December 20, 1996 7:30 PM PST

Sculley makes comeback

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With help from former Apple executives and the explosive growth of the Internet, former Apple Computer chief executive John Sculley is rapidly laying the groundwork to become a force in Silicon Valley again.

In an interview with CNET today, Sculley confirmed that he has quietly invested in start-up NetObjects, a Web publishing tool maker, and will soon increase his stake. Sources also said Sculley, 57, is expected to get a board seat at NetObjects, but he wouldn't comment on that possibility.

"NetObjects has a hot product called Fusion, and it fits with the mosaic of companies that I'm building," Sculley said. He declined to elaborate on his plans but said he would disclose more around the time of Apple's Macworld conference in the beginning of January.

It appears that Sculley is rekindling old relationships with Apple executives to build companies that will offer quality, original content on the Web--largely in images but also in text and sound. All these companies are also poised to go public, a move that could make Sculley and his partners even richer.

News of Sculley's deepening involvement in Silicon Valley came as former Apple CEO and cofounder Steve Jobs is returning to Apple. The company announced tonight that it had acquired Jobs's Next Software for $400 million. In the mid-1980s, Sculley won a top-level power struggle at Apple that forced Jobs out.

Sculley's investment in NetObjects has not been previously disclosed. But he is an investor and chairman in Live Picture, which makes software for editing images on the Internet. Sculley also is an investor in LiveWorld Productions, an Internet company founded in April that focuses on content, both in images and text.

All three companies include former Apple executives, such as LiveWorld cofounder Peter Friedman and NetObjects chief executive Samir Arora. Sculley also has recruited former Apple executives as investment partners, such as former Apple chief financial officer Joe Graziano in the LiveWorld deal.

Live Picture makes software for editing images on the Internet, and has teamed up with powerhouses such as Kodak in the burgeoning field. Sculley is a longtime digital photography buff and has been a consultant to Kodak.

Sculley's ill-fated investment in an East Coast wireless company called Spectrum Technologies in 1994 brought him unwanted and embarrassing attention after he resigned as chairman of Apple three years ago.

This mix, or "mosaic" of investments, as Sculley calls them, could help the former Apple executive return to Silicon Valley with a splash, experts said.

Earlier this week, CNET reported that NetObjects was shaking up its board and that a new round of financing was imminent. "I invested in the first round, and I'm investing again," Sculley said. The first round raised $5.4 million for NetObjects; the new round will be larger.

But some changes are afoot. Terrence Garnett, a partner with the venture capital firm Venrock Associates, has left the board. Another director, Promod Haque, a general partner of Norwest venture capital, is also on the way out, sources said. Venrock, an investment arm of the Rockefeller family, and Norwest are original investors in NetObjects.

The board is being expanded from three to five members as part of the refinancing effort.

Some sources said NetObjects was experiencing "growing pains" related to "operational issues." They also claimed that management had run into some criticism for its leadership.

Arora denied any problems, saying the company was doing "extremely well" and had exceeded its financial goals. He also said Venrock and Norwest would participate in the new round of financing. Sources said that AT&T Ventures might also invest in the second round.

Arora is also expected to remain on as head of the company.

NetObjects has established itself as one of the up-and-coming companies in the Net industry. In a public relations coup earlier this year, Fortune singled out NetObjects as one of the "coolest" companies at which to work. NetObjects also played a prominent role in designing the 24 Hours in Cyberspace instant Web site, which chronicled one day's events across the globe.

 

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