Return to the Little Kingdom (21 page)

Eventually Jobs prevailed and Wayne drew up a ten-paragraph partnership agreement liberally sprinkled with “therefores,” “herewiths,” and “thereins.” The agreement stated that none of the trio could spend more than $100 without the consent of another. It also laid down that Wozniak would “assume both general and major responsibility for the conduct of Electrical Engineering; Jobs would assume general responsibility for Electrical Engineering and Marketing, and Wayne would assume major responsibility for Mechanical Engineering and Documentation.” Once Wozniak had been persuaded to agree to the venture, he had no qualms about giving Wayne 10 percent of the company and dividing the remainder with Jobs. He was convinced that if Jobs performed all the commercial donkeywork the split was equitable. What the agreement didn’t say, but what they all understood, was that Wayne would act as tie breaker if Wozniak and Jobs couldn’t agree on something. On the evening of April Fool’s Day, 1976, at Wayne’s Mountain View apartment, with Wozniak’s friend Randy Wigginton looking on, the three signed the agreement forming Apple Computer Company. Jobs signed the document in a wide, faintly childish hand with all the letters in lower case. Wozniak scribbled a cursive signature, and Wayne’s pen left his name illegible.

 

While they were sorting out formalities, Jobs had pressed ahead. He had used the $1,300 that he and Wozniak had pooled to commission the artwork for the printed circuit board. He visited Howard Cantin, who had prepared the artwork for Atari’s game boards (and had laid out the original Pong board) and asked him to prepare the board for the Apple computer. Cantin complied—“I did it as a favor for Steve.” Once Wozniak had loaded the first printed circuit board with chips and completed the wiring, he and Jobs made a formal introduction of the Apple computer at the Homebrew Club in April 1976. Their remarks revealed the division of labor. Wozniak described the technical features of the machine: such things as the size of the memory, the BASIC that was available, and the clock speed of the memory. Jobs asked the members how much they were prepared to pay for a computer that, unlike the Altair, had all the essential features lodged onto a single printed circuit board. The overall reaction was muted. The majority of other engineers at the Homebrew Club didn’t even bother to inspect the Apple. A few, like Lee Felsenstein, looked at the black-and-white computer with its 8K bytes of memory and concluded that “Wozniak might very well be heading for a fall. I thought if he was going to fail he was going to fail big and I wasn’t going to step in the way.”

Jobs, who by the spring of 1976 had taken to religiously attending meetings of the Homebrew Club, was busy sorting out people with a commercial bent from the engineers. That wasn’t difficult since members were allowed to advertise their interests during the meetings. Paul Terrell was one of the more prominent salesmen and had become an influential figure in the murky world of distributors and kit suppliers. He had been selling peripherals for minicomputers until he had seen a demonstration of the Altair—after which he had quickly arranged to represent MITS in Northern California. At Homebrew meetings Terrell had pushed the Altair machines and ran afoul of the delicate sensitivities of the Homebrew members when he tried to charge $500 for a version of BASIC on paper tape.

Like others, Terrell had underestimated the enthusiasm of the hobbyists and when word of the Altair spread, he found engineers waiting outside his office door at the start of business while his regular customers started to complain that they couldn’t negotiate his jammed switchboard. So Terrell buckled. “I decided we should go up on El Camino, open a store, hang out a shingle, and get all the guys who were sitting in traffic jams at four P.M.” In December 1975 he transferred $12,700 worth of MITS inventory from his sales company to a computer store in Mountain View which he called the Byte Shop.

But Terrell’s ambitions stretched far beyond the parish. He examined and planned to emulate Radio Shack’s enormous chain of distributors and hoped someday to stock his stores with computers that he would manufacture. In private he chatted about a nationwide chain of Byte Shops like an enthusiastic goose breeder. He talked of “force-feeding the pipeline” and “pumping the product out” but he had to start somewhere and El Camino was a longer, if not better, strip than most. So El Camino, where almost every idea in search of a market was sure to find a temporary home, housed yet another. By the early summer of 1976 there were three Byte stores scattered along El Camino among the hot-tub emporiums, hi-fi stores, automobile dealers, and fast-food outlets. For the hobbyists, and for anybody hoping to sell a microcomputer, the imprimatur of the Byte Shop had become a seal worth having.

Terrell was one of the few Homebrew members with the means to buy more than one computer, so Jobs, hoping to obtain deposits before placing a firm order for one hundred printed circuit boards, visited the Byte Shop. Terrell had been wary of Jobs at Homebrew meetings. “You can always tell the guys who are going to give you a hard time. I was always cautious of him.” Nevertheless, when Jobs slopped into the store, Terrell made time for him. Jobs showed Terrell a prototype of the Apple and explained his plans. Terrell told Jobs that he had no interest in selling plain, printed circuit boards and said that his customers didn’t have any interest in scouring supply stores for semiconductors and other parts. Terrell said he was interested in buying only fully assembled and fully tested computers. Jobs asked how much Terrell would be prepared to pay for a fully assembled computer and was told anywhere between $489 and $589. The Emperor of the Byte Shops told Jobs that he would be prepared to place an order for fifty fully assembled Apple computers and would pay cash on delivery.

Jobs could not believe either his ears or his eyes—“I just saw dollar signs”—and rushed to telephone Wozniak at Hewlett-Packard. Wozniak, equally dumbfounded, told his colleagues around the lab who greeted the news with disbelief. Wozniak placed Terrell’s order in perspective—“That was the biggest single episode in all of the company’s history. Nothing in subsequent years was so great and so unexpected.” Terrell’s order entirely changed the scale and scope of the enterprise. The size of the business had expanded tenfold and instead of contemplating costs of around $2,500 for one hundred printed circuit boards, Jobs and Wozniak were looking at a bill of around $25,000 to cover the costs of one hundred fully assembled machines. Fifty would go to Terrell and the Byte Shop while Jobs and Wozniak would try to sell the other fifty to friends and members of the Homebrew Club. Wozniak recalled, “It was not what we had intended to do,” and Terrell’s order touched off a scramble for parts and a search for money.

Some ports of call were hopeless. Jobs strolled into a Los Altos bank, found the manager, asked for a loan, and was given a predictable rebuff. “I could tell that I’d get the same replies at other banks.” He went to Halted and asked Hal Elzig whether he would take a share of Apple in exchange for some parts. Elzig declined the offer, recalling, “I didn’t have any faith in these kids. They were running about barefoot.” Jobs approached Al Alcorn and asked whether he could purchase parts from Atari. Alcorn agreed but demanded cash up front. Jobs turned to Mel Schwartz, the Stanford physics professor, who had formed a small electronics company in Palo Alto and had an established line of credit at an electronics distributor, and Schwartz agreed to buy some parts for Jobs.

Jobs then approached three electronics parts houses where he asked for credit arrangements that would allow them to assemble and deliver the computers to the Byte Shops, before paying for the parts. He was granted receptions that ranged from amusement to outright skepticism. At one shop Jobs persuaded the controller of the company to conduct a background check. Paul Terrell was surprised to find himself paged during a seminar at an electronics conference and summoned to the telephone where he assured the controller that the two characters sitting across his desk were not spinning fairy tales. Apple’s biggest break came when Bob Newton, the division manager of Kierulff Electronics in Palo Alto, met Jobs and examined both him and the prototype. “He was just an aggressive little kid who didn’t present himself very professionally.” Nevertheless, Newton agreed to sell Jobs $20,000 worth of parts and explained that if the bill was paid within thirty days Jobs would not be charged interest. Jobs, unfamiliar with accounting rubric, recalled, “We didn’t know what ‘net thirty days’ was.”

Assured of a supply of parts, Jobs and Wozniak turned their attention to assembling and testing the computers. They were reluctant to rent a space in one of the parks of concrete and steel garages that dotted Sunnyvale and Santa Clara. Wozniak’s apartment, ballooning from the early months of marriage, was too small to take the strain of a miniature assembly line. Wozniak’s young wife, Alice, recalled, “The Apple was consuming all his time. I saw very little of him. He’d go off to HP and eat something at McDonald’s on the way home. He wouldn’t get home usually until after midnight. I was going nuts coming home from work and having things on the dining-room table that I couldn’t touch.” So with Alice resenting their presence, the founders of Apple resorted to the most practical spot which was the Jobs family home in Los Altos. Jobs, who was back living with his parents, commandeered the one unoccupied room in the three-bedroom house which had belonged, until she married, to his younger sister, Patty. The room was furnished with a single bed and a small chest of drawers and was fine for storing the plastic bags full of parts that arrived from the electronics distributors. The parts were assembled into Apple computers in that room and in Jobs’s own bedroom, where dripping soldering irons left scorch marks on a narrow desk.

The incoming parts weren’t subjected to exhaustive scrutiny. Jobs recalled, “We didn’t evaluate them too much. We just found out they worked.” The printed circuit boards were a great simplification over hand-wiring each computer. They sliced the assembly time for each machine from about sixty hours to about six. The boards also brought a new chore, known contemptuously in the electronics industry as “board stuffing,” which required that semiconductors and all the other parts be inserted into specially numbered holes on the lime-colored board. Jobs delegated the task to his sister, who was expecting her first child. He offered to pay her one dollar for every board she stuffed, and after some practice, she found that she could finish four boards in an hour. She sat on the living-room couch, boards and parts spread out in front of her on a Formica-topped coffee table, with the Jobses’ large color television providing background entertainment. The distractions of soap operas and programs like
The Gong Show,
along with telephone calls from her friends, meant that chips got plugged in the wrong way and some of their delicate gold pins wound up bent.

While the boards were being assembled, Jobs and Wozniak chewed over ideas for a retail price. Wozniak was prepared to sell the computers to his Homebrew chums for slightly more than the cost of the parts or for around $300. Jobs had larger thoughts and did some rough-and-ready reckoning. He decided that Apple should sell the boards for twice the cost of the parts and allow dealers a 33 percent markup. The arithmetic was close to Paul Terrell’s offer and also happened to coincide with a retail price that had a euphonious ring: $666.66.

When Jobs turned up at the Byte Shop in Mountain View carrying twelve bulging printed circuit boards packed in thin gray cardboard boxes, Terrell was dismayed. “There was nothing. Steve was half right.” The fully assembled computers turned out to be fully assembled printed circuit boards. There was quite a difference. Some energetic intevention was required before the boards could be made to do anything. Terrell couldn’t even test the board without buying two transformers to power the computer and the memory. Since the Apple didn’t have a keyboard or a television, no data could be funneled in or out of the computer. Once a keyboard had been hooked to the machine it still couldn’t be programmed without somebody laboriously typing in the code for BASIC since Wozniak and Jobs hadn’t provided the language on a cassette tape or in a ROM chip. Though Wozniak could type in 4K bytes of code in an hour, that was hardly a practical arrangement for even the most zealous hobbyist. Finally, the computer was naked. It had no case. Despite all the shortcomings and all his reservations, Terrell took delivery of the machines and paid Jobs, as he had promised, in cash.

Jobs was trying to balance everything, relying on instincts and common sense to cope with the daily rush of surprises. Aware of the importance of image he arranged for a polished corporate address by renting a mail-drop box in Palo Alto. He hired an answering service to help give the impression that Apple was a steady enterprise and not a fly-by-night operation. He also started to recruit some help and looked to familiar faces for support.

The steady, dependable Bill Fernandez had not been invited by Hewlett-Packard to transfer with the rest of the calculator division to its new base in Oregon and was looking around for work. Still living at home in Sunnyvale, Fernandez thought that Apple might someday offer him the chance to become an engineer. Jobs went through the pretense of an interview, asked some cursory questions about digital logic, and made his first job offer. Fernandez asked for a formal written contract and became Apple’s first fulltime employee. “I was the only legitimate Indian. The rest were chiefs. . . . I was basically the gofer.”

To keep track of the money Jobs asked his college friend, Elizabeth Holmes, who was working as a gem cutter in San Francisco, to monitor the Apple checkbook and keep a journal recording cash expenses. Holmes, who dropped by the Jobs household once a week and was paid the standard four dollars an hour, noticed that “Steve was working very, very hard. He was very directed and not very sentimental.” Meanwhile, Jobs also kept Dan Kottke abreast of progress, invited him to Los Altos for the summer, and promised some work. When Kottke arrived, Clara Jobs turned the family couch into a bed.