The Second Coming of Steve Jobs - Alan Deutschman [117]
The year began with high spirits. Steve’s dramatic gesture at San Francisco’s Macworld convention in January—declaring himself the “permanent” CEO after three years of refusing the title and the commitment—represented a final declaration of victory, a public statement that there was nothing left to prove. That winter Apple’s stock continued its long climb. The shares hit an astonishing all-time high of $150 on March 23, more than an elevenfold increase from the $13 price when Jobs took over in the summer of 1997. The peak proved ephemeral: Apple was soon pummeled in the Nasdaq panic of the spring, when investors’ fears about the overhyped Internet “dot-com” stocks dragged down prices for the entire technology sector. But Apple rebounded quickly and confidently from the short-lived market malaise, and on June 21 the company went ahead with a two-for-one stock split, knocking the shares from triple-digits to double-digits. The move rendered the stock a bit more affordable for small investors, making it cost less to buy a block of 100 shares, for instance. The split also exploited a flaw of human psychology by making the pricey stock seem like a better value, even though the effect was actually neutral. Perhaps most significantly, the stock split was management’s way of calling more attention to the company’s ascent and very publicly expressing a sense of confidence in its future prospects.
In retrospect, the split marked Apple’s vertiginous acme before the coming crash, though the first clear signs of trouble were greatly overshadowed by the continuation of encouraging results and buoyant moods. In July, Apple announced that its earnings for the March-to-June quarter were higher than the expectations of the Wall Street stock analysts. It was yet another triumph, the eleventh consecutive profitable quarter since Steve took over. Few observers made much of a fuss about the other piece of news that day—that Apple’s revenues were below the analysts’ projections because it had sold 500,000 fewer iMacs than planned. Almost two years since the iMac’s debut, the faddish item was losing its novelty, and many people who yearned to buy one already had. In corporate lingo, the market was nearly “saturated.”
The iMac’s sales were slowing for another reason: Steve, mired in middle age and openly disdainful of the dot-com craze, was so disconnected from the popular culture that he missed an extraordinary trend. For the rising generation of PC users, a “killer application”—one of the most compelling things they did with their computers—was downloading music for free (albeit illegally) over the Internet and “burning” their own compact discs using the new CD-RW drives (RW stood for “read-write”). In the summer of 1999 these devices were a statistical blip in the market, but by the winter of 2000 they were included with 40 percent of new PCs. Teenagers who wanted the technology could get it from Compaq or Hewlett-Packard or Dell, but they couldn’t buy it from Apple, which was supposedly the innovator among computer manufacturers. Nearly 30 million PCs with CR-RW drives were sold in the year 2000, and none carried the Apple logo. It was ironic that Apple slapped the letter i next to Mac to imply that it was an Internet computer when in reality Steve utterly ignored one of the Internet’s hottest trends. Steve relied on his own instincts, but this was beyond his experience. Teenagers steal inexpensive things; billionaires don’t have to. In his own youth Steve was the consummate freeloader, but now that he traversed the country in his own Gulfstream V jet, he wasn’t attuned to the moocher spirit.
The press didn’t seize