Steve Jobs Has A New Fix For Next: SoftwareKathy Rebello
Steve Jobs has always been fast on his feet. Since founding NeXT Computer Inc. in 1985, Jobs has met one setback after another with a quick-fix remedy. His coal-black NeXT computer was introduced in late 1988, but sales didn't take off because the software wasn't done. So Jobs lit a fire under his developers. Then, Jobs found that customers wanted the machine to come with a floppy disk drive. He added one. Next, they told him prices were too high. Jobs lowered them. Now, sales are climbing. But six-year-old NeXT still isn't profitable.
What's the solution this time? Software. NeXT insiders say that Jobs has concluded that whiz-bang hardware is not enough to propel his company into the big time. So he's now planning to sell the machine's object-oriented operating system as a stand-alone product. He hopes the technology, which makes it easy for buyers to customize applications for their own businesses, will build profits for NeXT and persuade big corporations to buy his machines.
So Jobs will announce in January that his NextStep operating-system will be rewritten to run on machines powered by Intel Corp. microprocessors. That means the program, due next summer, will be able to work with millions of IBM and IBM-compatible personal computers. That will make it attractive for PC owners to integrate NeXT computers into their offices, by making it easier for them to share software application programs.
The move pits him squarely against Microsoft Corp., which makes most of the operating systems sold today. But if it works, the payoff could be big. "It's the Trojan Horse that will get NeXT into Corporate America," says Jobs.
FAR SHOT. Jobs badly needs those customers. While 1991 has been a substantially better year for NeXT than most of the industry expected, it hasn't been enough to make the company a serious computer-industry contender. Jobs figures his company will post from $140 million to $160 million in revenues this year (chart), a considerable leap over the $28.8 million NeXT managed in 1990. Still, that's less than the $200 million Jobs was predicting three months ago and a far shot from No. 1 workstation maker Sun Microsystems, which posted revenues of $3.2 billion for its fiscal year, ended last June 30.
Then, there's the small matter of profits. NeXT has yet to finish a quarter in the black, and it has run through most of the $133 million invested in the company by Jobs, Canon Inc., and H. Ross Perot, the Texas billionaire.
Jobs, 36, is anxious to move his company into the black -- it's crucial to his plans to launch a public offering within the next 18 months. Marketing software is one way to get there: Software commonly has profit margins that are much higher than those on computer hardware.
HOT BUTTON. Besides, Jobs figures, the time is ripe. NextStep is the only object-oriented operating system now on the market, and object-oriented programs are among the computer industry's hottest hot buttons. The technology makes it much simpler to create application programs, such as spreadsheets and data bases. Indeed, the promise is so great that Apple and IBM have formed a partnership to create their own flavor of object-oriented software over the next three years.
Jobs thinks he's got a big advantage over IBM and Apple because his software has a proven track record. He says buyers tell him the reason they are plunking down $4,995 to $7,995 for NeXT workstations is that NextStep allows them to customize software for their businesses as much as 10 times faster than other computers.
Take UBS Securities Inc., a Wall Street firm that bought 22 NeXT machines to develop software for options trading and index arbitrage. "NeXT is hitting its stride," says Hadar Pedhazur, a UBS vice-president who says it took just three months to customize the software for his traders. That's at least three times faster than other workstations could have done the job, he says.
Still, not everyone is convinced that Jobs's plans to sell his software will work. "I give him 40-60 odds," says Nancy Battey, an analyst with market researcher International Data Corp. "It's hard for a young company to stake a claim in a market this big." Of course, just in case the software idea doesn't pan out the way he expects, Jobs also has another plan. Due next year: new NeXT workstations built around superfast chips.