Looking back at John Sculley's rise as Apple's CEO, and fall on October 15, 1993

Posted:
in General Discussion edited October 2018
A quarter of a century ago, Sculley resigned from Apple in profitable disgrace as the company headed toward destruction. AppleInsider looks at Sculley's tenure with the company, and how history has treated the man since.

John Sculley (center)


Next time you're asked to become CEO of a major company, make sure you negotiate your exit fee before you sign the contract. Until you sign, until you start the job, the company wants you and will give you practically anything. That's surely what John Sculley did because when he resigned Apple on October 15, 1993, he left with the equivalent in today's money of $17.5 million.

That included severance pay, a one-year consulting fee and Apple's commitment to buy Sculley's mansion and Lear jet.

This is the man who is most famous for firing Steve Jobs -- or so it appeared -- and in 2009 was described by CNBC as the 14th Worst American CEO of All Time.

Sculley is often credited with devising the Newton


And the reason he resigned on October 15, 1993 was because of what happened the day before when Apple announced its quarterly results. The firm did actually make a profit and it even increased its sales -- but that meant it just beat analysts' dire predictions. The reality was dire enough -- Apple's 1993 fourth-quarter earnings were down 97 percent from the same time in 1992.

Just to put this into context, this means that Apple's net income was $2.7 million in this 1993 quarter compared to $97.6 million the year before, which is equivalent to $4.7 million and $175.6 million today. We don't know what Sculley was earning in 1993, but CNBC says that in 1987 he was the highest-paid executive in Silicon Valley, taking home $2.2 million annually.

That's hard to support in a company doing so badly and it's also hard to stomach. Even if it weren't routinely believed that Sculley fired Jobs, you can imagine he wasn't the most popular person at Apple then.

Yet it all seemed so very different just ten years before.

Sculley joins Apple

You know the famous line that Steve Jobs said to John Sculley when persuading 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 it because at that moment, Sculley was president of Pepsi. Up to then he was famous, if only within the retail industry, for how he created The Pepsi Challenge.

Again, that's not quite accurate, but Sculley commissioned research that ultimately led to this long-running ad campaign. The ads featured members of the public in a blind taste test between Pepsi and its then much more successful rival, Coca-Cola.

Unsurprisingly, in every ad shown, Pepsi won. However, it's fair to say that Pepsi genuinely won at least most of these taste tests that were tried.

Detail from John Sculley's book cover


In his 1987 book, Odyssey: Pepsi to Apple, Sculley says that his study "showed that, on a blind basis, consumers overwhelmingly favored the taste of Pepsi over Coke. But Pepsi only won the taste test when both Pepsi and Coke remained unidentified. We didn't know how to exploit this competitive advantage, so we didn't act upon it."

In a move reminiscent of what Apple refers to as a skunkworks, one Pepsi executive went ahead and worked up what would become the Pepsi Challenge. When the Pepsi board, including Sculley, refused to pursue the idea, Larry Smith, Executive Vice President for Pepsi's bottling plants division, did it himself.

He hired an ad agency and created the campaign. That was in 1971 and Sculley moved to Pepsi's international division before returning in 1974. Sculley saw the challenge "as a far more powerful idea" when he returned four years later.

Where Larry Smith had done the Pepsi Challenge to help areas where the drink was being overwhelmed by Coke, Sculley turned it into a national campaign. He didn't have the idea and he didn't create the campaign, but Sculley took it across the US and that made it the famous success it is.

Although when Sculley himself took the Pepsi Challenge, he didn't go well. "I made the mistake of publicly taking the Pepsi Challenge once at the Daytona 500 car race in Florida," he wrote in Odyssey. "We had timed a massive campaign in the state to coincide with our sponsorship of the race. I took the Challenge and chose Coke! Fortunately, the media weren't there to witness my embarrassing gaff."

Steve Jobs and Apple

He's not as known as Jobs or Steve Wozniak, but Mike Markkula is crucial to Apple's story and to Sculley joining. Markkula guided Apple when it was a fledgling business. He even came out of retirement in 1977 to do so and had only intended to help the company grow for a few years before he would step away again.

However, circumstances meant he instead became president in 1981 and Steve Jobs took over Markkula's previous role as chairman. Apple's board, including Markkula, wanted a new CEO and Jobs made his choice. He wanted IBM's Don Estridge -- but Estridge didn't want Apple.

It's said that one of Jobs's criteria for picking a CEO was that he or she be someone Jobs could manipulate. If that's true, it ultimately didn't faze Sculley. After some 18 months of Jobs pressing him, John Sculley joined Apple.

He did it to change the world and gave up his $500,000 Pepsi salary for a mere $1 million at Apple -- plus $1 million in a signing bonus, a $1 million contract clause, the option to buy 350,000 Apple shares, and relocation expenses.

The Apple Challenge

It's easy to criticize Sculley for how Apple went downhill, but he did have successes. Steve Wozniak credits Sculley with the survival of the Mac.

"The Macintosh failed, really hard," he said to The Verge in 2013, "and who built the Macintosh into a success later on? It wasn't Steve, he was gone. It was other people like John Sculley who worked and worked to build a Macintosh market when the Apple II went away."

"You know, I loved the Newton. That thing changed my life," added Wozniak. "John Sculley got demeaned by Steve a lot, but he did the Knowledge Navigator, the Newton, HyperCard -- unbelievable things."

Sculley also brought the Pepsi Challenge idea to Apple and created a campaign called Test Drive a Macintosh. In a 1984 edition of Newsweek, Apple took out 16 pages of advertising, costing more than $2.5 million according to "Apple Confidential 2.0," promoting this idea.

You can read it all online and there were also TV spots to do with it.






If you had a credit card for security and you filled out a form, you could take home a Mac to try. Some 200,000 people did. However, Sculley was sure that just using a Mac would convince people to buy it.

You see his point but it didn't work out like that. Instead, a large proportion of Macs were returned -- and many were slightly damaged on the way.

1985 won't be like 1984

Steve Jobs and John Sculley were fast friends in every sense but they weren't it for long. By 1985, there were strains. Apple was struggling financially and Sculley was persuaded that Steve Jobs was less an asset and more a liability.






It isn't true that Sculley actually fired Jobs, but they did have boardroom battles. Ultimately, Sculley removed Jobs from any kind of company responsibility.

This led to Jobs quitting to form NeXT. And it led to Sculley pressing on at Apple for another eight years.

What happened next

You can look at the post-Jobs era of Apple as being when John Sculley invented the Newton and so started us all off on a road to the iPhone and other smart devices.

The less generous view is that Sculley believed himself to be a technological innovator and he wasn't. He created an idea called Knowledge Navigator which arguably predicted much of what we do today with the internet, but it was more a collage of existing ideas set to music.

Apple did most definitely create the Newton on his watch, except he had to be talked into it. And at the very same time he had a team creating the Newton, he had another team spun off into General Magic aiming to make effectively the same thing.

Then he caved to pressures from the Apple board and made a big announcement about the forthcoming Newton. It was a hugely successful announcement but it was 14 months premature.

Newton cost too much and competitors had a long time to create cheaper rivals.

You don't need to be an engineer to run a technology company and you don't need to be a visionary to make a success of a business. John Sculley acted like a visionary leader but he needed to actually set the trends in a timely fashion -- or set the company's course to where those trends were going on time and not too early or too late -- instead of bending to other pressures.

He was the archetypal corporate manager yet he failed to manage Apple the way that Apple needed to be run at the time.



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Comments

  • Reply 1 of 18
    **" but it didn't work out like that. Instead, a large proportion of Macs were returned —and many were slightly damaged on the way. "** LOL!!!
    edited October 2018
  • Reply 2 of 18
    Quick tip: If you want to blast your computer with a shotgun, don't take it out on the poor, innocent monitor.*

    *unless it's an iMac. In which case, sell it on eBay.
  • Reply 3 of 18
    GeorgeBMacGeorgeBMac Posts: 3,644member
    I think it's important to remember that neither Jobs not Sculley ever invented anything.   They provided overview, guidance and parameters -- and enabled the Geeks to do their best geeking.

    That's fairly obvious with Sculley but near heresy to say about Steve.  But even Gates mocked him for being non-technical.

    But, that doesn't mean that both were not geniuses in their own right.   Geeks need geniuses like that to lead and guide and enable and to see the bigger, longer picture.
  • Reply 4 of 18
    Terrible times for Apple back then. Please don’t even bother doing one of these for Gil Amelio.
  • Reply 5 of 18
    Mike WuertheleMike Wuerthele Posts: 4,108administrator
    Terrible times for Apple back then. Please don’t even bother doing one of these for Gil Amelio.
    Too late!

    https://appleinsider.com/articles/18/07/10/gil-amelio-resigned-at-apple-ceo-21-years-ago-paving-the-way-for-steve-jobs-ascension-as-ceo
    king editor the grateGeorgeBMac
  • Reply 6 of 18
    Nice write-up!

    Wish there has been more about the Knowledge Navigator and its similarity to the iPad; and more about the Newton and Sculley's role.

    The story about Sculley failing the Pepsi Challenge is a classic!  Maybe even a Classic Coke!

    However, there's a glaring error there;  the word about what happened to him is "gaffe", not "gaff". 

    😎
  • Reply 7 of 18
    blastdoorblastdoor Posts: 1,888member
    Some good things happened under Sculley -- 

    The Mac II line
    PowerPC 
    System 7 
    QuickTime

    The biggest failures were probably Newton (good idea, but prematurely launched and overhyped) and failure to advance the OS beyond System 7. 

    JWSCbb-15
  • Reply 8 of 18
    dewmedewme Posts: 1,900member
    I don't believe that John Sculley even remotely deserves to be as closely associated with the cast of characters in the CNBC "worst" list, much less at #14. He was obviously a fish out of water and in over his head without the direct support of Steve Jobs, but he was certainly not mean spirited, deceitful, backstabbing, corrupt, or isolated in his own self centered universe like most of the failed CEOs on the list. Having the "Guy who fired Steve Jobs" moniker on his head, even though it was not true, creates a visceral level of loathing for Sculley amongst Apple fans that is not really deserved. He took some swings and missed on more than a few, but he didn't end up serving time or being barred from serving in an executive role in industry. His eventual failure at Apple is as much a negative indictment on those who placed him in a position of authority and allowed him to continue in that role during a protracted decline as it is a reflection of his ineffectiveness.

    There is a huge difference between people who fail while making an honest attempt at success and those who fail through graft, moral corruption, ethical shortfalls, and deceit. In my opinion, John Sculley deserves a more sympathetic retrospective than the one he has been assigned by Apple fans. Steve Job's ego cast a massive shadow over everyone around him at the time and we will never know whether Apple's decline would have continued even with Steve still in place at Apple. Had that happened Steve may not have had the motivation to put his ego in his back pocket, mend fences with Microsoft, and distill exactly what needed to be done to survive and rebuild down to a very simple formula. Steve was forced to step away from the fray at its worst and ultimately came back reenergized and reinvigorated, and with some technical and visionary tools in his war chest to fight and win the next war. The rest is history, but so is the narrative of the Sculley and Armelio eras and Apple (barely) surviving to set the stage for the Jobs II era. In the grand scheme of things, if Sculley had been more successful perhaps Apple would have survived at a mediocre level, say like Palm or Gateway, and be buried somewhere deep in the Fortune 1000 list. I'm not advocating failure as a strategy, but failure sometimes sets the stage for success, and in Apple's case and the availability and motivation of Steve Jobs, it certainly did. 
    gatorguyking editor the grateGeorgeBMacJWSCstskMoorePhotography
  • Reply 9 of 18
    Rayz2016Rayz2016 Posts: 4,556member
    I think it's important to remember that neither Jobs not Sculley ever invented anything.   They provided overview, guidance and parameters -- and enabled the Geeks to do their best geeking.

    That's fairly obvious with Sculley but near heresy to say about Steve.  But even Gates mocked him for being non-technical.

    But, that doesn't mean that both were not geniuses in their own right.   Geeks need geniuses like that to lead and guide and enable and to see the bigger, longer picture.
    Absolutely true. 
    applehead
  • Reply 10 of 18
    Rayz2016Rayz2016 Posts: 4,556member
    dewme said:
    I don't believe that John Sculley even remotely deserves to be as closely associated with the cast of characters in the CNBC "worst" list, much less at #14. He was obviously a fish out of water and in over his head without the direct support of Steve Jobs, but he was certainly not mean spirited, deceitful, backstabbing, corrupt, or isolated in his own self centered universe like most of the failed CEOs on the list. Having the "Guy who fired Steve Jobs" moniker on his head, even though it was not true, creates a visceral level of loathing for Sculley amongst Apple fans that is not really deserved. He took some swings and missed on more than a few, but he didn't end up serving time or being barred from serving in an executive role in industry. His eventual failure at Apple is as much a negative indictment on those who placed him in a position of authority and allowed him to continue in that role during a protracted decline as it is a reflection of his ineffectiveness.

    There is a huge difference between people who fail while making an honest attempt at success and those who fail through graft, moral corruption, ethical shortfalls, and deceit. In my opinion, John Sculley deserves a more sympathetic retrospective than the one he has been assigned by Apple fans. Steve Job's ego cast a massive shadow over everyone around him at the time and we will never know whether Apple's decline would have continued even with Steve still in place at Apple. Had that happened Steve may not have had the motivation to put his ego in his back pocket, mend fences with Microsoft, and distill exactly what needed to be done to survive and rebuild down to a very simple formula. Steve was forced to step away from the fray at its worst and ultimately came back reenergized and reinvigorated, and with some technical and visionary tools in his war chest to fight and win the next war. The rest is history, but so is the narrative of the Sculley and Armelio eras and Apple (barely) surviving to set the stage for the Jobs II era. In the grand scheme of things, if Sculley had been more successful perhaps Apple would have survived at a mediocre level, say like Palm or Gateway, and be buried somewhere deep in the Fortune 1000 list. I'm not advocating failure as a strategy, but failure sometimes sets the stage for success, and in Apple's case and the availability and motivation of Steve Jobs, it certainly did. 
    2009 was a while ago. Since then we’ve had Elizabeth Holmes who has taken the first 25 spots in America’s Worst CEO List. 
    GeorgeBMacJWSC
  • Reply 11 of 18
    Rayz2016Rayz2016 Posts: 4,556member

    blastdoor said:
    Some good things happened under Sculley -- 

    The Mac II line
    PowerPC 
    System 7 
    QuickTime

    The biggest failures were probably Newton (good idea, but prematurely launched and overhyped) and failure to advance the OS beyond System 7. 

    Anyone still using a Newton?
    applehead
  • Reply 12 of 18
    Terrible times for Apple back then. Please don’t even bother doing one of these for Gil Amelio.
    Too late!

    https://appleinsider.com/articles/18/07/10/gil-amelio-resigned-at-apple-ceo-21-years-ago-paving-the-way-for-steve-jobs-ascension-as-ceo
    Oh, the humanity! ;)
    GeorgeBMacJWSC
  • Reply 13 of 18
    “AppleInsider looks at Sculley's tenure with the company, and how history has treated the man since”.

    Ummm....did I miss that last bit?
  • Reply 14 of 18
    GeorgeBMacGeorgeBMac Posts: 3,644member
    Rayz2016 said:

    blastdoor said:
    Some good things happened under Sculley -- 

    The Mac II line
    PowerPC 
    System 7 
    QuickTime

    The biggest failures were probably Newton (good idea, but prematurely launched and overhyped) and failure to advance the OS beyond System 7. 

    Anyone still using a Newton?
    I think there are...  Well, sort of...
    I remember an ai article a few months ago and several commented that they still have one and still pull it out on occasion -- mostly for old time's sake.
  • Reply 15 of 18
    JWSCJWSC Posts: 275member
    Terrible times for Apple back then. Please don’t even bother doing one of these for Gil Amelio.
    Too late!

    https://appleinsider.com/articles/18/07/10/gil-amelio-resigned-at-apple-ceo-21-years-ago-paving-the-way-for-steve-jobs-ascension-as-ceo
    Oh, the humanity! ;)
    Say what you will about Gil.  But he did make one decision that changed the world.
    GeorgeBMac
  • Reply 16 of 18
    Rayz2016 said:
    I think it's important to remember that neither Jobs not Sculley ever invented anything.   They provided overview, guidance and parameters -- and enabled the Geeks to do their best geeking.

    That's fairly obvious with Sculley but near heresy to say about Steve.  But even Gates mocked him for being non-technical.

    But, that doesn't mean that both were not geniuses in their own right.   Geeks need geniuses like that to lead and guide and enable and to see the bigger, longer picture.
    Absolutely true. 
    Actually that’s not even remotely true. Spend a few hours going through US Patent Office records and you’ll discover just how many things Steve Jobs’ name is on. As the inventor.....and before the trolls leap from their grubby hiding places.... that’s not just because he was head of Apple nor because he stole other people’s ideas. He may not have invented entire machines ... nobody really does in big companies now ... but many of the things that have made Apple great were a direct consequence of his creative mind and ability to articulate those things in ways others could turn them into working products. Sculley was not an inventor. Nor a visionary. Nor a leader. He was definitely not Steve Jobs. Nor Tim Cook for that matter.
  • Reply 17 of 18
    Rayz2016 said:
    I think it's important to remember that neither Jobs not Sculley ever invented anything.   They provided overview, guidance and parameters -- and enabled the Geeks to do their best geeking.

    That's fairly obvious with Sculley but near heresy to say about Steve.  But even Gates mocked him for being non-technical.

    But, that doesn't mean that both were not geniuses in their own right.   Geeks need geniuses like that to lead and guide and enable and to see the bigger, longer picture.
    Absolutely true. 
    Actually that’s not even remotely true. Spend a few hours going through US Patent Office records and you’ll discover just how many things Steve Jobs’ name is on. As the inventor.....and before the trolls leap from their grubby hiding places.... that’s not just because he was head of Apple nor because he stole other people’s ideas. He may not have invented entire machines ... nobody really does in big companies now ... but many of the things that have made Apple great were a direct consequence of his creative mind and ability to articulate those things in ways others could turn them into working products. Sculley was not an inventor. Nor a visionary. Nor a leader. He was definitely not Steve Jobs. Nor Tim Cook for that matter.
    Nice little world you live in there....   Tell the White Rabbit we said "Hi!"
  • Reply 18 of 18
    Rayz2016Rayz2016 Posts: 4,556member
    Rayz2016 said:
    I think it's important to remember that neither Jobs not Sculley ever invented anything.   They provided overview, guidance and parameters -- and enabled the Geeks to do their best geeking.

    That's fairly obvious with Sculley but near heresy to say about Steve.  But even Gates mocked him for being non-technical.

    But, that doesn't mean that both were not geniuses in their own right.   Geeks need geniuses like that to lead and guide and enable and to see the bigger, longer picture.
    Absolutely true. 
    Actually that’s not even remotely true. Spend a few hours going through US Patent Office records and you’ll discover just how many things Steve Jobs’ name is on. As the inventor.....and before the trolls leap from their grubby hiding places.... that’s not just because he was head of Apple nor because he stole other people’s ideas. He may not have invented entire machines ... nobody really does in big companies now ... but many of the things that have made Apple great were a direct consequence of his creative mind and ability to articulate those things in ways others could turn them into working products. Sculley was not an inventor. Nor a visionary. Nor a leader. He was definitely not Steve Jobs. Nor Tim Cook for that matter.
    Nice little world you live in there....   Tell the White Rabbit we said "Hi!"
    Of course, no one is saying that Jobs wasn't a great leader, but a patent is basically an idea and a method. The hard work is making the method work, and that's where Jobs excelled: finding and motivating talented people to make the hard stuff work.

    Which, is precisely what you said … so yup, absolutely true.
    GeorgeBMac
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