I didn't go to this one, but I was at the 96 WWDC. I remember all the shocked faces in the audience when Apple couldn't demo all the System 8 features in one build, and the weakened memory protection to be almost useless. There was a realisation that Apple's software story was bogus and they couldn't build a modern OS.

The purchase of Next was an acknowledgment of this. It's amazing how it turned out.