Written By Keshav Mohta (Grade 8)
The year was 1985. Steve Jobs had just resigned as Chairman of Apple. He had taken a handful of trusted employees to start a new venture. He was disgusted by the turn of events at Apple and needed money to start his new venture. So, he sold all his shares in Apple, earning him $140 million. However, he kept one share in the company so that he could attend shareholder meetings.
Jobs wanted an amicable and clean break from Apple. However, even after he resigned, John Sculley, the then CEO of Apple, tried getting Jobs fired. Within 3 weeks of Jobs’ resignation, the company filed a lawsuit against him. They accused him of taking proprietary and confidential information and breaching his contract. Eventually, the parties settled their differences outside court. It was decided that Apple would continue making computers for personal use while Jobs’ new company would focus on developing more powerful computers for a different market.
Towards the end of 1985, Jobs had set up his new venture and called it NeXT. Soon Jobs and his employees started work on the ‘imaginatively’ named, NeXT Computer which would pave the way for the most successful failure in computing history.
While NeXT was trying to develop their technology, Jobs came across a unique opportunity. Lucasfilm had by then released the first three parts (now parts 4, 5 and 6) of their movie trilogy called Star Wars. They were now looking to sell their Computer Division as George Lucas, founder of Lucasfilm, didn’t see potential in computer generated graphics.
The Computer Division had close to 10 years of animation experience with amazing graphics from movies like Star Trek II: The Wrath of Khan, Young Sherlock Holmes and so on. The Graphics Group within the Computer Division had been working on creating computer generated animations with complex character movements and hand gestures, motion blur and many other state-of-the-art features which would go on to build the foundation for computer generated animations.
Along with this they had developed a specialised computer for animation and graphics called the Pixar Image Computer which they sold for an extravagant $135,000 a piece. The computer was far ahead of its time and generated a lot of individual sales for large research labs. However, its inability to generate bulk orders meant that the business was not making money.
Jobs always had an interest in graphics and UI and in 1986 bought the Computer Division of Lucasfilm for $5 million. Jobs renamed the company to Pixar, which would revolutionise animation forever.
In the very same year, Pixar created Luxo Jr, a short film, the first ever fully computer-generated 3D animated film. This film eventually went on to win the Oscar for Best Short Film (Animated).
Meanwhile in 1988, NeXT had launched the NeXT Computer. The use of a similar nomenclature to the Apple I and Apple II, suggests that Jobs’ creativity didn’t extend to naming his products. The NeXT Computer combined hardware and software in a unique and powerful way which had never been done before.
The NeXT software was designed to rival that of Microsoft and Apple. It was based on UNIX and was so good that it would eventually form the foundation of Mac OS X, the operating system used till date by Apple (a good 30+ years!).
In the same year, Pixar launched their proprietary animation system called Marionette, which generated some much-needed revenues. Pixar’s proprietary renderer, a device used to generate pictures from a 3D model, called RenderMan, was also launched for internal use. They created another short film about a tiny baby playing with his tin musical toy, titled “Tin Toy”. Tin Toy become the first ever fully computer-generated animation film to win an Academy Award as the Best Short Film (Animated).
Both companies were sucking money out of Jobs, who was soon running low on funds. Pixar was doing great work and developing amazing technology but wasn’t generating enough revenue. NeXT too had developed an amazing product but was too expensive at $6,500 for schools and organisations with lower budgets to purchase.
In 1989, Pixar released a commercial version of RenderMan to generate much-needed revenues. Jobs also tried expanding the company into animated commercials, the first being an ad for Tropicana.
Meanwhile at NeXT, Jobs launched NeXTstation, an improved version of the computer with a faster processor. The NeXTstation Colour further added a 4,096-colour display and was launched at an even higher price. Along with this, NeXT also launched the NeXTcube, the first-ever computer to be shaped like a cube (!!). It had a 32-bit display which was revolutionary then. However, none of them sold well, primarily due to their very high price which limited their market reach.
In the spring of 1992, NeXT launched upgraded Turbo versions of NeXTcube and NeXTstation. They had larger memories and a faster processor. While the company sold nearly 20,000 computers generating $140 million in revenues, this was not enough to keep it afloat.
Around the same time, Microsoft-IBM was dominating the PC market with a share of 80%, leaving behind other competitors including Apple. In 1993, Jobs decided to convert NeXT into a software only company and fired 300 of 540 employees. He changed the name of the company to NeXT Software Inc. Soon thereafter, the company launched NeXTSTEP, their latest operating system, which eventually became Mac OS X.
Meanwhile, 50 miles away, Pixar was creating amazing films with great graphics which could not be mimicked by hand. Jobs had already put more than $50 million of his own money in Pixar, yet the company was running short of cash. Disney, the biggest children’s movie studio, wanted to up their game in animation. They had seen Pixar’s success in computer animation and wanted to invest in the company. Jobs eventually struck a deal for Pixar to make one feature-length film, to be owned and marketed by Disney. And thus, began the journey of Toy Story, one of the biggest blockbuster movies which would forever revolutionize animation.
After 4 years of hard work, Toy Story was launched on November 22, 1995. History had been made with the first ever entirely computer-generated feature-length film. This was the turning point for Pixar as Toy Story went on to become the highest grossing film of the year generating $362 million worldwide. A week later Pixar launched its IPO which turned out to be the largest of the year. Pixar’s shares opened at a price of $22 each and eventually closed the day at $39 on a volume of 8 million shares. This instantly made Jobs, who own 80% of Pixar’s stock, a billionaire!
Toy Story went on to win 3 Academy Award nominations for the best original song, score and screenplay the following year. John Lasseter, the director, was awarded with a Special Achievement Oscar. Over the next few years, Pixar continued to break box office records with consecutive successes in the form of A Bug’s Life, Toy Story 2, Monsters Inc and Finding Nemo.
In neighbouring Palo Alto, NeXT continued to sell its operating system, NeXTSTEP. The company had created versions for the IBM-PC, PA-RISC (HP developed computer) and SPARC (Sun Microsystems and Fujitsu). Other big corporates and American government agencies (intelligence and military) also started using NeXTSTEP.
Since Jobs departure, Apple had struggled in the PC market. The Microsoft-IBM partnership had almost entirely put the company out of business. Without Jobs’ marketing wiz they hadn’t been able to sell computers and had gotten themselves into other businesses like hard drives and printers. Also, Apple’s operating system and user interface were really old fashioned and needed a complete overhaul.
Instead of developing their own brand-new operating system, in December 1996, Apple announced its intent to buy NeXT Software Inc. The motive of this purchase was to replace the existing Mac OS with NeXTSTEP. This came as a surprise to Jobs and NeXT. Eventually, Apple bought NeXT for $429 million which was distributed among the shareholders of NeXT. However, instead of paying cash to Jobs they gave him an equivalent 1.5 million shares of Apple and hired him back as a consultant.
In 1997, Jobs was promoted to interim CEO which he shortened to iCEO. The nomenclature of iOS, iTunes, iPhone, iPad and iPod actually comes from this iCEO. He became permanent CEO in 2000. Over the next 5 years NeXTSTEP was modified and optimized for Apple computers and was finally launched as Mac OS X.
NeXT was very different from Apple despite having the same founder. During his exile from Apple, Jobs had completely changed as a leader. He had created a very different culture at NeXT. It was more of a community with members rather than a company with employees. Employees were given performance reviews and raises every six months on the basis of their work. The company had given health insurance plans to the employees as well. The payment system was also different from other Silicon Valley companies who paid their employees every two months that too after their work period was over. Jobs paid the employees every month and in advance.
It was this Steve Jobs 2.0 which would help rebuild Apple from a laughing stock in the technology field to the most valuable (tech) company in the world.
After Jobs became CEO at Apple, day-to-day operations of Pixar were left to John Lasseter and CTO Ed Catmull, with Jobs showing up once a week. However, Jobs remained CEO and majority shareholder of Pixar until it was acquired by Disney in 2006 for a whopping $7.4 billion, making Jobs the largest shareholder in Disney.
Trivia: The one lesser known fact about Jobs is that at the time of his death, his $10.2 billion net worth came predominantly from Pixar (owned by Disney), and not from Apple which contributed “only” $2 billion.
Go to Part 2: Steve Jobs – Growing Apple
Part 4 and 5 yet to come!
Featured Image Courtesy – Sumit Bookz 840 Blog