Amelio to leave Apple via $10m parachute

Departing CEO Gil Amelio seems likely to receive a $US10 million severance package from the troubled Apple Computer. According to a document filed with the SEC when Amelio was hired, detailing the terms of his contract, he will be paid US$10 million if he is fired 'without cause' or if he resigns 'for good reason.' Meanwhile, the man who will keep his seat warm said Amelio's resignation 'was a joint decision between both Gil and the board.'

Departing CEO Gil Amelio seems likely to receive a $US10 million severance package from the troubled Apple Computer. According to a document filed with the SEC when Amelio was hired, detailing the terms of his contract, he will be paid US$10 million if he is fired "without cause" or if he resigns "for good reason."

Meanwhile, the man who will keep his seat warm said Amelio's resignation "was a joint decision between both Gil and the board." Executive vice president and chief financial officer Fred Anderson said in a conference call that "Apple needs a different profile CEO, one that is more customer-focused."

Also leaving the company is Executive Vice President of Advanced Technology Ellen Hancock, who reportedly clashed with Apple co-founder Steve Jobs. Hancock had also worked with Amelio at National Semiconductor, and he brought her to Apple after he joined the company in early 1996.

Jobs, who recently returned to the company as an adviser when Apple bought his start-up Next Software Inc., is assuming an expanded role as a key advisor to Apple's board and executive management team, a statement from Apple said.

Anderson would not speculate as to whether the position would be offered to Jobs, although he did say that Jobs will be advising Apple's board on its marketing strategy. That strategy remains basically unchanged - the release of MacOS 8 on July 22 is still on target, and the Rhapsody operating system will be out imminently - but Anderson did say that Apple's strategy would be reviewed.

It was not a matter of if Amelio would leave, but when, said Apple-watcher and industry analyst Pieter Hartsook, who was once employed at the company, as vice president of Apple marketing and research.

"I have a problem with the timing because it's not that his leaving the company will cause a disruption, but his replacement will cause a disruption," Hartsook said, adding that Apple is due to shortly launch some strategic products, including the next generation of its operating system software. A better strategy would have been to "build a wall around Amelio" and leave him in place for a few more months, he said.

Apple is expected to post a loss of $70 million for the third quarter (earnings to be released on July 16). As this loss is in line with expectations, it is probably not the reason why the Apple board moved to seek Amelio's resignation now, Hartsook said. "Getting rid of Gil does not solve the problem," he said.

While Hancock probably resigned out of her own choice, "of all the people still at Apple, she was the best candidate for the [CEO's] job," Hartsook said.

"The question is, who is stupid enough to take the job? Only Steve Jobs and [Oracle CEO] Larry Ellison have an ego that big," the analyst added.

Ellison had no comment on this subject, according to his public relations agency.

In March, press reports quoted Ellison criticising Apple's management, and saying that he thought the foundering company could be saved. At that time, Ellison tried to round up investors to join him in a $1 billion bid to take a major stake in Apple, an effort that failed to reach fruition.

Industry analysts said the dark cloud hanging over Apple's headquarters got even darker today.

"They have not hit rock bottom yet. Things will get even worse now," one observer said.

Stopping short of saying a recovery is almost impossible, analysts said a radical shift in strategy is inevitable.

"We have not gotten the whole story yet," said James Staten, industry analyst at Dataquest in San Jose, California. "Apple is putting Amelio up as a scapegoat so they can write him off and the quarter. We have not heard anything about a turnaround plan yet."

Analysts expect the announcement of Apple's third-quarter results next week will be followed by a shift in strategy.

"They wanted to achieve profitability and growth, but they have to aim for profitability in a market that isn't growing and adjust their business plan accordingly," Staten said, adding that Apple needs to further reduce operating expenses.

Among the options Apple has is concentrating on software only, while shedding hardware manufacturing operations, concentrating on vertical markets and getting serious about licensing its operating system, said Roger Kay, senior analyst at International Data Corp. in Framingham Massachusetts.

Analysts also said that following Amelio's departure an acquisition of the company is more unlikely than ever.

"Apple is very vulnerable right now. You can probably get them for under $2 billion, but I have a hard time imagining anybody would do it," said Tim Bajarin, president of Creative Strategies, in San Jose, California.

While nobody would speculate on who would want to replace Amelio, Bajarin suggested a non-technical CEO would be best.

"Apple's board did not feel Amelio had what it takes to stop the bleeding and they need to find somebody that can inspire Apple developers and customers. They need to bring in somebody that is very consumer- and customer-oriented and not a technologist," he said.

Apple would be well advised if it concentrates on new markets such as the next generation of home users and the small business market, Bajarin said.

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