Steve Jobs' Boston Macworld Expo '97 Speech

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Copyright 1997 by Bill Fox

Last Updated: August 17, 1997

[Steve Jobs, Boston Macworld Expo 97] "Thank you very much for that warm welcome. Now I guess I'm going to have to give a speech. I came today to give you a status report on what's going on and to try and fill you in on some of the steps we're taking to get Apple healthy again.

As you know, I'm the Chairman and CEO of a company called Pixar -- thank you -- And I am pulling together, like a lot of other people, to help Apple get healthy again. And I am extraordinarily confident that that is going to happen.

Now, when I started to get involved, a lot of people gave me advice, and some of the most popular advice was, "Apple has become irrelevant." There was a great one that was, "Apple can't execute anything." And another one was, "The Apple culture is anarchy. No one could manage it." You've read all these things in the press.

After four weeks, I found quite the opposite of these things, actually. Apple's not as relevant as it used to be everywhere, but in some incredibly important market segments it's extraordinarily relevant. I want to share some of that with you today.

Apple is executing wonderfully on many of the wrong things. The ability of the organization to execute is really high, though. I've met some extraordinary people at Apple. There's a lot of great people at Apple. They're doing some of the wrong things because the plan has been wrong.

And lastly, rather than anarchy, I found people that can't wait to fall into line behind a good strategy. There just hasn't been one.

So, what I see is the makings of a very healthy company with some extraordinarily talented people who are still just as passionate and committed to the dream of computing as they ever were. They need to come together and get a great plan and then start to execute it. That's exactly what's been happening over the last four weeks.

What's the fundamental problem? I think the fundamental problem is a little more subtle, but I think this is a symptom: Apple sales in 1995 were $11.1 billion; in 1996 they were $9.5 billion; this year they'll be $7 billion plus or minus a little bit. That's the problem, or the symptom, depending on how you look at it. This needs to be stabilized and turned around. And people are working very hard to do that.

Board of Directors So what are some beginning steps that we're going to take? One of the first ones has to be to start at the top. Apple's done a lot of change at the bottom and I think this change needs to happen at the top, with the Board of Directors.

Focus on relevance. Apple needs to find where it is still incredibly relevant and focus on those areas. It needs to figure out what its core assets are and invest more in them. Apple has neglected its core assets for a while.

Apple has to forge some meaningful partnerships, not just partnerships in press releases. And it needs to define some new product paradigms. We've got some great ideas. I'm not going to be talking about products today, though. I just want you to know that we have some wonderful ideas that you'll be hearing about between now and the end of the year.

So let's talk about some of these. Board of Directors, Apple had a very decent group of people as the Board of Directors. They worked very hard for Apple. But I think, with Apple, in the situation it found itself, it was time for a change. The directors agreed with that.

We have put together a new Board of Directors that I would like to announce to you today. There are two members of the prior board that we are extremely pleased are going to stay on the new Board. The first of those is Ed Woolard. Ed is the Chairman and former CEO of Du Pont. I've gotten to know Ed over the last several weeks and I think he's terrific. He has provided a tremendous amount of leadership during this very critical time for Apple.

Next is Gareth Chang. Gareth is the President of Hughes International. Again, he's been on the Apple Board for a short while. Gareth brings a tremendous international experience to Apple, in particular in Asia, which is a very important high growth market for Apple.

The rest of the prior Board has resigned. We're going to add four new Board members to carry the company forward. The first is Larry Ellison, CEO of Oracle. Larry started Oracle in his garage about a year after we started Apple. It's grown to be the second largest software company in the world. We would like to do a lot more in terms of software, and we thought having some software industry expertise on the Board would be a good idea (laughter).

The second Board member is Jerry York, former CFO of IBM and Chrysler. Jerry did a lot of the turnaround work at Chrysler and IBM, and is extremely well-known and respected in the financial community for his work.

The third new Board member is Bill Campbell, CEO of Intuit. Bill, in addition to CEO of Intuit, was formerly the Vice President of Sales and Marketing for Apple during some of its heyday. He also ran Claris. He is very familiar with some of the successes and some of the failures that Apple has had, and I think will be an extremely good Board member.

And lastly, I am joining the Board as well.

I'd like to just take a moment and thank the outgoing Board members. I think it has not been an easy job to be a Board member of Apple over the last few years. These are very decent people and they've been trying very hard to do the right thing for the company.

I'd also like to welcome our new Board members. I think we have a really exciting task ahead of us: to help the management team and guide Apple back to health and prosperity.

And so I hope you'll agree that this is a pretty sweeping change. We're adding a tremendous amount of industry expertise. We are not naming a Chairman at this time. We're going to wait till we have a new CEO, and sort things out at that time.

Now, I put together a little video. If you'd like, I'll show it to you. We asked the Board members a few questions and just maybe you can get a little familiar with them. Would you like to see it?

================ [video]===================

[Board Members]

The old Board has been associated with the past and the past has been a failure. And the new Board brings hope.

The new group on the Apple Board are all computer insiders, we've all been in the computer industry.

Everyone knows that the computer industry changes at the speed of light. Now we have people who clearly can help us articulate and understand where the niches are where Apple can compete and successfully win.

A lot of times we try and focus on ourselves. We engineer ourselves internally, and we forget sometimes who pays the bills. It's the customer out there who pays the bills.

One of the things that bothered me years ago was when they raised prices; It made me think that Apple didn't understand the outside world.

I think Apple needs to worry less about competing with Microsoft and worry more about doing things that are different. That's back to innovation, it's back to creativity, it's back to vision. (live applause)

No one's really going to believe Apple can be successful until we get the revenues and the costs back in line. And that means we've got to start growing the revenues again.

Companies have to look at everything they're doing and determine their core competencies. What are the core parts of the business?

In a sense, Apple is trying to do too many different things. We need to focus on a handful of things and do them really, really well.

Well, I was on the Citicorp Board in 1991. The price of the stock was $9 a share. There were many negative articles being written about how Citicorp was going bankrupt. The price today is $130, mainly because we did the fundamental things that were necessary to focus on the customer and focus on having a highly successful business.

At Chrysler, we had to take nearly $4 billion out of the cost structure to get Chrysler fully competitive, particularly with the Japanese.

I've seen this at Du Pont, I've seen it at IBM, I've seen it at Citicorp: Success starts to generate additional success.

Well, the confidence has to start with a clear vision. What are we trying to accomplish? What are we trying to do? You take that vision down to a strategy. People have to look at it and say, "Yes, they can do that."

When a company lacks the energy, you can't do anything to the company. So I think with Steve and the new Board members, the first thing we need to do is inject a tremendous amount of new energy, and new thoughts.

Apple has very strong positions in two market segments; first, education, and secondly, creative content.

What other computer system has 20-25 million loyal, enthusiastic, committed users? Just building on that base, we are capturing their dedication and strength, because we're bringing out great products.

Whenever you have a strong position in a market segment, you can capitalize on that.

You know, Apple's the only lifestyle brand in the computer industry. It's the only company that people feel passionate about. You know, my company, Oracle, it's a huge company. IBM is a huge company. And Microsoft is a huge company. But no one has incredible emotions associated with our companies. Only Apple is really a lifestyle brand.

And companies can spend billions of dollars to build a brand. Apple does not have to do that, it's already been done.

The important thing is to build products that are wonderful, or as Steve would say, Insanely great. It's time to start building insanely great products.

The biggest thing you can do is go out and by a Mac.

Do I use a Mac? Absolutely, I use a Mac. I have three of them in my home.

I've been using a Mac since 1984 and I'm not about to stop.

I probably own every single machine that Apple has ever produced, and I can tell you, no one can change me in terms of personally what machine I would use: It's got to be a Mac.

============== [End Video]==============

So, as you can see, this is a pretty diverse group of people with a lot of deep industry expertise who have come together to say, "Hey, this world's a lot better place with a healthy Apple computer in it."

Key Markets Next: Market focus. I can't get anyone to tell me the definitive market share number for Apple, but it's around 7%, from what I can gather. And the question is, Where is Apple relevant? Where is Apple still the dominant player? Which market segments.

And there are two. The first one, I call creative content. It's publishing, design, pre-press, etc. It's creative professionals using computers. And what's interesting is that Apple is still the dominant market leader for creative professionals, by far. It's like, 80% of the computers used in advertising and graphic arts design, pre-press are all Macintoshes. And 64% of all Internet websites are created using a Mac. It's amazing.

But we haven't been doing a good enough job here. As an example, something like 10 to 15% of Mac sales can be traced directly back to people using Adobe Photoshop as their power application, right? When was the last time you saw Adobe and Apple co-marketing Photoshop? When was the last time we went to Adobe and said, How do we make a computer that will run Photoshop faster? These things haven't been as cohesive as they should have been. I think we're going to start proactively focusing much more on how do we these things.

The second market is one that's very close to my heart. It is education. Apple put the first computers in education. Apple did it again with the Macintosh. And Apple is still the dominant leader in education. Now, I'm going to ask you a question. Who is the largest education company in the world?

The answer is Apple. Apple is the single largest education supplier to education in the world. We are the single largest education company in the world. Now, I've asked 100 people at Apple this, and only two have thought of Apple. It's incredible, the position Apple still has in education. 60% of all computers on education are Apples. 64% of computers teachers use are Apples. It's a $2 to 2.5 billion business for Apple every year. What an incredible foundation to build off of. What an incredible legacy to build off of.

So, you're going to see Apple proactively focusing much more on these two markets where it is very relevant. And both of these markets are growing over 20% a year. Now Apple share is shrinking in these markets slowly, but I think you're going to see that stabilize and turn around. You're going to see Apple grow with these markets, because it's going to do a much better job of focusing where its relevance is and where its legacies lie.

The Brand + the Mac OS Next: Core assets. As you know, Apple's greatest core assets are you all. It's the group of 20-25 million active users that believe that Apple products and Macintosh is still the best in the world. I don't think we've done a good enough job taking care of you. I call the support lines myself. I've gotten very acquainted with the hold signal. And so I think we're going to see some changes there soon, and I apologize for anything in the past.

But what I want to do right now is get a little more analytical in defining Apple's core assets. There are two of them that I've been able to uncover. The first one is the brand itself, and the second is the Mac OS.

Now, the brand. What are the five greatest brands in the world? If you went out and you asked professionals this question, I think Nike would be on everybody's list, Coca-Cola would be on everybody's list, Disney would be on everybody's list. And Apple would be on everybody's list. We have one of the world's greatest brands and we haven't paid much attention to it in the last several years. I think you're going to see that start to change.

Now, I want to focus on the Mac OS. The Mac OS is an incredible core asset to Apple, and we've been walking all over it. Most people think that we're about to abandon the Mac OS. We just released Mac OS 8 which was code named Tempo. So we just released Tempo. Our next release next year is code named Allegro. Then most people think our next release will be Requiem (laughter). It's crazy. It's absolutely crazy.

The Mac OS is still the best thing in the world. It is still the best thing in the world. There are over 20 million active users. The number's a little closer to 25 million. There are thousands of developers. There's a $1.5 billion software industry built around this thing. This is one of the core assets of the company, and we are going to invest a lot more in it. We think it is an incredible asset and it has yet to be really fully exploited.

Apple is about the Mac OS. We're going to be doing other things, because we're creative people. But, at the core, Apple is about the Mac OS. All of the fears that I've heard from people, that we're abandoning it, are absolutely not true.

Concerning our latest release, Mac OS 8, I've got some really good news for you. We released this thing two weeks ago, and we have already sold 1.2 million copies. That's four times greater than what our forecast was. So we're scrambling to ship everything. If it takes a little time to get yours, I apologize. We are scrambling. And this 1.2 million number is going up. It shows no sign of abating. Things are going very well with Mac OS 8.

Microsoft Partnership Now, I'd like to talk about meaningful partners. Apple lives in an ecosystem, and it needs help from other partners. It needs to help other partners. Relationships that are destructive don't help anybody in this industry as it is today. So during the last several weeks we have looked at some of the relationships. One has stood out as a relationship that hasn't been going so well, but has the potential to be great for both companies. I'd like to announce one of our first partnerships today, a very meaningful one, and that is one with Microsoft.

I'd like to take you through this. The discussions actually began because there were some patent disputes (laughter). I know. Rather than repeating history, I'm extremely proud of both companies. They have resolved these differences in a very professional way. This has led to an overall relationship which we're announcing today. It's got several parts to it, and we're extremely excited about it.

The first part of it is a patent settlement cross-license. The two companies have reached a full cross-license agreement for all patents that exist and for patents that are filed within the next five years. It has been a very serious patent settlement.

The second part of this is that Microsoft is committing to release Microsoft Office on Macintosh for the next five years. They are going to release the same number of major releases as they release on Windows during that time. They're targeting to have their first release out near the end of the year. It might slip a few months in the next year, but they're working real hard on it. It looks very, very good.

Internet Explorer Next, we have taken a look at browsers out there, and Apple has decided to make Internet Explorer its default browser on the Macintosh. Since we believe in choice (laugher, applause), we're going to be shipping other Internet browsers on the Macintosh as well. Users can, of course, change their default should they choose to (cheers, applause). But we believe that Internet Explorer is a really good browser. We think it's going to make a fine default browser.

Java. We are going to be collaborating with Microsoft on Java to ensure that we can get the best from each other and ensure that there's compatibility between our virtual machines. We think that will serve everybody's interest.

And lastly, Microsoft is making an investment in Apple. Microsoft is buying $150 million worth of Apple stock at market price. These are non-voting shares. And they've agreed not to sell them for at least three years.

So this means that Microsoft is going to be part of the game with us as we restore this company back to health. They will have a vested interest in that stock price going up. We're going to be working together on Microsoft Office, on Internet Explorer, on Java. And I think that it's going to lead to a very healthy relationship.

So it's a package announcement today. We're very happy about it, we're very excited about it. I happen to have a special guest with me today via satellite downlink, and if we can get him up on the stage right now.

=============== [Satellite Transmission] =============

[Bill Gates] Some of the most exciting work that I've done in my career has been the work that I've done with Steve, on the Macintosh. Whether it's the first introduction or products like Excel, these have been major milestones. It's very exciting to renew our commitment to the Macintosh. We have over eight million customers using Microsoft software on the Macintosh. We make it very easy for people to use Macintosh to take their documents and work with all kinds of machines.

We're very excited about the new release we're building. This is called Mac Office 98. We do expect to get it out by the end of this year, and we've got some real exciting features. It's a product that's going to require no set-up. It's going to be an easy transition from past versions, and I think it's going to really set a new benchmark for doing a good job of performance and exploiting the unique Mac features. In many ways it's more advanced than what we've done on the Windows platform.

We're also excited about Internet Explorer, and we've got a very dedicated team that's down in California that works on that product. The code is really especially developed for the Macintosh. It's not just a port of what we've done in the Windows environment.

So we're pleased to be supporting Apple. We think Apple makes a huge contribution to the computer industry. We think it's going to be a lot of fun helping out. And we look forward to the feedback from all of you as we look forward to doing more Macintosh software. Thanks.

================ [End Satellite Transmission]===============

Right now we're shepherding some of the greatest assets in the computer industry. And if we want to move forward and see Apple healthy and prospering again, we have to let go of a few things here.

We have to let go of this notion that for Apple to win Microsoft has to lose. For Apple to win, Apple has to do a really good job. And if others are going to help us, that's great. Because we need all the help we can get. And if we screw up or we don't do a good job, it's not somebody else's fault. It's our fault. So I think that's a very important discussion. I think, if we want Microsoft Office on the Mac, we'd better treat the company that puts it out with a little bit of gratitude. We like their software.

So, the era of setting this up as a competition between Apple and Microsoft is over, as far as I'm concerned. This is about getting Apple healthy and this is about Apple being able to make incredibly great contributions to the industry to get healthy and prosper again.

I'd like to leave with one last incentive. You know, sometimes points of view can really make you look at things differently. Like, for me, when I was looking at the statistics, and it hit me that Apple is the largest education company in the world, that was like a bolt of lightning. That's huge. What an incredible base to build off of.

Another bolt of lightning is that Apple plus Microsoft equals 100% of the desktop computer market. And so, whatever Apple and Microsoft agree to do, it's a standard. And I think that you'll be seeing us work with Microsoft more, because they're the only other player in the desktop industry. And I think you'll be seeing Microsoft want to work with Apple more, because Apple is the only other player in the desktop industry. I hope we have even more cooperation in the future, because the industry wants it.

Creative People Lastly, I want to just talk a little bit about the Apple brand and what it means to a lot of us. You know, I think you always have to be a little different to buy an Apple computer. When we shipped the Apple II, you had to think different about computers. Computers were these things you saw in movies. They weren't these things you have on your desktop. You had to think differently because there wasn't any software at the beginning. You had think differently when a first computer arrived at a school, where there had never been one before. It was an Apple II.

I think you have to really differently when you bought a Mac. It was a totally different computer working in a totally different way, using a totally different part of your brain. It opened up the computer world for a lot of people who thought differently. You were buying a computer with an installed base of one. You have to think different to do that.

I think you still have to think differently to buy an Apple computer. And I think the people that do buy them do think differently. They are the creative spirits in this world. They are the people that are not just out to get a job, but they're out to change the world. They're out to change the world using whatever great tools they can get. We make tools for those kinds of people.

So, hopefully, what you've seen here today are some beginning steps that give you some confidence that we too are going to think differently and serve the people that have been buying our products since the beginning. Because a lot of times, people think they're crazy. But in that craziness, we see genius. And those are the people we're making tools for."

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