Gil Amelio: Facts & Speculation

There's been a whole lot written in the last week about Gil Amelio's resignation. Most of it is a mixture of a few facts and a lot of speculation. From my perspective, these are the facts:

• On Wednesday, July 9, 1997, Gil Amelio resigned as chairman and CEO of Apple.
• Apple's board of directors was in agreement with this decision.
• Amelio remains an Apple employee through September.
• Also on July 9, Ellen Hancock tendered her resignation.
• Apple CFO Fred Anderson will oversee day-to-day operations until Apple has a new CEO.
• Steve Jobs will be acting head until a new CEO is in place.
• Apple will release third-quarter financial results on Wednesday, July 16.

There has been a great deal of speculation regarding Amelio's resignation and it's timing. Amelio has been with Apple for 17 months of his five-year contract.

According to MacWeek*:

Amelio's employment package also included a $5 million loan. According to the agreement, the loan is repayable within 90 days of his resignation.

As part of his severance package, Amelio will receive the sum of his salary and annual target bonuses for the remaining three and a half years of his contract. In 1996, his target bonus was equal to his salary, but his contract states that the bonus can be 50 percent to 300 percent of his salary. Based on the 1996 figures, Amelio's severance package could be close to $7 million - about $3.5 million in salary and $4 million in bonuses.

After paying off the loan, Amelio could still walk away from Apple with a couple million in his pocket. The resignation was definitely not a cost-saving measure.

The biggest question is whether Amelio planned to resign, was asked to resign, or was forced out. Writing for the Chicago Sun-Times,* Don Crabb calls it an ouster, which certainly doesn't sound voluntary. Yet he maintains elsewhere (scroll to bottom of linked page) that Amelio had planned to leave at the end of September, in all likelihood to pursue a political career, and that his departure now was for personal reasons. It's unlikely, but not impossible, that the board chose to push Amelio out at the same time he chose to leave.

Apple is projected to have another losing quarter now, but it may well turn a profit in the next quarter. Most CEOs would rather leave on an up note, which makes me suspicious of the timing if Amelio indeed chose to leave. It seems far more likely that the board recognized that he had done his job and taken cost cutting about as far as he could - and that it was time for new leadership.

The press is quite agreed that Amelio did what he was hired to do: cut costs. Call it corporate triage, but without the restructuring, the blood loss could have killed Apple. Instead, Apple survives and the Mac clone market is healthy. Apple may not be completely out of the woods, but it is out of intensive care.

There are several other rumors, including Steve Jobs wants to run Apple again; Mike Markkula used Amelio as a sacrificial lamb; third-quarter results will be worse than anticipated, so Amelio jumped ship; and third-quarter results will be so bad the board wasn't willing to put up with Amelio any longer.

The most likely scenario, in my opinion, is that all parties agreed that Amelio had done what he does best (cut costs), and now is the time to change direction. Moving into the back-to-school and holiday buying season, Apple's board of directors, including Amelio, concluded that Apple needs a visionary leader who will bolster support. (Everyone seems agreed that Amelio was one of Apple's least charismatic leaders.)

By moving Amelio out of the CEO office but keeping him on staff and providing a parachute, Apple has not abandoned him and makes it possible for him to work with his successor.

I wish Apple well in finding the right leader to take it into the 21st century. (Can an Apple CEO last that long? Time will tell.)

Further Reading

• Steve Jobs, Amelio, and Everything Forgotten, Jeff Valvano, AppleInsider, 1999.06.04
• 500 Days at the Helm: The Rise and Fall of Gil Amelio, Tom Hormby, Orchard

* The links to these online articles are no longer valid, and they are not available in the Internet Archive.

This was one of the first editorials published on Low End Mac, just 3 months after we got started. Gil Amelio was succeeded by Steve Jobs, who took Apple's reins as "interim CEO" and has remained in charge ever since. dk