The Rise and Fall of NeXT Computer

Struggling to find success

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As the title of one of his multiple biographies says, Steve Jobs truly was an icon. He cofounded Apple computer in 1977, revolutionized the personal computer industry with the first Macintosh in 1984, triumphantly led Apple into the new millennium with dashing and stylish products like the iMac in 1998 and the iBook in 1999.

As the new millennium dawned Jobs upended the music industry with the release of the iPod and iTunes in 2001 and then went after the phone industry with the iPhone in 2007, whose success allowed him to essentially create the tablet industry with the iPad in 2010. Until his untimely passing in 2011, Jobs seemed unstoppable and everything he touched, barring one or two things like the G4 Cube, seemed to be exactly what consumers didn’t even know they wanted. 

But in between introducing the Macintosh in 1984, and introducing the iMac in 1998, Jobs went through a period of enormous personal struggle, starting with being essentially fired from Apple computer and ending up founding a computer company called NeXT that was on the edge of complete bankruptcy when it was purchased by the flailing Apple Computer in 1997.

This is the story of that enormous business failure, the failure that changed Steve Jobs from a brash youngster into a more mature and rounded businessman, who understood far more about the balance between form and function and the need to produce things that people had clear reasons to buy.

It is somewhat of a puzzle to me that the writer of the best all around biography on Steve Jobs, Walter Issacson, spends little time on Jobs’ time at NeXT in his otherwise excellent biography. To understand how Jobs was able to become the practical visionary who took Apple from the brink of failure to enormous success, it is critical to understand just what he experienced at NeXT.

NeXT, which was eventually renamed NeXT Computer, before finishing its life as NeXT Software, came into existence on June 20th, 1985 and limped along until its dissolution on February 7th, 1997. Rarely profitable and selling just a fraction of the computers that were originally envisioned, NeXT nevertheless attracted a small but intensely loyal group of users. B

ut it was never enough for it to fully get off the ground. A 1993 article by the San Jose Mercury News states that  “Despite years of full-tilt trying, Steve Jobs’ Next Computer Inc. sold about 50,000 machines -- or what Apple Computer Inc. ships in just six days.¹” this in a period when Apple itself was in danger of foundering. Another point of comparison would be the fact that Apple sold its one millionth Macintosh in 1987, barely three years after its introduction whereas NeXT had sold a mere one twentieth of that number four years after its introduction.

But regardless of their modest sales, NeXT’s systems had an enormously disproportionate impact. NeXT computers powered Tom Berners-Lee’s development of the original web browser and web server, while pioneering gaming company ID Software created Wolfenstein [edit 7/27/2024: as Rhetorica pointed out in a comment, id didn’t actually use their new NeXT systems for Wolfenstein 3D development. According to a footnote in the book “Game Engine Black Book: Wolfenstein 3D”, the sole usage id made of their NeXT systems for Wolfenstein 3D was to design the manual], Doom and Quake using NeXT computers as development systems.

The company also received enormously favorable publicity for much of its life as Jobs, ever the master showman, displayed his talent for generating great reviews and publicity to full effect.  IBM even spent 50 million dollars in October of 1988 to buy a license to use the NeXTStep operating system as the operating system for some of its PCs, potentially replacing DOS, although it never actually used it.

As a side note, for all of NeXTSTEP OS’s unfinished state in 1988, it was probably considerably better than IBM’s own OS/2 operating system, which had been updated with a marginal graphical user interface that same month.

Moving on.

One of the indirect ways that NeXT left a mark was in Wolfenstein 3D. If you are playing the original 1992 version, in Episode 2 Floor 8 of  Operation: Eisenfaust, there is a maze called the Aardwolf maze. Solving the maze brings you to a sign that says “Call Apogee Say Aardwolf”. The idea was that solving the maze would be extremely difficult, and the first person to solve it could call Apogee, say what the sign said, and win a copy of every Apogee game for the rest of his life.

This contest was quickly dropped due to the realization that new, easily available software tools would let people just disassemble the game files and find the graphic without ever solving the maze.

But why was “Aardwolf” chosen as the word? The Wolfenstein 3D wiki says that it was “presumably chosen for obscurity: an aardwolf is a small African mammal.²” In actuality, according to Game Engine Black Book: Wolfenstein 3D, the aardwolf was ID’s mascot and John Carmack, one of the cofounders of ID Software and the programmer who built the Wolfenstein engine, is quoted as saying that “aardwolf” was chosen because “it was the first image file in the NeXT dictionary on all of our NeXTStations.³” 

NeXT’s approach to software development and the user interface was so far ahead of its time that the best comparison would have to be the equally revolutionary Amiga line of computers. In an interesting contrast, while the Amiga line of computers had poor marketing and great specifications with strong practical uses, NeXT machines consistently had phenomenal marketing and great specifications paired with crippling drawbacks. One wonders what could have happened if Steve Jobs had been in charge of the Amiga team.

In the end NeXT failed as a business, its computers were only bought in small quantities and its giant automated factory, capable of making thousands of machines a month, frequently was manufacturing fewer than 100. Although its status as a revolutionary system with a strong cool factor was undisputed, few people bought the computers or used the software.

So what happened? Why can’t we go down to Best Buy and pick up a brand new NeXT laptop or desktop, take it home and hop online or play the latest games? Well, the answer is that you actually sort of can as the NeXTStep operating system is still somewhat with us today, it just goes by the name Mac OS X.

In the late 1990s it eventually became the basis for a complete ground up redo of the Macintosh operating system that became known as OSX and even today, OSX applications like TextEdit, Mail, and Chess are all direct descendants of NeXT applications.

But the path that led to this outcome is pretty wild, so let’s go back to the high point of Steve Jobs 1980s career, the launch of the Macintosh and take a look at how we got from there to here.

In January of 1984, Steve Jobs had led the Macintosh team to an initially successful launch. The problem was that the Macintosh in its original incarnation was a very limited computer, with a miniscule amount of memory, a high price tag, and almost no applications. Even basic word processing was challenging on its tiny 128k of RAM (even less once the RAM needed for the operating system was subtracted) which only allowed for a handful of pages of writing before the computer ran out of memory.

Regarding its chances in the lucrative business market, as Robert Cringely puts it in Accidental Empires, “Not even the enthusiasm of Steve Jobs could make the world see a 128k Mac with a floppy disk drive, two applications, and a dot matrix printer as a viable business computer system.⁴” 

After an initial burst to early adopters, sales fell to a crawl, coming in well below Jobs’ predictions. Far from gaining a massive new source of revenue, Apple was still mostly relying on the aging Apple II, initially released in 1977, for the bulk of its revenue. The Apple II’s direct successor, the Apple III, had failed in the market in 1980 and the drain of talent and burnout that the Macintosh project and its unsuccessful older sister the Lisa had caused had left the company with no clear successor to its rapidly aging Apple II.

By spring of 1985, Steve Jobs was no longer viewed as Apple’s Wonder Boy and with sales continuing to lag, the Apple board of directors, led by the man Jobs’ had hand picked from Pepsi, John Sculley, were at odds with Steve. In late spring of 1985, he lost a power struggle and was stripped of all operational responsibilities and demoted to the essentially figurehead position of chairman. 

Shortly thereafter, Jobs resigned from Apple, saying in a letter “The company’s recent reorganization left me with no work to do and no access even to regular management reports. I am but thirty and want still to contribute and achieve” and left Apple, selling all but a single one of his shares of Apple stock at 18 dollars a share and banking 100 million dollars. He then used seven million dollars of that money to found NeXT. He also used five million of those dollars to buy a tiny company called Pixar from George Lucas, but that's a story for another time.

Taking with him some key members of the Macintosh team, he announced that he was founding a new computer company, NeXT. This was to be no ordinary company, as Jobs was determined to make NeXT the third standard in computing, joining the IBM PC and Apple. He had very personal reasons for founding NeXT as well. One of NeXT’s publicists, Andrea Cunningham wrote, “Part of Steve wanted to prove to others and to himself that Apple wasn’t just luck.⁵”

Jobs felt betrayed by what had happened at Apple and his removal from the levers of power and was determined to ensure that NeXT was run exactly as he felt it should be, with him in complete control and answerable to nobody. His attitude can perhaps best be exemplified by an interview he gave Business Week in October of 1985 where he was quoted as saying, “I’m not going to make the same mistakes twice.⁶” NeXT was to be Jobs personal company, with his hand controlling and guiding every decision, from the design of the computers and operating system, to the design and flow of the assembly line that would build the computers.

Because Jobs had no intention of starting his new company inside a garage like Apple had been, NeXT was initially started out of his mansion, before moving to expensive office space in Palo Alto. Jobs’ initial vision for the machine came from a specification floating around the academic community for a machine called a “3M” computer, or a machine with a megapixel display, a megabyte of memory, and capable of performing a million instructions per second.

These theoretical machines would occupy a place somewhere between the refrigerator sized minicomputers that were very prevalent in higher education laboratories, and the relatively low end PCs that were sprouting up everywhere else. 

But designing a computer based on a theoretical set of specifications is one thing, making it attractive in price enough to be purchased upon release is an entirely different thing. Additionally, the mythical 3M machine was not necessarily the type of machine that would find wide usage outside of a few specialized ones, as many students and teachers were already using contemporary PCs and Macintoshes that were attractively priced for a student’s budget, a sweet spot that had been determined to be somewhere around a thousand dollars. 

Job’s originally stated goal of a final price of 3000 dollars was pushing things quite a bit as it was, if he couldn’t keep it somewhere around that price for at least a base configuration, NeXT was going to be in a very difficult spot. 

In spite of the enormous pressure to produce a computer and operating system that could be sold at a reasonable price, you would never know it from how NeXT was run. Unlike a typical startup, Jobs acted as if NeXT was already a well established and financially successful company, spending lavishly on amenities and perks. He even hired legendary designer Paul Rand, the creator of the IBM, UPS, and ABC logos to do NeXT’s own logo.

Rand accepted on three conditions:  he would only turn in one design, he would do no revisions, and he would be paid 100,000 dollars up front. These conditions were cheerfully accepted by Jobs, and he was so happy with the sleek logo that Rand turned in that he actually hugged the designer. Rand also created a pamphlet on what the logo meant and why he had designed it in the way he had. According to Rand, the lowercase “e” could mean “education, excellence, expertise, exceptional, excitement, e= mc2.”

Jobs was also determined to make NeXT the kind of mecca that would attract the best and brightest, the top talent who would be eager to work for a company that valued them and gave perks that were lavish even by Silicon Valley standards of the time. Some of the benefits are enumerated in Randall Stross’s interesting book called Steve Jobs and the NeXT Big Thing. He writes, “NeXT employees were...provided health club memberships, counseling services, emergency personal loans up to $5,000...housing assistance in the form of a low-interest loan, up to fifty percent of the employee’s annual salary.⁷” 

Initially, all employee compensation was very open and flat.  NeXT started out with only two salary tiers, senior staff made 75,000 a year and every other employee made 50,000 a year. This quickly went away however, in favor of a far more typical, and wider, distribution of salaries and stock options. However, all salary and stock grants information remained publicly available to any NeXT employee who wished to publicly look at it in the human resources office. 

But to get these perks required passing a brutally difficult interview process, similar to the one the Xerox PARC and Jobs’ Apple team prior had been famous for. Candidates were peppered with unpredictable questions across multiple interviews, culminating with a final interview with Jobs that could break a candidate who had thus far come through the gauntlet without issue. In Jobs’ eyes, only the best people would be able to pass this rigorous screening process.

As the team came together, Jobs was also working on putting together the type of organization that could handle the massive goals and growth that he anticipated coming to NeXT in the future. As Stross puts it, “Nothing less than a billion-dollar company would suffice. Jobs...did not pause for intermediate goals; he immediately set about building an organization suitable for the billion-dollar company.⁸”

So with a new trendy logo, lavish facilities, a highly motivated and well paid team, and having survived a lawsuit filed by Apple against NeXT Steve Jobs was ready to start fulfilling his ambitious goals for his new company. And what were these ambitions? It took a couple years before NeXT finally articulated a mission statement, but this was merely putting onto paper the philosophy and goals that Jobs had been pursuing since the start.

 In a four points of trendy lowercase lettering, NeXT declared that its mission was: 

• to build computers that change the world and that our friends can afford to buy

• to build a great company, so exciting and fulfilling that we can’t wait to come to work in the morning

• to treat our customers so well that they will love our products and our company

• to lead the industry with vision and innovation⁹

Work finally began in 1985, similar to the way the Macintosh had been designed, NeXT was going to produce both the hardware and the operating system for its computers. The first NeXT computer would simply be called the NeXT Computer, and it would run NeXT’s custom operating system, NeXTSTEP OS.

 In the words of former NeXT executive George Cummings, Steve Jobs wanted to build a system that through hardware and software delivered “...total interconnectivity via networking, with the power and performance to drive it all. Provide a new multi-tasking operating system, but make it user-friendly enough so that everyone could use it effectively. Make the user interface world-class, with details never before provided - even if that meant grey-scale only to start. Provide a multi-media email system bundled along with the first digital library. Why not introduce a radical storage medium that extended the user’s reach from 1.44 MB on a single floppy to 256 MB on one device? Add a special purpose computer chip to process sound and music, as well as another special chip to support advanced mathematical routines. Provide a system that could easily solve problems the user didn’t even know they had!¹⁰”

All of this would be achieved using the peak of 1980s technology, delivering an experience that would firmly cement NeXT as the first and greatest entry into what Jobs called the fourth wave of computing. Very much a bold and ambitious vision, but one that Jobs was confident was achievable. 

The problem was that Jobs’ drive for a perfect realization of his vision resulted in endless delays. NeXT’s first computer, the retroactively named NeXT Cube, finally hit the market in 1989, four years after the company’s formation and two years after Job’s original planned release date of summer of 1987.

There was some precedent for a delay this long from Jobs’ own recent past as the Macintosh had also taken longer to develop than Jobs originally expected, losing him a 5000 dollar bet he had made with the head of the rival Apple Lisa project, John Couch. As Apple Confidential 2.0 puts it, “Like the Macintosh before it, the NeXT Computer took longer than expected to develop, was more expensive than originally hoped for, used a nonstandard disk drive, and did not have a color display.¹¹” And in spite of formally being released in 1989, NeXT only moved about a thousand systems in total that year, almost entirely to academia.

An interesting exercise in Jobs’ refusal to accept any compromises to his vision, the NeXT Cube was a slick looking one foot by one foot magnesium cube, packed full of interesting technology that made for excellent press notes and a nice lengthy feature list. Unfortunately it came with a price tag to match.

At launch, the NeXT Cube was built around a 25 megahertz Motorola 68030 processor, a 68882 math coprocessor, also made by Motorola. It could be configured with 8 to 64 megabytes of RAM and could be outfitted with a 40, 330, or 660 megabyte hard drive. It even had a powerful Motorola 56001 DSP chip for music and sound processing, something no other personal computer had at the time.  

Instead of a floppy drive, it had magneto-optical removable disks made by Canon, each of which held a whopping 256 megabytes of data, extremely large when compared with the ubiquitous floppy disks that only held 1.44 megabytes. Each disk would be priced at 50 dollars, actually well below Canon’s cost. Due to the relative expense of hard drives, the 50 dollar price point of the cartridges meant that for many, they would be used in place of an actual hard drive. It also had a one megapixel grayscale 17” monitor with a resolution of 1120 by 832 pixels. 

But there were enormous drawbacks to some of the decisions that had been made by Jobs in his quest to design the perfect computer, five years ahead of anybody else. First of all, only limited quantities of computers were available in 1989, and they were targeted solely at universities. Due to Jobs decision to focus solely on academia, NeXT had no retail presence at all.

Secondly, the starting price for a base configuration had more than doubled Jobs’ original goal of 3000 dollars, coming in at a whopping 6500 dollars. And that amount could easily go up quite a bit if you wanted more RAM or a bigger hard drive. This was far more than what the average college student was willing to pay for a machine with almost no software and a black and white display, no matter how powerful the machine was and how crisp the display.

Thirdly, these machines were only running beta versions of NeXTSTEP OS as the final version of the operating system still had yet to be completed, making it an even harder sell. End users typically do not react well to a computer with almost no software, that is twice as expensive as other offerings, and that comes with a buggy, incomplete operating system.

After limping through 1989 and into 1990, NeXT finally started pushing their systems into retail distribution, the fruit of a 1989 deal struck with a former Compaq reseller, Businessland. Businessland seemed an excellent choice as a retail partner, having recently passed the billion dollar sales mark in 1988.

They were certainly large enough to market NeXT systems to a far wider audience than the limited range of academia that had previously been NeXT’s focus for all of 1989. Businessland’s CEO, David Norman, was so taken in by the picture that Jobs painted of the vast amount of NeXT computers that would fly off Businessland’s shelves to eager customers that at the March 1989 press conference where the partnership was announced, he stated “NeXT revenues will be as much over the next twelve months as Compaq was over the last twelve months¹²”, which would equate to over 150 million dollars of NeXT systems.

1990 also marked the release of the second generation of NeXT computers.  First was a revised NeXT first generation system, now officially called the NeXTCube,  and a new system called the NeXTSTATION which replaced the cube form factor of the original computer with more of a pizza box look and had a 25 mhz Motorola 68040 processor.

Hard drive options ranged from 105 megabytes all the way up to 4 gigabytes. Additionally, the magneto-optical drive had finally been replaced by a 2.88 mb floppy drive, double the size of normal floppy drives of the day.

The new operating system, NeXTSTEP, was designed “to make life as easy for software developers as the Macintosh had for computer users.¹³” Unfortunately it was way behind schedule with its first full release not occurring until September 18th, 1989. And even that release was still full of bugs, as recently as April of 1989 one of the few outside programmers working on developing applications for the nascent OS had stated “today, it crashes once every thirty minutes; two weeks ago, it crashed every thirty seconds; that’s a logarithmic pace of improvement¹⁴”, which is putting a brave face on a very real problem. If software developers cannot develop applications on final software, then their releases will tend to be buggy themselves. 

Without programs, computers are nothing more than paperweights and doorstops, and NeXT was about to run headfirst into this problem in a big way as they started attempting to move systems through Businessland.

The main problem NeXT quickly ran into was the typical chicken-and-egg problem that new computer systems face, the need to get a large enough installed base of users so that software developers would be interested in writing programs for their system, which would in turn spur the purchase of more NeXT systems. And the biggest detriment to that happening was the incredibly high price of a NeXT system, which actually started at multiple times what the Macintosh had cost upon release. 

In the words of one author: “NeXSTEP ran on the NeXT computer, Steve Job’s incredibly cool black-cube desktop PC that cost 10,000.00 per unit. At that price, no one actually intended to buy a NeXT box, but everyone hoped someone would buy one for them so they could put it on their desk and look as cool as Steve Jobs.¹⁵”

It also didn’t help that Microsoft would have no part of developing software for NeXT, with Bill Gates being quoted in Infoworld in 1988 as saying “Develop for it? I’ll piss on it.” and somewhat more professionally stating in 1989 that Microsoft was “in the business of writing for machines that sell in the millions, so this is not for us.¹⁶”

To be successful, NeXT needed to find some sort of niche where its unique abilities could be used to differentiate itself. The Macintosh had found a strong market in the desktop publishing arena with Quark and Illustrator, the Amiga was quickly making a name for itself in low cost video and graphics production with the Video Toaster and Deluxe Paint, even the Atari ST had found a profitable niche with music production, and Windows 3.1 was taking the PC market by storm by being an affordable way of getting a graphical user interface that worked well enough to get people away from the DOS prompt.

Where could NeXT find a niche? The black and white screen paired with the high price tag meant that graphics, gaming, video production, and desktop publishing were pretty much out given the more affordable existing alternatives. Trying to find an answer to that question would occupy NeXT for the remainder of its existence. 

Challenges were present from the start as in spite of everything that Steve Jobs and his talented team could do, the challenges faced in not only designing hardware to meet Jobs’ ambitious goals for the hardware and software, but also meeting his other requirements such as arranging the NeXT factory to produce computers in the most aesthetically pleasing fashion stretched development out enormously. NeXT not only took a total of three years to bring to market its first generation computer but also went a whopping seven years without turning a profit. 

NeXT was unfocused and frequently contradictory as a company, as Jobs first took it one way, then another. In light of this, it comes as no surprise that according to NeXT veteran executive George Cummings, “Until July 1991, although we did have budgets and standard business management metrics, NeXT didn’t even have a real operating plan.¹⁷”

An operating plan is critical to aligning a company and giving it direction. The definition that Cummings provides in his excellent book on NeXT cannot be improved on, “An operating plan is the business bible that insures all parts of the company are pointed to achieving a goal or series of objectives.” Lacking an operating plan all but guaranteed that NeXT would lack focus.

NeXT continued pushing its hardware and software as the 90s progressed, the new hardware systems introduced in 1990 were upgraded in 1992 to what were called “Turbo” variants, with a processor increased to a 33 megahertz 68040 and possible RAM expansions up to 128 megabytes, which was an enormous amount of RAM in the early 1990s. NeXT’s engineers’ use of the 68040 in the Turbo variants also came a year before Apple was able to incorporate these new fast chips into competing systems. With prices also being dropped, the price to power ratio of NeXT systems was looking better than ever.

By 1992 NeXTStep OS was finally a fully functioning and stable operating system that fulfilled all of the promises Jobs had made about it. Its object oriented nature made it easy to develop software for, it boasted rock solid Unix stability while still being incredibly easy to use and it still boasted features well in excess of either the Macintosh or Windows operating systems. NeXT themselves made full use of their system’s advanced features, with the entire company having its own internal network in place by 1991, with all NeXT systems linked together no matter where they were in the world.

Any file on any NeXT computer, unless it was protected for security reasons, could be accessed from any other computer anywhere in the world. This was heady stuff in the pre-World Wide Web days. George Cummings states that most internal emails no longer even needed to have attachments as all that was needed was to send a link with the email that pointed to whichever computer the file was located on¹⁸.

However NeXT had still been unable to find a niche where its unique features fit well. The closest thing it had was the fact that software development was so easy on it thanks to its advanced operating system and object oriented design, some game companies used it for game development, such as ID as was previously mentioned. But that was a very small market as most companies saw no need to spend extra money for expensive NeXT systems when existing Windows and DOS systems were so much cheaper and were the target platform for almost all computer games anyhow.

But by 1993, Jobs finally had to face up to the facts. In spite of the excellent software and high performance hardware, NeXT was losing money hand over fist, and was not sustainable in its current form. With the hardware business such an expensive albatross around NeXT’s neck and endless quarters with no profit, the company was sinking fast. Investors such as Ross Perot had already bailed out and remaining major investor Canon, who had purchased a 16.67 percent share of NeXT in 1989 for a whopping 100 million dollars, was refusing to throw more good money after bad. 

But Jobs wasn't willing to throw in the towel just yet, and in 1993 he made drastic changes to NeXT’s business model, in a final attempt to find a path to profit and a stable business. We will take a look at the outcome of these changes, as well as what eventually happened with NeXT and Apple in the second part of this series.

1. "NeXT Axes Hardware," San Jose Mercury News, 10 February 1993

2. https://wolfenstein.fandom.com/wiki/AARDWOLF

3. Game Engine Black Book: Wolfenstein 3D, Page 166

4. Cringely, Robert, Accidental Empires, Page 217

5. Blumenthal, Karen, Steve Jobs The Man Who Thought Different, Page 137

6. "Valley Squalls: Apple Drags Jobs Into Court", Businessweek, 7 October 1986, Page 36

7. Stross, Randall, Steve Jobs and the Next Big Thing, page 81

8. Stross, Randall, Steve Jobs and the Next Big Thing, page 84

9. Stross, Randall, Steve Jobs and the Next Big Thing, page 78

10. Cummings, George T, iFailed: The true, inside story of NeXT, Page 122

11. Linzmayer, Owen, Apple Confidential 2.0, Page 209

12. Stross, Randall, Steve Jobs and the NeXT Big Thing, Page 209

13. Stross, Randall, Steve Jobs and the NeXT Big Thing, Page 177

14. Stross, Randall, Steve Jobs and the NeXT Big Thing, Page 216

15. Chapman, Merrill, In Search of Stupidity, Page 102

16. Stross, Randall, Steve Jobs and the NeXT Big Thing, Page 233

17. Cummings, George T, iFailed: The true, inside story of NeXT, Page 200

18. Cummings, George T iFailed: The true, inside story of NeXT, Page 276 "The standard of sending email with 'attachments' had, for the most part, been rendered obsolete inside the company"