Return to the Little Kingdom (9 page)

“There are these guys at Apple,” Whitfield said, “who are saying, ‘Let’s make a lot of hay out of price.’ Then the left hand says, ‘Don’t advertise price.’ And the right hand says, ‘Promote the hell out of price.’ We look like idiots if the right hand doesn’t know what the left hand is doing. I don’t think price is an advantage for Apple. The price of the Apple Two isn’t all that low compared to other machines. People don’t know what price means.”

“It’s almost deceptive advertising,” Goldman agreed as he stretched out his legs. “Everybody and his brother has to buy a box, drives, monitor, and printer. It’s plain misleading. The preconception is that they can get into an Apple for thirteen hundred dollars. Then they go into a dealer’s, find they have to spend three thousand dollars, and come out without a computer.” He paused. “And pissed off.”

“It makes it easy for people to price-shop,” Whitfield said, shaking his head in dismay.

“The nineteen ninety-five suggested retail price,” Folley elaborated, “meant a loss of eight percent for the dealers. The dealers are taking it in the shorts.”

“We’ve got fifteen suits against us from mail-order people for price fixing,” said Whitfield as he thumped the table with his fist. “You can see them now trying to convince a judge, moaning about this poor little retailer and this big company. It’s conceivable that a judge could say there was a pattern of price-fixing. We want an image like Sony or IBM. You don’t see those guys running an ad for price.”

“Our whole strategic position,” said Goldman, “is to enhance position for Apple. We have to add brand preference. We’ve got a lot of people who don’t know about PCs. People don’t even know they need these damn things, and we’re trying to sell them something they don’t think they need on the preference of price.”

Whitfield started to complain about Paul Dali, director of marketing for the Apple II, who was keen to advertise the price of computers. “How do you convince him otherwise? He sold thirty-three thousand computers or whatever the hell the number was in July. I’ve racked my brain and we just don’t have enough research to convince him that it isn’t price.”

“It’s cost benefit,” said Goldman.

“He’s got to step back and look at himself as part of an organization,” suggested Goldberg who had his feet propped against the edge of the table.

“How do you say that diplomatically?” asked Whitfield.

“Wake up, schmuck!” Goldberg said as he smoothed his fawn tie. He rephrased the suggestion: “Take a global perspective!”

After the chuckles subsided, Goldberg turned to the greater issue. “Apple has to be careful not to get down and dirty. An Apple means more than just a computer. Apple means plugging yourself into an energy source.”

“We can’t fight it out with the unwashed masses,” Goldman agreed. “We’ve got to show Apple is the brand of choice. Stick in the price and you become the cheapo.”

“Start cutting price,” Goldberg warned, “and you erode position. You can get thrown out at some point. If IBM steps in above you. You get thrown out.”

“How the hell are the unwashed masses out there going to figure out what to do?” Goldman wondered. “Everybody is trying to beat themselves over the head for the current market which is only three percent of what it will be.”

“It’s the whole corporate image,” Whitfield said. “Crocker Bank doesn’t want to buy a computer from a company for eleven ninety-five.”

Whitfield, who looked as if the cares and the future of the company were resting on his shoulders, pointed out, “Apple isn’t like General Foods. At General Foods the Sanka guy doesn’t have to worry about hurting the Jell-O guy. They’re separate. At Apple every brand manager affects the other brand managers.”

“Every brand manager wants to sell product,” said Goldberg.

“Yeah,” Whitfield agreed, as he replaced his cigarette with a strip of bubble gum and continued to enlighten Goldberg about the ways of Apple. “At Apple there’s a fundamental disagreement. Dali’s job is to sell product but others want to sell image and the idea that a computer is more than just a computer. Going to nineteen ninety-five we were overpriced. We were selling an overpriced machine. Suddenly there was IBM, and suddenly there was Osborne who was saying, ‘We’re going to give you more than Apple for seventeen ninety-five.’ Then we featured price and said, ‘Hi, Mr. Dealer! We love you so much we’re going to take eight percent out of your hide.’”

“What are the corporate objectives?” asked Goldberg.

“To reestablish Apple as not being behind in technology,” answered Whitfield. “We’re hung up in our own underwear. The perception is we’re out here peddling old machinery. We’ve got to show Apple is back on the track. People don’t know where we’re going and we don’t have enough advertising dollars to beat them over the head with it. They’ve heard all the rumors: ‘Gosh, they’re out of date. They’re late with new products.’ We’ve got to reinforce the impression that Apple’s out there with a full line of products.”

“By announcing and making hoopla out of the interface, you run a major risk of hurting the Two and the Three,” Goldberg said.

“We’ve got to show that Apple is
the
computer company,” Maurice Goldman added. “The unwashed masses don’t know the difference between eight and sixteen bits, much less between a mouse and a green screen.”

“Price isn’t the news,” Whitfield repeated. “The customer doesn’t know whether price is a good price.”

“Technology is the news,” Folley suggested tentatively.

Whitfield embarked on a sudden diversion. “I’ve been looking at the dealer numbers,” he said. “IBM is getting so friggin’ smart. They’ve got four hundred ninety-five outlets now. They’ve been adding them like crazy. We’ve only got four hundred ninety good dealers. IBM only went to the guys who didn’t have a history of discounting. The Computerland dealers wouldn’t think of selling an Apple. What we should do is buy a dealer, buy fifty truckloads of IBMs, load ’em up and sell ’em for five hundred dollars and bust their price level. We need two lawyers sniffing down their throats to catch ’em price fixing.” He caught his breath. “IBM has no high risk in this marketplace.”

Goldberg returned doggedly to the issue of price. “We’ve got hundreds of millions tied up in the image. If we sell on price we’re selling equity. We’re selling the franchise.”

“Apple makes money on the boxes,” Whitefield emphasized. “Our strategy is for accessories, peripherals, and software to take lower margins.”

“Then there are dealers who discount the box,” objected Folley.

“Like Billy Ladin,” said Goldman.

“Who is he?” asked Goldberg.

“Billy Ladin’s this dealer in Texas,” explained Goldman. “He’s got something like four stores and he sells goldfish.”

“Goldfish?” asked Goldberg who was baffled.

“Yeah,” said Goldman. “Goldfish. He says, ‘I’ll give the goldfish away for nothing. The little boy runs home and in an hour he’s back with five bucks from his mom and then I’ll sell him the bowl, the gravel, and the food.’”

Returning to the problems posed by the introduction of the new computers, Whitfield remarked, “We have an image that we’re a one-shot company. We want to be your personal computer company. We’re not just selling Lisa. If it was my company, I’d be saying this interface is the greatest thing since sliced bananas and all the others are obsolete. I’d be hitting every city in the country with seminars. We were going to announce Lisa and ship. But now we cannot. We’ve been burned so many times at Apple that I know that’s what’s going to happen. It’s going to slip. Then rumors will get out that Mac’s a cheap version of Lisa and people will be saying why should we buy a Two or a Three when we can wait a few months and buy a Mac.”

“We want to be your personal computer company,” Folley echoed. “We’re not selling Lisa.”

“You just said it,” Goldberg noted.

“The question is not Apple but which Apple,” Goldman amplified.

“This way,” Goldberg said, “you’re not running any downside risk. There’s no downside here.”

“We’ve got the line,” Whitfield said. He pointed toward Goldman. “He gave me the line. It was so memorable I’ve already forgotten it.”

“Evolution. Revolution,” Goldman said.

Goldman explained that Regis McKenna, the head of the public-relations agency retained by Apple, was trying to arrange stories that would coincide with the company’s stockholders’ meeting and the announcement of Lisa. “McKenna is talking about a front page on
The Wall Street Journal
and they’re also talking about a cover on
Business Week
. That should enhance the editorial launch of these products.”

“The stockholders’ meeting should reestablish your personal computer company,” said Goldberg. “It should reestablish everybody’s personal computer company.”

“They should say, ‘Buy stock, buy computers, buy everything, ’” said Goldman.

The four also had to grapple with the fact that there would be a four-to-five-month gap between the announcement of Lisa and the day when it would be available at dealers.

“When Lisa is in the store we drop a business insert into the world,” said Whitfield. “It’ll say ‘See this wonderful, mouse-activated computer.’ Then when Mac’s available we start with ads saying that mouse-activated computers are taking over the friggin’ world.”

“Are you concerned,” asked Goldberg, “that another competitor could preempt all this?”

Goldman calmed his fears. “We’ve got pretty good G-Two. Unless there’s the tightest security in the world on this.”

“The day of the stockholders’ meeting someone is going to stand up on a podium and they’re going to announce the bloody thing,” said Whitfield.

“What happens if editorial press ever pumps McKenna about a low-cost Lisa?” asked Goldman.

“If they do that, we’re friggin’ dead,” said Whitfield. “We’d be in real deep trouble. It’ll kill the sales. People can ask it and we’ll have some line like we’ll be coming out with a low-cost computer in a couple of years.”

S
tephen Wozniak, Bill Fernandez, and Steven Jobs came to view each other’s peculiarities through the telling eyes of friends. They were introspective and wrapped up in the privacy of their own worlds. When they stopped to look, each thought the others were shy and withdrawn. They were loners. Fernandez first encountered Jobs after he arrived at Cupertino Junior High School: “For some reason the kids in eighth grade didn’t like him because they thought he was odd. I was one of his few friends.” Neither Jobs nor Fernandez was as obsessed with electronics as Wozniak. They didn’t pore over computer manuals, or linger around computer rooms or spend hours messing with instruction sets on sheets of paper but they still found electronics an engaging and diverting pastime.

Fernandez and Jobs meddled together in the quiet of their garages. They struggled in their combined ignorance to build a box with a photocell that, when a light was flashed, would switch another light on or off. They didn’t know enough mathematics to form a model but they drew diagrams and tried to build the device with relays and transistors and diodes. When Paul Jobs started to work as a machinist at Spectra Physics, a company that specialized in lasers, Fernandez and Jobs fiddled with the laser parts that, in due course, dribbled back to Los Altos. They played rock music, balanced mirrors on stereo speakers, pointed lasers at the mirrors, and watched images play against a wall.

Like Wozniak and Fernandez, Jobs found the forum provided by science fairs irresistible. While he was still at Cupertino Junior High School he entered a science fair for which he built a silicon-controlled rectifier, a device that can be used to control alternating current. So when he began to attend Homestead High School it was natural for him to enroll in John McCollum’s electronics class. Unlike Wozniak he didn’t become a teacher’s pet, wasn’t given access to the closely guarded stockroom, and dropped the course after a year. McCollum drew his own conclusions. “He had a different way of looking at things. I’d put him down as something of a loner. He would tend to be over by himself thinking.” On one occasion when McCollum couldn’t supply him with a part he needed, Jobs called the public-relations department of the supplier, Burroughs, in Detroit. McCollum objected. “I said, ‘You cannot call them collect.’ Steve said, ‘I don’t have the money for the phone call. They’ve got plenty of money.’”

But the whirl of electronics was certainly strong enough to intrigue Jobs. He made some trips to NASA’s flight simulator which had been built at Sunnyvale’s Moffett Field. He attended meetings of the school’s electronics club. Along with a few others he went to meetings of the Hewlett-Packard Explorer Group where company scientists gave lectures. There were talks on some of the features included in Hewlett-Packard’s latest calculators, developments in light-emitting diodes and laser inframetry. After one lecture Jobs buttonholed a scientist, wangled a tour of Hewlett-Packard’s holographic lab, and was given an old hologram. On another occasion he called the home of Bill Hewlett, one of the co-founders of Hewlett-Packard, and asked for some parts. Hewlett provided the parts and also gave Jobs the name of a person to contact for a summer job. So at the end of his high-school freshman year Jobs spent the summer working on an assembly line, helping to build Hewlett-Packard frequency counters. Spurred by the devices passing in front of his eyes at the factory, Jobs set about trying to design his own frequency counter but never completed the project.

The resistors, capacitors, and transistors that were used by Jobs and Wozniak came from the local electronics stores and mail-order firms. Jobs was at least as familiar as Wozniak with the quality and reputations of these outlets. As they both grew older, and as they graduated from bicycles to automobiles, their shopping choices expanded. Sunnyvale Electronics was one of the most convenient spots. Just off El Camino Real, it was sheeted with fake rock but its contents were more substantial. It stocked new parts, dozens of magazines and manuals, and also the eighteen-dollar walkie-talkies for which Wozniak saved his thirty-five-cent lunch money while at junior high school. They learned to avoid the Radio Shack outlets because they thought the parts were inferior. Radio Shack, with its garish neon signs, was a last resort, a place to be visited late at night when every other place was closed.