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After Steve Jobs, the best known Apple CEO was John Sculley, and yet he resigned from Apple in disgrace, which brought him benefits, just as the company was heading towards destruction. AppleInsider takes a look at Sculley's tenure at the company and how history has treated the man since then.
The next time you are asked to become the CEO of a large company, be sure to negotiate an exit fee before you sign the contract. Because until you sign a contract, until you start working, the company wants you and can give you almost anything. That's exactly what John Sculley did, because when he left Apple on October 15, 1993, he walked away with the equivalent in today's money of $17.5 million.
This included severance pay, an annual consulting fee, and Apple's commitment to buy Scully's mansion and Lear's plane.
This is the man most famous for firing Steve Jobs — or so it seemed — and in 2009, CNBC named him the 14th worst American CEO of all time.
He didn't even top the list. (Dick Fuld of Lehman Brothers took first place.)
And the reason Sculley resigned on October 15, 1993 was because of what happened the day before when Apple announced its quarterly results.
The company actually made a profit and even increased sales — but barely enough to beat analysts' gloomy forecasts. However, the reality was still grim: Apple's profits in the fourth quarter of 1993 fell 97 percent compared with the same period in 1992.
To put that in context, that means Apple's net income for that quarter in 1993 was $2.7 million, up from $97.6 million the year before, which is equivalent to $5.74 in 2023 million and 207.4 million dollars. We don't know how much Sculley made in 1993, but CNBC reports that he was Silicon Valley's highest-paid executive in 1987, earning $2.2 million a year.
That's the equivalent of $5.95 million in 2023, and that's been hard to maintain in a company that's doing so poorly. It was also difficult to digest food — Even if it weren't generally believed that Sculley fired Jobs, you can imagine that he wasn't the most popular person at Apple back then.
However, just ten years ago everything seemed completely different.
Sculley joins Apple
You know the famous line that Steve Jobs said to John Sculley, when convincing him to join Apple. “Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world?”
He said this because Sculley was the president of Pepsi at the time. Before that, he was known, at least in the retail industry, for creating the Pepsi Challenge.
Again, this is not entirely accurate, but Sculley commissioned the research that ultimately led to this long-running advertising campaign. The ad featured members of the public participating in a blind taste test between Pepsi and its much more successful competitor Coca-Cola.
Unsurprisingly, Pepsi won in every ad shown. However, it's fair to say that Pepsi did win at least in most of these taste tests.
In his 1987 book, The Odyssey: From Pepsi to Apple, Sculley said his research “showed that blind consumers overwhelmingly preferred the taste of Pepsi over Coke. But Pepsi won the taste test only when both Pepsi and Coke remained unidentified. We didn’t know how to use this competitive advantage, so we didn’t take advantage of it.”
One Pepsi executive ignored the company, went ahead and developed what would become the Pepsi Challenge anyway. This is reminiscent of what Apple calls skunkworks. When Pepsi's board, including Sculley, refused to pursue the idea, Larry Smith, executive vice president of Pepsi's bottlers division, simply did it himself.
He hired an advertising agency and created a campaign. It was in 1971 that Sculley moved to Pepsi's international division, but when he returned in 1974, Sculley saw the challenge as a “much more powerful idea” than himself.
Where Larry Smith ran the Pepsi Challenge to help in certain regions where the drink had been supplanted by Coca-Cola, Sculley turned it into a national campaign. He didn't have the idea and didn't create the campaign, but Sculley took it across the US and it became such a famous success.
Although when Scully took part in the Pepsi Challenge himself, things didn't go very well for him. “I made the mistake of publicly participating in the Pepsi Challenge one day at the Daytona 500 in Florida,” he wrote in the Odyssey. “We have a major campaign in the state to coincide with the sponsorship of the race. I accepted the challenge and chose Coca-Cola! Luckily, the media was unable to witness my embarrassing gaffe.”
Steve Jobs and Apple
He's not as famous as Jobs or Steve Wozniak, but Mike Markkula is crucial to the history of Apple and Sculley's joining. Markkula led Apple in its early days. To do this, he even retired in 1977 and only intended to help the company grow for a few years before he left again.
However, circumstances meant that he became president instead in 1981, and Steve Jobs took over Markkula's former position as chairman. Apple's board of directors, including Markkula, wanted a new CEO, and Jobs made his choice. He needed Don Estridge from IBM — but Estridge didn't want Apple.
It is said that one of Jobs' criteria when choosing a CEO was that he or she should be someone Jobs could manipulate. If this is true, Scully was ultimately unfazed by it. After about 18 months of pressure from Jobs, John Sculley joined Apple.
He did it to change the world, and it's not his fault that Apple doubled his salary at Pepsi from $500,000 to $1 million. Or that Apple included a $1 million signing bonus, a $1 million contract clause, an option to buy 350,000 shares of Apple stock, and moving expenses.
It's easy to criticize Sculley for the way Apple went downhill, but he were really successful. In particular, Steve Wozniak credits Scully with Mac's survival.
“The Macintosh failed, badly,” he told The Verge in 2013, “and who made the Macintosh succeed afterwards? It wasn't Steve, he left. These were other people.” like John Sculley, who worked and worked to create the Macintosh market after the Apple II left.”
“You know, I loved Newton.” This thing changed my life,” Wozniak added. “Steve put John Sculley down a lot, but he did Knowledge Navigator, Newton, Hypermap—incredible things.”
Sculley also shared the Pepsi Challenge idea with Apple and created a similar campaign called Test Drive a Macintosh. In a 1984 issue of Newsweek, Apple ran 16 pages of advertising costing more than $2.5 million, according to Owen Linzmeier's book, “Apple Confidential 2.0,” promoting the idea.
You can read all 16 pages online, and there have been TV spots dedicated to it.
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If you have a credit card for security and fill out the form, you can take the Mac home and give it a try. About 200,000 people did this. However, Sculley was confident that simply using the Mac would convince people to buy it.
You see his point, but unfortunately it just didn't work. Instead, most Macs were simply returned at the end of the trial period — and many were slightly damaged in transit.
1985 will not be like 1984
Steve Jobs and John The Scullys were fast friends in every way, but they didn't last long. By 1985, strains appeared. Apple was struggling financially, and Sculley was convinced that Steve Jobs was less of an asset and more of a liability.
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It's not true that Sculley actually fired Jobs, but they had board battles. Sculley ultimately removed Jobs from any responsibility at the company.
This led to Jobs leaving NeXT. And this led to Sculley continuing to work at Apple without him for another eight years.
What happened next
The post-Jobs era of Apple can be seen as the era when John Sculley invented Newton and thus started us all on the path to the iPhone and other smart devices.
A less generous view is that Sculley considered himself a technological innovator, but in fact he was not. (He has since stated that, due to his ignorance of computers, hiring him was a “big mistake” on Apple's part.)
He did create an idea called “Knowledge Navigator,” which may have predicted a lot of what we do. today, with the advent of the Internet, but it was more of a collage of existing ideas set to music.
Apple definitely created the Newton for Scully's watch, but he had to be persuaded. And oddly enough, at the same time he had a team that created Newton, he created another team looking to do the same thing.
This other team was later spun off into a separate company called General Magic, which eventually went bankrupt.
Sculley then succumbed to pressure from Apple's board of directors and announced the Newton too early. It made a big splash and everything looked great, but it would be another 14 months before the Newton could go on sale.
So when it happened, it wasn't as good as it could have been. It was definitely more expensive than anyone wanted – — and with 14 months' notice, competitors had plenty of time to create cheaper competitors.
You don't have to be an engineer to run a technology company, and you don't have to be a visionary to succeed in business. John Sculley acted as a visionary leader, but he needed to set trends in a timely manner — or set the company's course to ensure that these trends develop on time, not too early and not too late — rather than giving in to other pressures.
He was a typical corporate manager, but he failed to manage Apple as needed at the time.