Five Reasons For Apple iPod Guru's Big Payout12:39 PM EST Thu. Nov. 06, 2008
Apple Senior Vice President Tony Fadell, the father of the iPod and one of the driving forces behind the iPhone, could receive a payout valued at nearly $9 million (a $300,000 salary and 77,500 shares valued at $8.4 million) for acting as a senior advisor to Apple CEO Steve Jobs.
The payout is part of a complicated settlement agreement that prevents Fadell from suing Apple or soliciting Apple employees for one year after he leaves the company.
The agreement, which was disclosed in an Apple Securities and Exchange Commission filing, ties Fadell to Apple until March 24, 2010.
Here are five reasons Apple agreed to the big payout to Fadell.
1. It Prevents Fadell From Bringing An iPod Killer To Market In Near Term
Fadell, no doubt, has dozens of ideas on how to bring a next generation iPod to market. Steve Jobs has finally learned the lesson hammered home by Don Corleone in The Godfather: keep your friends close and your enemies closer. By the way, we'd be living in a different computing world if Jobs had learned that back at the dawn of the PC age and had outsmarted Microsoft co-founder and Chairman Bill Gates.
Given Fadell's intellectual capital, you have to wonder why he settled for a paltry potential $9 million. That $9 million, by the way, probably does not preclude him from coming up with new patents related to technology that has nothing to do with the current state-of-the-art iPod. Let your imagination run wild and just think what Fadell could come up with that he would own lock, stock and two smoking barrels pointed at Apple beyond 2010.
2. It Prevents A Messy, Drawn Out, Bitter Legal Battle
There is clearly more to Fadell's exit than meets the eye. There's a reason they call it a settlement -- as in dispute, hard feelings, pay me up to shut me up. Remember the settlement agreement includes what Apple calls, "Fadell's release of claims against the company." That means Fadell gets the payout for giving up his right to engage in a messy, drawn out legal battle with Apple. That messy legal battle could include a lot of dirt about the inner workings of Apple and its messianic co-founder and CEO Jobs. No one has really gotten to the heart of the matter of what exactly went down at the company that caused both Fadell and his wife, Apple's senior vice president for human resources, Danielle Lambert, to leave the company, both at the same time. My guess is that it involves Jobs and a disagreement over future direction of the iPod and the iPhone. It isn't a long walk to think that the strategic differences got personal with Jobs taking offense. Remember we're talking about Steve Jobs, the king of beating up any and all comers that get between him and his vision of what Apple can and should be to everyone on this planet.
It's worth noting that the Fadell departure comes with Apple attempting to bring on board IBM PowerPC technical whiz Mark Papermaster as Fadell's replacement. Are you telling me that Jobs' big time wooing of Papermaster came without any kind of disagreement between him and Fadell? Not likely.
Bringing Papermaster on board was a big fat slap in the face to Fadell. Don't tell me there's not something going down between Jobs and Fadell. Pushing Fadell out the door makes room for Papermaster. The only trouble is, IBM has filed a lawsuit against Papermaster to prevent him from defecting to Apple. Think about it. Does Jobs want another lawsuit on his hands from Fadell? This settlement assures Jobs has only one lawsuit to handle as he navigates next generation product development with the Apple team.
3. The Payout Keeps Fadell From Poaching Apple Developers
The most important part of the pact between Fadell and the company may be the stipulation that he can not solicit Apple employees for one year following his termination. By my count, that means Fadell can't go after any of his loyal development team until March 24, 2011. That's no small matter if Fadell has plans to bring an iPod or iPhone killer to the market once his "settlement" agreement ends. The big payout guarantees Apple does not have to worry about losing high-priced development talent. Good move Apple. You just protected your flank against what could every well have ended up in a mass developer exodus.
4. It Keeps Fadell Pushing Big Product Development Advances At Apple
Hard feelings or no hard feelings between Fadell and Jobs, one thing is clear: if Apple does well, Fadell does well. Fadell was granted 77,500 restricted stock units that only vest on March 24, 2010. That means for the next 17 months Fadell has a vested interest in seeing Apple shares rise. Nothing causes Apple shares to rise more than cool, new consumer electronics products. That is Fadell's specialty. No matter what the real story is behind the Fadell departure, Jobs would be wise to get his feedback on products that are set to hit the MacWorld stage in 2009 and 2010.
5. It Keeps Steve Jobs At The Center Of The Apple Universe
Don't think Jobs doesn't smart a little when he sees Fadell being touted in the press as the iPod Genius. Jobs believes that it was his vision that delivered Apple into the land of iTunes, not Fadell's. The problem is that just isn't true. Remember Fadell had the vision for a hard disk-based digital music player in the the 90s. He also holds a good number of patents. The point is that Fadell brought the iPod idea to Apple and made it happen -- albeit with Jobs. With Fadell out of the development trenches, Jobs is free to run wild and come up with his next big CE product -- whatever that may be. It makes Jobs the Big Man on the Development Campus (BMODC).
Jobs may be the undisputed King of Apple, but he was not the undisputed king of the Apple developers. That was Fadell's province. With Fadell out of the day-to-day picture, Jobs has no one he has to battle with to get his -- and only his -- products designed and engineered just the way he wants them. That may be the best thing that ever happened to Apple or the worst. Only time will tell.