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Former CEO John Sculley: Apple must adapt or die

Prices 'dramatically different' in emerging markets

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John Sculley, the former PepsiCo president who served as CEO of Apple during most of the 1980s and early 1990s, says that while Apple is "an extraordinary company," it has not done enough to adapt its products to suit emerging markets.

In a video interview with Bloomberg on Monday, Scully – who is perhaps best known for a 1985 coup in which he ousted Apple cofounder Steve Jobs – warned that Cupertino's growth in developed markets such as the US and Europe is bound to slow, as those markets are already growing saturated.

Emerging markets will be the key to future success, Sculley says, but there's no way Apple will be able to gain a foothold in the developing world as long as its products are priced like luxury items.

"Apple's a premium-priced story," Sculley said. "And now it needs to adapt to where the growth is, which is the emerging markets. And the price points are going to be dramatically different in the emerging markets."

Sculley's comments echo recent rumors that claim Apple is in fact already working on a redesigned iPhone that will carry a lower price tag, aimed specifically at emerging markets such as China and India.

In typical form, Apple has refused to comment on the matter. It even went as far as to ask a Chinese newspaper to amend a recent story that implied Apple marketing head Phil Schiller had denied the rumors.

According to Sculley, however, there's no question that Apple will need to lower its prices. But to do so, he said, it will need to make big changes.

"The big shift as we go from $500 smartphones to even as low – for some companies – as $100 for a smartphone, you've got to dramatically rethink the supply chain and how you can build these products and do it profitably," Sculley said.

Sculley added that he believed current Apple CEO Tim Cook was more than up to the task, calling Cook "the world's greatest expert on supply chain." Sculley noted that under Cook, Apple has already increased the pace of its new product announcements from once a year to twice a year, which he called "a massive undertaking."

But Sculley said the other big challenge facing Apple now is competition, something to which Apple has not always been accustomed. The most prominent challenger is, of course, Samsung, and Sculley said he expects that rivalry to continue into the foreseeable future.

"Apple and Samsung are selling in such high volumes, and they're vertically integrated more and more, that it's very, very hard for anyone to compete against Apple and Samsung in the high-volume part of the smartphone or tablet market," Sculley said.

Sculley spoke to Bloomberg in his role as cofounder and managing partner of Pivot AC, an acquisition company that specializes in technology firms. Over the past two decades, he has also cofounded several companies and has sat on numerous corporate boards.

He remains best known, however, for his ten-year stint as boss of Apple. Sculley joined the company in 1983, after Jobs famously asked him, "Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?" By 1987, Jobs was out and Sculley was reportedly the highest-paid exec in Silicon Valley, pulling down a stunning (for the time) $2.2m per year.

Sculley's reign over the fruity firm was a tumultuous one, however. He was widely criticized for lacking the technical background to understand what made Apple's products tick, and he was ultimately forced out by Apple's board in 1994, after a series of market missteps.

Owing to his poor performance at Apple, Condé Nast Portfolio and Business Insider have both included Sculley on their lists of the worst American CEOs of all time. ®

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