competitors, and speculators alike since the top of the Apple tree started swaying early last year with the arrival of Amelio from National Semiconductor.

But the focus has remained squarely on Jobs, especially since Amelio's resignation was announced in July. As part of the fallout, Jobs assumed an expanded role as a key adviser to Apple's board and executive management team. That role grew broader still, with Jobs joining the company's board of directors.

None of this seems to faze executives at Pixar, where Jobs is also CEO. Lawrence Levy, the company's CFO, described the news of Jobs assuming the top spot at Apple, even if only temporarily, as a "non-event" for Pixar.

"[His assumption of the interim CEO role] really just confirms what's been going on for a while now," Levy said. "We're set up with an office of the president that has run successfully for the last few years, through Steve's work at Next and everything else. It's working great and he's very involved."

Levy added that he has no fear Jobs will eventually step up to a permanent CEO position at Apple and leave Pixar behind.

Apple spokeswoman Katie Cotton said the decision to move Jobs into the role of CEO was a formality. She said the timing of the move was not significant in any way, noting that last week was the first regularly scheduled meeting of the new board of directors.

"Steve has been serving as an adviser to our executive team and has been involved in many decisions of Apple," she said. "This really reflects the role that he has been playing, and this announcement provides clarification."

But analysts say that, rather than a formality, the board is showing sensitivity to corporate governance issues because Jobs has been running the show without an official title. "This sets the stage for transition," Mazzucchelli said.


Others argue that giving Jobs the title of interim CEO is a transition vehicle that will allow him to take the job permanently.

"Everyone would love to see Steve take the job. This is one step closer to him being CEO," one industry analyst said. "For all practical purposes, he has been making all of the decisions...Fred Anderson, the CFO, was a big clone supporter, and Steve killed the clones."

Indeed, some question whether an incoming CEO will be able to take over the direction of the company with Jobs's large shadow looming over each move. The drastic changes Jobs has made in recent weeks--deciding against clone licenses and bringing the Newton division back into the corporate fold--further complicate the issue.

Jobs has admitted before that there had been times when he lost faith in the company. In August, he disclosed in an interview that he sold 1.5 million shares of Apple stock two months earlier. "Yes, I pretty much had given up hope that the Apple board was going to do anything," Jobs told Time magazine. "I didn't think the stock was going up."

But now he has taken the reins and is making changes that will have a huge impact on the future of the company.

Under his direction, Apple purchased the major operations of Power Computing, the largest Mac clone maker, in a stock deal worth $100 million. Power Computing was one of several Mac clone makers that wrangled with Apple over licensing fees for the company's latest version of the Mac OS operating system.

In September, after much internal confusion, Jobs decided that Apple would not spin off its Newton subsidiary, after the company had announced last July that Newton would be officially spun off as an independent subsidiary with its own management and business plan. Under Jobs, Apple ultimately decided to bring the Newton team back into Apple and create a division for the eMate 300, a product based on the Newton operating system, which is sold only to education markets.

Reduced compensation and severance packages also have been part of Jobs' recent initiatives, according to an internal memo. The changes will affect the company's stock options, sabbatical program, travel plan, and bonuses. Executives will no longer get cushy cash bonuses, and will instead forfeit current and future
bonuses in exchange for stock options.

Jobs also announced the new Apple board members and an expanded partnership with Microsoft during an upbeat keynote at Macworld Expo Boston.

But Cotton maintained that Apple is continuing with its CEO search. "We expect," she said, "that a new CEO will be named by the end of the year."