Why Gil Amelio is dead wrong about Steve Jobs
by Robert Moriarty
January 31, 2000
Anyone coming to this site to hear a constant stream of praise about the antics of Steve Jobs will usually be disappointed. I proudly stand willing to issue my words of wisdom anytime I see him straying from the straight and narrow path. I am one of his most harsh critics. But once in awhile I may even find something I think he has done right. After Apple recently announced their last quarter results, Business Week reported some comments from former Apple CEO Gil Amelio regarding his contribution to Apple's success and his thoughts on the compensation of Steve Jobs. It makes interesting reading for anyone following the continuing saga of The Cupertino Fruit Company. The piece found little mention in the Mac press with the exception of MacCentral. I can only presume that the Mac press found Amelio's comments a little bizarre. |
Amelio felt a $40 million dollar jet and options on 10 million shares of Apple stock the board awarded Steve Jobs was a bit much considering his own golden parachute only reached $3.5 million. From Gil, "I think that's an absurd number. That is an unreal amount. I'm stunned. . . I guess I was really cheap for Apple, although I took a lot of heat then for my pay." Let's look at it and see exactly what Steve got and ask if Amelio is on target or not. We are told the value of the Gulfstream V is $40 million and I am going to accept that figure for the sake of argument. The options were granted to give Jobs the right to buy within a certain time frame, 10 million shares of Apple stock at about $87 a share which was the going price on Jan 12th, 2000. Steve Jobs gets paid $1 per year. He has not gotten a raise in two and a half years and the board felt his pay was appropriate at $1. When Amelio got the boot, Apple stock was a fraction over $13 a share. It hovered at $30 a share when Amelio took over in February of 1996. So during Amelio's reign, Apple stockholders shuddered and watched in horror as the value of their investment went down and down. During Amelio's last 12 months as CEO, the company lost $1 billion dollars. When Jobs took over at Apple, the stock was, as I said, just over $13. It climbed and climbed. Last week it hit $118 a share. So if you were a shareholder, who would you want running the company, Amelio, who wiped out 55 percent of the value or Jobs who increased the value of the company about 900 percent? |
When Steve Jobs gets his paycheck, he doesn't cash it at the bank. In Silicon Valley, the banks won't cash checks for $1. Steve gets his paper boy to cash the check. He probably is fairly paid at $1 a year. How can you compensate someone who is worth a billion dollars? But the cost of living in the Valley runs high so Steve has a part time job across the San Francisco Bay at Pixar. I can agree his time is valuable. Not perhaps to Steve, after all a buck a year doesn't work out to much. But to Apple shareholders, his time is worth about $6 billion a year. So I agree he needs fast wheels. The Gulfstream is fast but for a 20 mile trip... it may not be the right vehicle. Fast helicopter, yes, fast jet? Maybe. But considering he took a dead company worth maybe $2 billion in the grave and turned it into an $18 billion dollar company, maybe Steve does deserve some compensation. Figure 3.5 years into $40 million for the plane and you come up with a little over $10 million a year. That's not expensive by any standards. How reasonable is 10 million shares of stock? Well, Steve owned about 3 million shares if memory serves me right, which he dumped at about $15 a share when he realized Apple was headed down the tubes under Amelio. His recently granted options at $87 dollars a share are going to have to go up a long way just to make up for what he lost by not buying the stock back when he took over. He could have bought 10 million shares for about $130 million back then. He should have and I said so. Now he only makes money if the stock goes higher than $87 a share. This is going to come as a real shock folks but even the stock of well run companies does go down now and again. I realize we have reached a permanently high plateau of stock prices and the stock market will never, ever, go down but it is at least a possibility. If Apple stock goes above $87 a share, it will because of Steve Jobs, not Gil Amelio. Let him make some money, maybe he does deserve it. |
The real question Gil Amelio should have answered was, "How do you compensate someone for destroying an institution such as Apple?" He feels his $3.5 million dollar check really wasn't fair. I can some up with a reasonable compensation. Tar and Feathers would work. Keel hauling, maybe? Paying a person $3.5 million dollars when all they have done is lose $3.5 million a day for a year seems a bit of a stretch. On to the subject of business plans, Gil was quoted, "In the spring of 1996, I wrote a white paper on Apple's strategy. That's the strategy they're pursuing now." and expanded, "I wanted a minimum of three years. It turned out to be 18 months." (before he was ousted). In 1985, Bill Gates gave Apple a business plan or white paper. It showed Apple exactly how to open the market through the license of clones. The paper was brilliant and everyone now seems to agree it would have worked. But Apple didn't execute it. What seems to come across in every interview with Gil Amelio is his three year plan thingie. What Gil Amelio doesn't seem to understand is that the value of the very best plan in the world is zero if it isn't implemented. Gil Amelio had the reins at Apple for 18 months. He may have had a great plan. He just didn't implement it. He believed and evidently still believes he had three years to fiddle while Apple burned to the ground. Gil, you were in the computer business. Don't bother with a three-year plan when you are dealing with a company with a one year half-life. Lead, follow or get the hell out of the way. You took a great company that was in trouble and flushed it down the toilet. Steve Jobs pulled a great company from the grave and made it profitable beyond anyone's belief. |
Steve Jobs may or may not have a plan for Apple. It may or may not be Amelio's plan. But when you find yourself without a plan, you can always cover up a lot of mistakes with that magic stuff called profit. Amelio had six quarters of increasing losses. Steve Jobs has had nine quarters of increasing profits. Screw the plan, Gil. If all else fails, go for the money. Every business leader should leave some words of wisdom which we can all learn from and gain. Anyone doubting the wisdom and business experience of Gil Amelio should take his parting shot at Apple to heart. In a nutshell it sums up everything about Gil Amelio and his future success in business no matter where he goes. From Gil, "Steve is a great marketing guy. He's done great, but I should get all the credit for making (his work) possible. . . Look, I'm not carrying any axes here. I don't want to rewrite history. But strictly from the shareholder point of view, it's always better when they have the real facts." Who can disagree? If I was a shareholder, I'd have very strong feelings about both Gil Amelio and Steve Jobs once I knew the real facts. Since I am not an Apple shareholder, however, I would like to suggest to Mr Amelio that he shouldn't be giving interviews just after a three-martini lunch. Having Gil Amelio comment on the success of Apple Computer is like asking General Custer on how he could teach military tactics to Sitting Bull. And Steve, while you are basking in these rare, kind words from MacCPU, where is the G4 500MHz you began taking orders for in August? It is an award winning product, I saw it won Vaporware Product of the Year from one website. January 31, 2000 |
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