“A Billion Dollars not Once, not Twice, but Three Times”
When Steve Jobs launched Apple with Steve Wozniak in 1976, they decided to name the company after the fruit that according to legend spurred Isaac Newton’s theories on gravity. Since that moment, Jobs’
entrepreneurial career has had a tumultuous battle against gravity – and from the latest score, gravity is losing.
From the beginning of Apple, Jobs demonstrated the tenacity and resourcefulness that defines every great Creator. Realizing they did not have the expertise or financing to build the business, Jobs brought on a local VC, Mike Markkula, who bought shares in the company and subsequently became CEO. He brought in Regis McKenna, the best public relations man in Silicon Valley, to market the Apple II, and over the next five years he continued to seek out the best minds and mentors he could find for his company. Markkula was responsible for the early financing of the company, and for taking Apple public in 1980.
Starting with the premise that the best ideas are already out there, Jobs also negotiated with Xerox to grant Apple engineers access to the Xerox PARC facilities in return for selling them one million dollars in pre-IPO Apple stock. It was from this visit that Jobs collected the ideas behind the fundamentals of today’s PC – the graphic user interface, mouse and pointer.
On the day that Apple went public, riding the PC wave, Steve Jobs became worth $217 million. Each wealth profile has an Achilles heel, however, and Jobs’ heel came to trip him over. Ambitious Creators can trip up by running against the grain of the team – especially if the team is riding a struggling business model. As IBM led the PC manufacturers into a Microsoft-enabled war against Apple, Jobs continued to insist that the Apple bundle of software and hardware remain as one package – preventing Apple from leveraging as either a software company or a hardware company with the rest of the industry. As a result, within two years of entering the market, the revenue of IBM’s PC division had already overtaken Apple’s.
Thinking (as Creators often do) that he knew best, with Apple now a billion dollar company, Jobs continued to drive his product development team purely from intuition. Apple’s head of marketing, Mike Murray, commented, “Steve did his market research by looking into the mirror every morning.” Sales stalled, Jobs’ management style was seen by his board as a liability and, in 1985, he was thrown out of the company he had started nine years earlier.
That might have been the end of another entrepreneur story, was it not for Jobs’ perseverance. Having left Apple, he launched NeXT, to provide PCs to the education market. Apple sued Jobs for launching in competition, prompting him to say, “It’s hard to think that a $2 billion company with 4,300 plus people couldn’t compete with six people in blue jeans.”
Jobs sold all but one of his Apple shares, and Apple continued to languish, falling from 20% market share to under 5% by 1996. Jobs, in the meantime, struggled with NeXT, burning through $250 million of investors’ money as he tried to market his new computers.
In the same year that Jobs founded NeXT, George Lucas was looking to sell a small computer animation group he owned. Disney rejected an offer to buy 50% for $15 million, and a deal to sell to Ross Perot and Phillips for $30 million fell through. Jobs ended up negotiating Lucas to under $10 million for the business, thinking he could market the high-end animation computers that the group had designed.
Jobs kept 92%, with the other 8% going to the two founders, Alvyn Ray Smith and Ed Catmull. Renamed ‘Pixar’, the company began marketing the Pixar Image Computer to the medical market – with little success. By 1989, with Pixar losing over $1 million each month, and NeXT faring little better, Jobs found himself left with less than 20% of the $150 million he had received when he sold his Apple stock. At the rate he was going, within two years he would be back to zero.
Taking drastic measures, Jobs sold the hardware side of Pixar for several million, taking a massive loss. Most people at this point would have thrown in the towel, but Jobs persevered, keeping the core team and looking for a way to make money from their animation talent. The
perseverance seemed to pay off. An animated short movie they had produced, “Tin Toy”, received an Oscar, and in 1993, Disney approved a full feature joint venture with Pixar called “Toy Story”. The victory was short lived, however, with Disney shutting production of Toy Story down later in the year after losing confidence in the script.
The following year, 1994, became Jobs’ worst year ever.
1994 was the year that Disney lost four executives in a helicopter crash, including Chief Operating Officer Frank Wells. In the aftermath, animation head, Jeffrey Katzenberg, fell out with Michael Eisner and left to launch SKG DreamWorks with Steven Spielberg and David Geffen. Meanwhile, Jobs was left attempting to get Toy Story back on track while also having to close the NeXT manufacturing facility and sales operation. Most of the NeXT team left. The investors, having put in another $100 million, saw that money disappear too. From the deal that Katzenberg had originally negotiated, with Toy Story now back on Disney’s agenda, it would need to earn at least $100 million for Pixar to make any money from it at all; more than any other Disney film had made at the time. Even so, Jobs decided to bet that not only would Toy Story be a success, it would enable him to publicly list Pixar and raise further funds.
In November 1995, Toy Story opened to enormous acclaim, becoming the highest grossing release of the year, generating over
$450 million in cinema and video rental sales, and leading to a lucrative seven-film deal with Disney. One week later, Pixar had its IPO. The advisers argued for a $12 to $14 price range. The stock opened at $22, and ended the day on $39. Less than twelve months after his worst year financially, Steve Jobs was a billionaire.
Then, in 1996, Gil Emilio (the new CEO of Apple) went hunting for a new operating system and finally found it… in NeXT. Approaching Jobs for his system, Jobs was only interested in selling the entire company. Apple bought it for $377.5 million in cash and $1.5 million in Apple shares. In one fell swoop, Jobs could pay off all his investors and was involved with Apple again – after over ten years.
In 1997 Apple sales were $7 billion and losses were over $1 billion.
Jobs took to the challenge of revitalizing Apple, first as consultant and then as “interim-CEO”. By 1998, Jobs launched the iMac, which was
followed – entirely by chance – with the iPod and then iTunes.
Ironically, Jobs’ need to rely on a leverage structure he could not own when he entered the entertainment world made it a natural step to approach the music giants when he launched iTunes. The partnerships he has now created have given him incredible leverage for his undoubted creative leadership – multiplying the effect of his creations into the billions.
Jobs is now transforming Apple into a cutting-edge multimedia company. 2005 sales were up to a record $14 billion, and Jobs net worth has risen to over $4 billion.
In January 2006, Disney (having rejected the chance to buy 50% of Pixar for $15 million ten years earlier) bought a transformed Pixar from Jobs for $7.4 billion in stock, making Jobs Disney’s largest individual shareholder and a billionaire for the third time.