Apple Computer had always meant something special to Anderson and his wife. Judging from his appearance, you wouldn’t suspect that Fred Anderson was what people now would call an Apple “fanboy.” He looked the part of a wonky, corporate CFO: tall, even-tempered, well coiffed, and partial to dress slacks and crisply pressed, monogrammed shirts or, when slumming it, to khakis and a polo shirt. But both he and his wife were avid Macintosh users and had always felt a special, almost romantic affection for the company since its very founding. Fred originally hailed from Southern California, and Marilyn had graduated from Stanford University, smack-dab in the middle of Silicon Valley. They had always hankered to move back to the West Coast.

So Anderson listened to what Apple had to say. As with all things Apple at the time, his recruitment had its own drama. Company officials didn’t bother to tell Anderson that, even as they were pursuing him, the company was secretly trying to hammer out a merger with Sun Microsystems. Anderson probably should have sensed that something was not right when one of his early phone conversations with Spindler, a gruff German nicknamed “the Diesel,” came while the executive was convalescing in the hospital for a health condition brought on by extreme stress. Spindler would be fired in the weeks ahead, after which Anderson found himself being courted as the first big hire of Apple’s next CEO, Gil Amelio, a former semiconductor executive who had been a member of the Apple board of directors for less than a year.

Ultimately, it wasn’t the sales pitch from Spindler or Amelio that swayed him. It was more as if Anderson sold himself on the Apple job, using the same logic Steve Jobs had used on John Sculley when wooing him with that famous taunt, “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?” Anderson liked the idea that he might help save a great American success story from oblivion. “There was a part of me that said, ‘You know, I’d hate to see that company die,’ ” he remembers. “That’s reason number one. I knew how passionate my wife and I were about their products, and I believed that there was this loyal, passionate customer base that didn’t want Apple to die. What I hoped was that it also translated into a passionate employee base that would fight to save the company, too. But to be honest, I didn’t know that for sure. When I told my wife I’d like to take the Apple job, she looked at me and said, ‘Are you crazy?! You already have a fantastic job.’ ”

Apple’s troubles were deep indeed and had worsened over many years. John Sculley’s “market-driven” strategy failed to produce any significant technological breakthroughs. Apple’s efforts to do so were only made worse by the CEO’s desire to prove himself to be as much of an innovator as Steve. Most costly of all his misguided efforts was his attempt to carve out a brand-new category of personal computing with a handheld device called the Newton, which was met with widespread ridicule after its highly touted handwriting recognition feature turned out to be prone to absurd malapropisms. It was an expensive failure, made worse by the fact that Sculley decided to open a bunch of Apple retail stores to sell the doomed new device. Sculley’s nurturing of the Macintosh did provide some financial cover for the company. But Apple’s share of the PC market eroded as Windows steadily improved.

The Apple board grew disenchanted with Sculley’s misfires and abruptly dismissed him in 1993. They replaced him with Spindler, the German sales executive whose idea of a strategy was for Apple to ape Bill Gates and license the Macintosh operating system to other manufacturers in a belated attempt to fend off Windows. But this strategy too failed, and the availability of cheap clones tarnished Apple’s mystique as a maker of premium hardware. Spindler, who preserved Sculley’s old “market-driven” approach to product development, also allowed Apple’s product line to swell uncontrollably, as engineers experimented with different bells and whistles in order to target potential markets that they thought warranted entirely new and distinct Macintosh models.

But Apple’s biggest problem was Microsoft. Bill Gates’s company had become a juggernaut, and with the release of Microsoft’s Windows 95 it formally seized the initiative for driving PC innovation from Apple. It even outdid Apple in over-the-top marketing. Gates introduced this landmark version of his industry-standard operating system with a tightly orchestrated, worldwide rollout emceed by Jay Leno from a big white circus tent on the Microsoft campus and beamed by satellite to gatherings in forty-three cities around the world. The fanfare prompted tens of millions of PC users to line up for hours or even days in order to be among the first to be able to buy the software and install it on their machines when it went on sale at midnight on August 24. The Rolling Stones’ “Start Me Up” was the official promotional anthem.

Apple’s own attempts over the previous eight years to modernize the architecture of its computer operating system had failed again and again. Projects with code names like Pink, Gershwin, and Copland fell by the wayside, and a couple of awkward joint ventures also went nowhere, including one with IBM curiously named Patriot Partners. The problem was that there were so many things Windows 95 could do that Apple’s aging Macintosh System 7 simply couldn’t begin to match. The list included nerdy-sounding features like preemptive multitasking, which allowed several applications to operate simultaneously without interfering with one another, automatic document saving, and most important, much greater speed, stability, and reliability. Microsoft went so far as to hire the graphic designer for the original Macintosh onscreen icons to spiff up Windows’ look and feel. Windows 95 also introduced the “Start” button, which made it much easier for users to deduce how to launch programs and otherwise manage files in a PC. Overnight, Apple’s sales tanked, and inventories of unsold Apple machines and unused components began to pile up. Worse, Apple seemed to have instantly and visibly lost whatever mojo it was that had made it seem cool for nearly two decades. After Windows 95, Apple wouldn’t post consecutive years of sales growth again until 2002.

By the time Spindler was bounced in the spring of 1996 and replaced by Amelio, Apple had become an undisciplined and unmitigated mess in just about every way imaginable, with sales shriveling at a truly alarming rate. No longer a growth company, the cash-strapped outfit was beginning to hemorrhage money. It had far more manufacturing capacity, inventory, and, of course, employees than it needed or could afford. There were no promising new products in the pipeline, much less over the horizon. No wonder Spindler had been so stressed out, and no wonder he was fired. No wonder Amelio and longtime Apple director Mike Markkula immediately redoubled their efforts to find a buyer, like Sun Microsystems or the old AT&T or even IBM. No wonder they had to consider filing for bankruptcy. No wonder they needed a great CFO.

Anderson gave his notice to ADP in March, and spent a month consulting for Apple before he and his wife moved west. He knew the situation was getting desperate, but it wasn’t until he arrived at corporate headquarters that he began to get a sense of just how bad things were in Cupertino. Nothing in his career had prepared him for anything quite like this. ADP had posted thirty-five consecutive years of double-digit earnings. His employer before that, a minicomputer maker called MAI Basic Four, had been through some rough patches, but nothing comparable to Apple’s quagmire. In the previous six months, Apple had swooned from being marginally profitable to posting a loss of nearly three-quarters of a billion dollars in the first calendar quarter of 1996. The company soon would be technically in default on hundreds of millions of dollars of bank loans. On his very first day at Apple, Anderson was shocked to learn that Amelio had already asked bankruptcy counsel to stand by. What Fortune 500 CFO in his right mind would want to step into this mess?