The Second Coming of Steve Jobs - Alan Deutschman [61]
The Sun guys had acted swiftly, sold cheaply, and built a huge business. They hadn’t obsessed about the aesthetics of their machines. They put circuitry into bland beige boxes, and their corporate buyers just didn’t care. They didn’t try to make the software visually attractive and easy to use. Their customers were technical wizards—engineers, scientists—who liked the fact that they had to speak in tongues to get the things to work the way they wanted. That proved they were genius types, members of an elite technical priesthood. They liked that mammoth companies had to depend on their mystical skills. Sun had no style, no panache, and its leader Scott McNealy was a no-bullshit MBA, not a visionary or an aesthete. Sun was the anti-Next, and it had triumphed even before Next’s executives realized that the two companies were competing in the same market.
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WITH THE FAILURE of his two ventures, Steve’s money was beginning to run out. Pixar was a money sink. He had bought the company for $10 million, and it had accumulated a debt of $50 million. Sixty million, lost in four years! If Pixar was a hobby, it was an extremely expensive hobby, and Steve couldn’t afford it. Pixar was getting strangled by the huge debt. It could hardly cover the interest charges or even pay for the upkeep of its building.
Steve got off easier at Next, where he had plunged only $12 million of his own cash, since he tapped others for most of the funding: Perot for $20 million, Canon for $100 million. (Though the investors had a voice as members of the board, Steve ensured his unilateral control by keeping half the stock for himself.) But Next had eaten through almost all of its capital and once again it was nearly broke.
Between Next and Pixar, he had spent $72 million of his personal fortune. He was left with about $25 million in reserve. His bid for vindication had been devastating financially. If only he had held on to his Apple shares, he’d be worth over $450 million.
And his remaining $25 million of savings was in great jeopardy. Steve had 570 people on his staff at Next and 80 at Pixar. His “burn rate”—the amount of money it took to meet the payrolls and overhead and keep the companies running—was more than $60 million a year. It was highly unlikely that even someone with Steve’s blinding persuasiveness could attract new investors from the outside, since his companies had such dismal financial histories. If Steve tried to sustain the businesses, he could easily squander the rest of his personal fortune in a year or so. He had already burned through his “fuck you money.” Now he had to struggle to protect the safety net that supported his lifestyle: the Woodside mansion, the New York penthouse, the German sports cars. He needed to cut back drastically. At the very least, he needed to pick one venture and kill the other.
Steve’s torment was transparent to his executives, especially as Christmas approached and he reviewed the disappointing results and numbers from the closing year and made his plans for the new year. Pam Kerwin, the marketing chief at Pixar, recalls: “Steve tended to get scared about things in December. I always feared December.”
In December 1990, when Alvy Ray Smith and Ed Catmull were out of town on extended trips, Steve resolved to slash Pixar.
“Steve was totally freaking out,” says Pam Kerwin. “Because of the huge Pixar debt, Steve worried that he wouldn’t be able to tap his personal funds to bail out Next. Pixar and Next blew up at the same time, and it was obvious that his real love was Next.”
Steve called for a massive retreat, laying off thirty of Pixar’s eighty employees. When he had to make cuts and save money, he was characteristically extreme: he didn’t want to give severance pay to anyone, not even the longtime