Return to the Little Kingdom

by Michael Moritz

  Few stock watchers needed to be reminded that Apple was going public. In the last half of 1980 the new issues market seemed almost like a throwback to the late sixties when the hot intersection had been in Beverly Hills at the corner of Wilshire and Santa Monica boulevards. As fall turned to winter Arthur Rock’s hunch came to look better and better. When Genentech went public in October 1980, it was the cause of pandemonium. After opening at $35 the stock burst to $89 before retiring for the night at $71. With that display the interest in new issues spread like swine flu. Though the SEC forbade companies to give earnings forecasts or promote the stock in the weeks before the public issue, magazines and newspaper reporters did their own work. The publicity that Apple received in the weeks leading up to the stock issue was the first widespread national publicity that the company had received. It was partly generated by the prospect of the size of the issue but it was also the belated payoff for the way Apple had wooed, flirted, and dallied with the press during the previous years.

  Apple was touted by investment analysts and portfolio counselors, by mountebanks who made their living dispensing tips, by the authors of stock guides and newsletters, digests and advisory columns. “Every speculator in hot new issues,” The Wall Street Journal reported, “wants a bite of Apple—Apple Computer Inc.—but most will be lucky even to get a bit.” Potential investors came out of the woodwork. The sacks of letters that arrived at Hambrecht and Quist’s office in San Francisco included an appeal for stock from a seven-year-old boy.

  In the weeks before Apple went public, the telephones in Cupertino also started to ring with alarming frequency. Callers wanted to know where they could buy stock or when it would split again. Strangers lurked in computer stores that Wozniak was known to frequent, and both he and Jobs received calls from people they hadn’t talked to in years. School friends, distant cousins, and even the contractors who worked on their homes wondered whether they could lay their hands on a couple of shares. Other major Apple stockholders arranged private sales with British unit trusts and investment houses, Caribbean-based technology funds, the Hewlett-Packard pension fund, and with people who had either spotted Apple or maintained trading accounts with the underwriters. Some of the most persistent callers were professional investors who wanted to add Apple to the list of coups they had participated in over the last couple of decades. Charlie Finley, the controversial owner of the Oakland Athletics baseball team, arranged a sale with four officers despite Arthur Rock’s objections, and then sued because he was dissatisfied with the price. Some doctors, dentists, and lawyers who served Apple’s stockholders also managed to get their hands on a few shares. One Beverly Hills consultant bought shares, explaining that he was familiar with Apple because he had conducted “a workshop training the top management of the corporation in more effective communication skills.”

  At brokerage offices the prospect of the offering produced a frenzy. One customer at a San Jose firm offered to open a $1 million account in exchange for 3,000 shares of Apple. Around the country brokers tossed their names into hats to get a couple of shares for their favorite clients. One Merrill Lynch analyst said, “Even my brother who invests in the stock market only on Tuesdays in leap years called to ask what I knew about Apple Computer.” An analyst with the Detroit Bank and Trust remarked, “It’s safe to say that everybody is going to be able to find some money to buy Apple stock.” Another observed the clamor and the news that a computer store intended to go public with the dry prediction that some owners of Apple IIs would soon try to issue shares. Apple employees found that the mere whisper of the company name brought clicks of attention. One youngster found stockbrokers hanging on his every word even though he still got carded when he entered a bar. Owning Apple stock, he decided, “was like having an American Express card made of platinum.”

  The fever also served to accentuate the resentments and jealousies that had built up within Apple. Wozniak dreamed up his own scheme to try to correct the lopsided stock distribution. He decided to sell some of his own holdings to colleagues who had either not received what they deserved or were victims of broken promises. The Wozplan, as it quickly became known, touched off a small stampede. Almost three dozen people snapped up close to 80,000 shares which, according to documents, Wozniak offered at $7.50 apiece. In answer to the formal questions posed by the California Commissioner of Corporations, the buyers explained their circumstances and how they learned about the offer. William Budge, for example, disclosed: “The amount of the proposed investment is in excess of 10 percent of my net worth and annual income.” Jonathan Eddy revealed that his personal investment adviser urged him to buy. “She owns some herself.” A few, like Timothy Good, resorted to familiar jargon: “I have interfaced with several officers on a professional level.” Lewis Infeld said he had heard about the opportunity “from word of mouth within my working environment.” Others, like Wayne Rosing, were blunt. “I am single, have no debts and more than sufficient net worth and insurance to provide for my needs.” Meanwhile, Wozniak also sold another 25,000 shares to Stephen Vidovich, the developer of the DeAnza Racquet Club where Apple held a corporate membership: “Due to the fact that the founders were friends of mine I had made it known that I was interested in purchasing stock if it ever became available.” Jobs observed the progress of the Wozplan and Wozniak’s private sales and decided that his partner “ended up giving stock to all the wrong people. Woz couldn’t say no. A lot of people took advantage of him.”

  Jobs meanwhile was harried by private worries that had been provoked by the birth of a daughter to his high-school flame, Nancy Rogers. The child was born on Robert Friedland’s farm in May 1978 and Rogers was convinced that Jobs was the father. Jobs, who arrived at the farm a couple of days after the birth, helped Rogers settle on a name for the baby girl. They called her Lisa. After the birth Jobs and Rogers went their separate ways with the latter supporting herself and the child with the proceeds of a variety of waitressing and housecleaning jobs. Eventually she asked Jobs for a $20,000 settlement. Markkula, who thought this was too little, suggested Jobs pay $80,000. Jobs demurred and insisted that he wasn’t Lisa’s father. Absolutely convinced that he had nothing to do with the child, Jobs stopped making voluntary child-support payments on three occasions. “Each time we started to get a lawyer involved,” said Rogers’s father, “he started to pay.”

  In May 1979 Jobs startled the Rogerses by agreeing to submit to blood tests to determine paternity. The analysis conducted by the department of surgery at the University of California, Los Angeles, concluded: “The probability of paternity for Jobs, Steve . . . is 94.41%.” Jobs wasn’t swayed by the evidence and insisted that, thanks to statistical quirks, “twenty-eight percent of the male population of the United States could be the father.” Eventually he came to grips with what was an immensely painful matter and agreed to a court-ordered settlement. “I settled because we were going public and it was consuming a ton of emotional energy. I had to get it resolved. I didn’t want to defend a suit for ten million dollars.” Within a month of Apple’s stock offering, Jobs agreed to start paying Rogers $385 a month in child support, to cover the cost of the child’s medical and dental insurance, and also to reimburse the county of San Mateo for the $5,856 that it had spent on public assistance to support the baby.

  As Jobs battled with his own troubles, outside interest in Apple continued to climb. The head of steam kept pushing up the price of the stock. At Apple the eventual price became the source of furtive bets and sweaty speculation. The price climbed so steeply that in Massachusetts the secretary of state for a time banned citizens of the Bay State from buying the stock because Apple violated state regulations that required a company’s book value to be at least 20 percent of the market value. During the first week of August 1980, Hambrecht and Quist (in which the Apple director and investor Arthur Rock was a limited partner) bought 40,000 shares for $5.44 each. When Apple’s first stock prospectus was published on November 6 it was anticipated that the stock would
be priced between $14 and $17. Even on the morning of December 12, 1980, the day Apple finally went public, when the stock was priced at $22, there were still signs that it had been underpriced because at the end of the first day of trading it closed at $29.

  The day of the stock issue turned into an unofficial company holiday. For of the 237 companies that made initial offerings in 1980, Apple’s was by far the largest and became the biggest initial offering since the Ford Motor Company went public in 1956. Apple’s switchboard operators found that a few callers were complaining that they hadn’t been warned about the actual day of the issue.

  Around the company, computers were connected to the Dow Jones ticker and programmed to print the stock price every few minutes. There was a premature celebration when a few of the machines began spitting out the quotes for a company with the call letters APPL rather than Apple’s AAPL. Some people wanted to erect a mock thermometer in the middle of the road that separated Apple’s main buildings. Anticipating a surge in the price, they wanted to mark notches up the stem. Cooler heads prevailed.

  Michael Scott hooked up a speaker phone to the New York offices of Morgan Stanley and at the end of the day carted in a few cases of champagne to help celebrate the $82.8 million that had been added to Apple’s bucket of cash. Robert Noyce, vice-chairman of Intel, co-inventor of the integrated circuit, and husband of Apple’s director of human resources, attended the small party while Jef Raskin surveyed the other guests and noticed that “all the people in the room were millionaires. The forceful thing was that the world had shifted. I hadn’t seen that happen before.”

  It was natural to be overwhelmed since there were so few precedents. At the end of December 1980 the paper worth of a few individuals should have been etched in uranium. Jobs’s 15 percent share of the company was valued at $256.4 million, Markkula’s at $239 million, Wozniak’s at $135.6 million, and Scott’s at $95.5 million. Teledyne’s Henry Singleton had a 2.4 percent stake in Apple that was worth $40.8 million. The venture capitalists’ investments had also crept up. Venrock’s initial $300,000 and its two subsequent investments had grown to $129.3 million, and Arthur Rock’s $57,600 stake had turned into $21.8 million.

  Meanwhile, Rod Holt found himself sitting on $67 million, Gene Carter on $23.1 million, and John Couch, the head of the Lisa Division, on $13.6 million. The head of engineering, Thomas Whitney, who had departed on what was politely called a “two week vacation” and whom Markkula uncharacteristically dismissed in private as “a burned-out case,” found that his twenty-six months at Apple translated into a barrel of stock worth $48.9 million. Meanwhile, Alice Robertson, Wozniak’s first wife, discovered that her share of the separation settlement was valued at $42.4 million, though she later complained she had been the victim of a raw deal.

  After the company went public, there were other complications. Some of the executives whose names and stockholdings were revealed in the official prospectus and newspaper reports started to worry. They installed extra fences around their houses, bought faster cars, wired up elaborate security systems, and fretted about the possibility of kidnap attempts on their children. Leslie Wozniak, who had been given some stock by her brother, retired from her work as a journeyman printer and was overwhelmed. “It was hard to decide what to do with my life. Anybody who wins a lottery should get a year’s free therapy.”

  At Apple people found that they couldn’t sell the stock as soon as they had hoped because of legal restrictions. Others waited to cash in their three-year options and then retired, while many worried about the best timing for a sale. A sizable group even flew to Vancouver, Canada, on the day when 1980 income tax returns were due in order to qualify for an extension. Programmer Bill Atkinson complained, “Some people spent half their waking hours counting their stock options. Those who eventually sold their shares discovered that ownership was interpreted as a matter of loyalty. When Jef Raskin sold his stake, Jobs accused him of betrayal. Raskin countered, “I didn’t want to have to open the paper each day to find out how much money I had.” As a company Apple began to find it more difficult to recruit people because they couldn’t be made wealthy with quite as much ease as before the offering. Charts that plotted every hiccup and lurch in the price were tacked to the outsides of cubicles and had a discernible effect on morale. When the stock fell, the charts disappeared. Bruce Tognazzini admitted, “I went through a year of being totally whacko because my mood was entirely tied to the Dow Jones.”

  For Jobs, Wozniak, and the other chief beneficiaries of the wealth created at Apple, the benefits turned out to be more mechanical than emotional. They, and others, learned that wealth and the prospect of leisure didn’t suddenly bring happiness and, to some extent, confused everything. Jobs and Wozniak began to receive letters thanking them for what they had done. Occasionally the envelopes contained photographs of houses which carried inscriptions like “This is the house that Apple built” and the painted spaces in the company parking lot began to be sprinkled with Mercedeses and Porsches.

  Some of the wealthier individuals made larger purchases. Alice Robertson bought condominiums and a gold-colored Mercedes which she decorated with the vanity license plates 24 CARAT. Rod Holt eventually took up ocean-racing, ordered a yacht and had a large Apple logo stitched to one of the sails. Markkula took to the skies, bought a used Learjet, had it repainted, equipped it with a stereo system, videotape player and Apple II, hangered it at San Jose airport under the company name ACM Aviation, retained a pair of pilots, and used it to gad to a weekend home on the shores of Lake Tahoe.

  Jobs was at one time going to share the jet with Markkula but decided that was too ostentatious and settled for a life of expensive austerity. “You run out of things to buy real quick.” He was not sure whether to be embarrassed or coyly proud of the fact that he and Markkula had shared a $200 bottle of Sauterne at dinner one evening or that he had the means to contemplate buying (though he never did) a full-page advertisement in Le Monde to help track down a woman he had met fleetingly in Paris but who had failed to turn up for a date. He found that the wealth, and the notoriety that trailed in its wake, opened doors to a wider stage. Invitations started to arrive for dinner parties, politicians began to solicit contributions, charities with unfamiliar names mailed fund-raising letters, and when he was asked to give talks or speeches, Jobs became increasingly polished. As business started to take him about the world he found large cities like Paris and New York more diverting than Cupertino or Sunnyvale. His wardrobe also took on a worldly air. The jeans began to be replaced by elegantly cut two-piece suits furnished by the San Francisco outfitter’s Wilkes Bashford.

  When the San Francisco newspaper columnist Herb Caen, with a characteristic lunge for the jugular, referred to Cupertino as Computertino, Jobs must have been part of the reason. Before Apple went public, the young master of Computertino bought a quiet home set in the hills of Los Gatos which he shared, for about three years, with a girl friend who had once worked at the Regis McKenna Agency. There he demanded the same quality of workmanship from his contractors as he did at Apple. But he was too busy to bring his full energies to the house that stayed empty of furniture and full of echoes.

  After his girl friend moved out, it became the home of a lonely soul. About the only furnished room was the kitchen, decorated in French peasant style, but with knives by Henckel and a coffee maker by Braun. The master bedroom contained an Apple II, a mattress, and a dresser on top of which stood an eclectic collection of photographs: the guru Neem Karolie Baba, former California governor Jerry Brown, and Albert Einstein. A half-filled lawyer’s bookcase in another room stood guard over packets of shirts returned from the dry cleaner. Architectural plans stayed scattered on the floor of a downstairs room. There were no easy chairs or sofa.

  Outside in the driveway a Mercedes replaced the succession of beat-up old cars and he would run his hands along the smooth, sleek lines, promising people that someday Apple’s computers would look equally elegant. He bought a BMW R-60 mo
torcycle which he sometimes rode about the hills and a painting by Maxfield Parrish. Along with Robert Friedland Jobs bought some land in the Pacific Northwest and also helped to finance SEVA, an organization devoted to eliminating blindness in Nepal.

  But he was much too introspective to find the wealth comfortable. He worried about some of the consequences, asked his parents to remove the Apple bumper stickers from their cars, wondered how to give them some money without turning their world topsyturvy, worried that women might like him just because he was wealthy, and knew that his friends expected him to use his fortune wisely. He had become—in his middle twenties—a digitized version of Scott Fitzgerald’s Monroe Stahr.

  Wozniak, who seemed determined to follow Samuel Johnson’s advice that it was better to live rich than to die rich, was always louder, splashier, and more cavalier about his fortune. As a student and an engineer he had always managed his financial affairs haphazardly and nothing changed as he grew wealthy. He could never keep track of receipts, for months didn’t bother to seek financial advice, and made a habit of filing his tax returns late. Wozniak turned into an approachable teddy bear and a soft touch. When friends, acquaintances, or strangers asked him for a loan he often wrote out a check on the spot.