Execs question Amelio leadership

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When Amelio first moved into the CEO office in February 1996 from the CEO slot at National Semiconductor, the choice surprised many. While he brought with him a reputation for being a turnaround expert, many questioned his ability to conceive a vision for Apple's future. But with the red ink flowing in torrents, Wall Street and even insiders were willing to give him the benefit of the doubt on his vision. Their priority was halting the losses.

Through the end of its fiscal year in October, it looked like Amelio was achieving that. It was his predecessor Michael Spindler, not Amelio, who was the scapegoat for Apple's shocking $740 million loss announced in April.

Wall Street was reassured by a reorganization plan announced in June designed to help assess Apple's operations by creating six distinct profit and loss centers. After the first reorg, Amelio got credit for the $25 million profit posted for the fourth quarter in September.

306K 465K Amelio on Apple marketing

But that was the last of the good news.

Of the 6 senior executives brought in to the upper management ranks and 12 vice presidents named during that June reorganization, about half are no longer at Apple. And the $25 million fourth-quarter profit was followed by a $120 million first-quarter loss announced in January.

Some Apple executives blame that loss on Amelio's inexperience in the consumer market and bad advice given by then COO Marco Landi.

During the fall fourth quarter, Landi wanted to stuff the distribution channels with Apple computers in the hopes that they would drive holiday sales. This is a common practice for some consumer product companies, but for Apple, it also drove up costs for the following quarter.

"A lot of executives went to Gil and said don't do this," said an Apple executive who participated in discussions of the distribution plan. "Neither Gil nor Marco were familiar with the consumer market. Once you stuff the channel, you can only make so many moves to push sales?.It reminded us of what happened a year ago," he added, referring to the last Christmas quarter of Spindler's reign.