Return to the Little Kingdom (46 page)

The press also started to feel the results of the flush of power. When a trade newspaper,
Infoworld,
published a copyrighted story that was said to describe Apple’s future product plan, the editor received several telephone calls from Jobs in which he successively argued that publication would severely damage Apple, called the story only partially accurate, denounced the reporter as “a criminal,” offered a “real nifty two-page ad” if the story was held, and offered to pay the costs of stopping the print run. Apple’s attitude toward the press was made clear in a memo that was circulated within the company. After a run of analytical stories that contained whiffs of criticism appeared in the months following Apple’s public offering, a memo was distributed by Fred Hoar, the vice-president of communications. It complained that journalists often took matters out of context by misquoting executives and compressing what they had to say. The memo read in part:

If journalists were one focus for contempt, so were Apple’s competitors. One by one other companies had muffed the development and introduction of their personal computers. Large companies like Hewlett-Packard and Xerox had stumbled and belatedly introduced machines that didn’t match the Apple II. Firms with a reputation among consumers, like Atari and Mattel, had also missed the boat while the minicomputer makers like Data General and Digital Equipment were slow to realize the threat posed by microcomputers that were getting more powerful by the month. And Texas Instruments, the company that had once been the cause of such fear, flubbed its computer strategy so badly that Apple looked better with every passing day. The TI computer showed little attention to cosmetic details, gave low performance for the price, had thin distribution, and was received so poorly that within two years the price dropped from more than $1,000 to $100. So at Apple the arrival of a new competing computer had developed into a ritual. In the months leading up to a major announcement, there was a certain amount of trepidation at Apple. But after the announcements were studied and the UPS delivery trucks pulled up in Cupertino bearing the latest product, the machines inside the Styrofoam cartons were almost always greeted with derisive hoots.

Machines that carried the names of Japanese companies were given the same reception as American computers. Some of the statements that emerged from Cupertino sounded ominously like the confident claims which had once risen into the air of Detroit in the mid-sixties. At one time or another the Japanese were not supposed to understand the microcomputer market, had no experience with complicated electronic consumer items, wouldn’t be able to master software, wouldn’t find any room left on dealers’ shelves, and wouldn’t be able to build an image for their brands. “The Japanese,” Jobs liked to say, “have come flopping up on our shores like dead fish.”

This despite the fact that Apple came to depend on a variety of Japanese companies for a steady supply of semiconductors, monitors, printers, and disk drives. And while Japanese manufacturers like Hitachi, Fujitsu, and NEC designed and made almost every part needed in a personal computer, Apple was little more than an assembler of other people’s work. The long-term challenge was stark: Apple had no alternative but to become the lowest-cost producer in the world and simultaneously offer the most value to its customers if it hoped, in the long run, to beat the Japanese. The extent of the Japanese threat was made clear not in the United States but in Japan, where within three years conditions had changed dramatically. In 1979 Apple and Commodore owned 80 percent of the Japanese market; by 1980 this had slumped to 40 percent and the November 1981 issue of the
Japan Economic Journal
reported: “The three leading American personal computer makers—Apple Computer, Commodore International and Tandy—have witnessed their combined market share in Japan plunge from 80-90 percent in 1979 to less than 20 percent at present.”

There was, however, one competitor that everyone had expected to enter the microcomputer market once it was large enough to matter. That was the company with three of the most imposing initials in American business: IBM. It was easy to dismiss IBM as an old, lumbering, stuffy, East Coast company that could offer its engineers or programmers neither fame nor fortune and insisted that everyone wear white shirts and striped ties. In 1981 when IBM introduced its personal computer, its revenues were ninety times as large as Apple’s. It made satellites, and robots, memory chips and mainframe computers, minicomputers and typewriters, floppy disk drives and word processors. At the Homebrew Club the Juggernaut of Armonk had always been the butt of jokes and engineers like Wozniak had always been more intrigued by the features of machines made by IBM’s competitors.

Though the company had sold calculators, tabulators, cards, and accounting machines in the twenties, it switched direction after World War II when Remington Rand’s UNIVAC machine was close to becoming synonymous with computing. In 1952 when IBM entered the computer business, its total sales were dwarfed by General Electric and RCA and smaller fry like Sperry Rand, Control Data, and Honeywell, all of whom thought they could beat IBM. Some of the computers were superior. But for all-round strength, for profit margins, earnings growth, sales force, reputation for service and reliability, nobody could match IBM. By 1956 IBM owned more than three quarters of the computer market in the United States and one weary competitor exhaled, “It doesn’t do much good to build a better mousetrap if the other guy selling mousetraps has five times as many salesmen.”

A decade later IBM was virtually rebuilt around a family of computers given the number 360. In the late 1960s, after leasing companies sprang up to serve as middlemen between the factory and customers, IBM helped savage them. At the start of the 1970s when the so-called plug-compatible manufacturers started to chip away at the market for peripherals, IBM responded aggressively. In the mid-1970s when other mainframe companies introduced powerful machines, IBM cut prices and changed the price structure of the industry.

There were only two conspicuous exceptions. IBM had failed to match Xerox when it tried to sell copying machines and had also played second fiddle in the minicomputer market which was dominated by companies like DEC, Data General and Hewlett-Packard. It was those two examples, the exceptions to IBM’s general ferocity, that offered hope for personal-computer makers. But the moral was plain: Anytime the managers of IBM felt that other companies were threatening their business they retaliated savagely and with a ruthlessness that was hidden behind a benevolent facade. In every decade of its history, when IBM had been threatened by other companies, it had always eventually competed and it had almost always won. IBM had made an art of defying the past and none of its victims ever accused it of playing fraternal games.

So it was with IBM’s personal computer. It was not novel but it was impressive. The Apple II, even as a four-year-old computer, was more elegant than the IBM machine. The Apple was cleverer, it occupied less space on a desk, was nowhere near as heavy, and didn’t need a fan. Thanks to the passage of the years IBM’s had a better keyboard and more memory. It copied some of the features of the Apple II like expansion slots and graphics.

The most impressive feature of IBM’s introduction was not the computer but the nimble way this enormous company had moved. IBM had established a small group to do in thirteen months what Apple had so conspicuously failed to achieve with the Apple III. IBM relied heavily on outsiders. Outsiders were brought in to help plan the product and outsiders supplied software. Microsoft, the company that had licensed a version of BASIC to Apple for the Apple II, developed IBM’s operating system. Personal Software adapted Visicalc to run on the IBM, and the men from staid America even dealt with a convicted felon in the shape of retired phone phreak John Draper, who converted his Easywriter word processing which he had originally written for the Apple II. Outsiders supplied the microprocessor, which like those in the Apple II and III (despite IBM’s assertions to the contrary) was an eight-bit device. Outsiders supplied the memory chips and printer and disk drive.

IBM, which had always relied on its army of salesmen, also announced that it would sell the personal computer through stores like Computerland and Sears Business Machines stores. The computer base price was between the Apple II and Apple III. As the electronics analyst Ben Rosen remarked, “It seems to be the right system at the right price with the right marketing approach for the right markets.”

Neither precedence nor presence seemed to matter at Apple. The company greeted the arrival of the IBM Personal Computer with a full-page advertisement which reeked of earnest goodwill and, some said, condescension: “Welcome IBM. Seriously. Welcome to the most exciting and important marketplace since the computer revolution began 35 years ago. . . . We look forward to responsible competition in the massive effort to distribute this American technology to the world.” (It was a politer version of an advertisement that the minicomputer company Data General had contemplated running when IBM entered the minicomputer market in 1976. That advertisement—which never saw the light of day—had read: “The bastards say, welcome.”) Some days later Jobs received a letter from IBM chairman John Opel, which thanked him for the greeting and made an oblique reference to the fact that such friendly gestures might cause a cocked eye at federal agencies.

In Cupertino Markkula and Jobs elaborated on their advertisement. Markkula said during the week IBM announced its computer, “We don’t see anything out of the ordinary. There are no major technological breakthroughs and there isn’t any obvious competitive edge that we can see.” Even at the time it was clear that the leaders of Apple were grievously underestimating the power of their new rival. Markkula could barely contain his irritation when asked how Apple planned to respond to IBM. “We’ve been planning and waiting for IBM to get into the marketplace for four years. We’re the guys in the driver’s seat. We’re the guys with one third of a million installed base. We’re the guys with a software library. We’re the guys with distribution. It’s IBM who is reacting and responding to Apple.” He added, “They’ll have to do a lot more reacting and responding. IBM hasn’t the foggiest notion of how to sell to individuals. It took us four years to learn about it. They must learn about distribution structure and independent dealers. You cannot reduce time by throwing money at it. Short of World War III nothing is going to knock us out of the box.” Jobs had his own, clipped appraisal of the IBM announcement and predicted, “We’re going to outmarket IBM. We’ve got our shit together.”

Like a nervous spinning top Apple’s hot-air balloon bobbed alongside an enormous stage. When its gas-burner flared, the balloon tugged at its moorings and the generous Apple logo, stitched on the side, glowed. The balloon was the most visible sign of Apple Computer in the place where Stephen Wozniak was promoting what he wanted to be the largest rock concert ever held. At the end of the summer of 1982 Wozniak financed a grotesquely magnified version of what could have been an outdoor party at his split-level home. His Labor Day weekend rock concert turned into a Disneyland version of Woodstock and had little to do with either computers or companies. It dealt with the thin look of fame, the tinny sound of legend, and with billboard America.

Wozniak erected his rollicking, collapsible monument in a scrofulous desert bowl at the edge of the largest suburb in the world. Here on the doormat of Devore, a little town that nobody noticed apart from its 372 inhabitants, a colony of nudists and drivers who dropped off the freeway for gas or a hunk of watermelon, Wozniak chose to stage his first three-day rock ‘n’ roll festival.