Content

CH.1

1976-1981

Steven Wozniak and Steven Jobs had been friends in high school. They had both been interested in electronics, and both had been perceived as outsiders. They kept in touch after graduation, and both ended up dropping out of school and getting jobs working for companies in Silicon Valley. (Woz for Hewlett-Packard, Jobs for Atari)

Wozniak had been dabbling in computer-design for some time when, in 1976, he designed what would become the Apple I. Jobs, who had an eye for the future, insisted that he and Wozniak try to sell the machine, and on April 1, 1976, Apple Computer was born.

Hobbyists did not take the Apple I very seriously, and Apple did not begin to take off until 1977, when theApple II debuted at a local computer trade show. The first personal computer to come in a plastic case and include color graphics, the Apple II was an impressive machine. Orders for Apple machines were multiplied by several times after its introduction. And with the introduction in early '78 of the Apple Disk II, the most inexpensive, easy to use floppy drive ever (at the time), Apple sales further increased.

With the increase in sales, however, came an increase in company size, and by 1980, when the Apple III was released, Apple had several thousand employees, and was beginning to sell computers abroad. Apple had taken on a number of more experienced mid-level managers and, more importantly, several new investors, who opted to take seats on the board of directors. Older, more conservative men, the new directors made sure that Apple became a "real company," much to the dismay of many of its original employees.

In 1981, things got a bit more difficult. A saturated market made it more difficult to sell computers, and in February. Apple was forced to lay off 40 employees. Wozniak was injured in a plane crash. He took a leave of absence and returned only briefly. Jobs became chairman of Apple computer in March.

CH.2

1981-1983

Following the historic visit to Xerox PARC in 1979, Jobs and several other engineers began to develop the Lisa, which would redefine personal computing. Jobs, however, proved to be a poor project manager, and was taken off the Lisa by Mike Markkula, then president of Apple, and one of the major stockholders. Jobs, who owned only 11% of Apple, decided to take over someone else's project, and began working with the Macintosh--which had started as a $500 personal computer. Jobs made sure it was much more.

In 1981, IBM released its first PC. With the power of Big Blue behind it, the PC quickly began to dominate the playing field. Jobs' team would have to work very quickly if they hoped to compete with IBM in the personal computer market. Jobs began to realize that Apple would have to become a "grown-up" company, and realized he was not the man for the job.

In early 1983, Jobs began to court John Sculley, then president of Pepsi-Cola. In April, he was successful, and Sculley became president and CEO of Apple. Jobs believed Sculley would help Apple "grow up," but had no idea how right he would turn out to be. Eventually, it cost him his job.

CH.3

1983-1985

Although a successful businessman, it soon became clear that Sculley did not know much about the computer industry. He and Jobs were at odds almost immediately. As the announcement of the Macintosh drew closer, Jobs went into hyperdrive. He worked hard to get developers to write programs for the upcoming machine--Jobs had realized that the Mac would ultimately be made or broken by the software industry.

On January 22nd, 1984, during the third quarter of the Super Bowl, Apple aired its infamous 60 second commercial (13.4 MB) introducing the Macintosh. Directed by Ridley Scott, the Orwellian scene depicted the IBM world being shattered by a new machine. Initially, the Mac sold very well, but by Christmas of 1984, people were becoming fed up with its small amount of RAM, and lack of hard drive connectivity.

t was around the beginning of 1985 that Jobs and Sculley began to argue. Sculley believed Jobs was dangerous and out of control; Jobs believed that Sculley knew nothing about the computer industry, and was making a poor effort to learn. In May of 1985 Jobs decided to make a play for control of the company. He enticed Sculley to schedule a meeting in China, and planned to stage a boardroom coup while Sculley was gone. At the last minute someone leaked the information to Sculley, and he decided to confront Jobs. After a heated argument between the two, the board took a vote, and sided unanimously with Sculley. Jobs resigned that day, leaving Sculley as the head of Apple.

CH.4

1983-1985

It was around the beginning of 1985 that Jobs and Sculley began to argue. Sculley believed Jobs was dangerous and out of control; Jobs believed that Sculley knew nothing about the computer industry, and was making a poor effort to learn. In May of 1985 Jobs decided to make a play for control of the company. He enticed Sculley to schedule a meeting in China, and planned to stage a boardroom coup while Sculley was gone. At the last minute someone leaked the information to Sculley, and he decided to confront Jobs. After a heated argument between the two, the board took a vote, and sided unanimously with Sculley. Jobs resigned that day, leaving Sculley as the head of Apple.

CH.5

1985-1993

Sculley became the de facto head of Apple in May 1985. Over the next few months, Apple was forced to lay off a fifth of its work force, some 1,200 employees. The company also posted its first quarterly loss. All this, and the resignation of Jobs, served to erode confidence in Sculley's abilities as CEO of Apple.

At the same time, Sculley became locked in a battle with Microsoft's Bill Gates over the introduction of Windows 1.0, which had many similarities to the Mac GUI. Gates finally agreed to sign a statement to the effect that Microsoft would not use Mac technology in Windows 1.0--it said nothing of future versions of Windows, and Gates' lawyers made sure it was airtight. Apple had effectively lost exclusive rights to its interface design. This would prove to be an important document in future lawsuits between Apple and Microsoft, involving the Windows interface.

What brought Mac out of the hole were the twin introductions of the LaserWriter, the first affordable PostScript laser printer for the Mac, and PageMaker, one of the first Desktop Publishing programs ever. These two in tandem made the Mac an ideal solution for inexpensive publishing, and the Mac became an overnight success, again.

In 1987, Apple introduced the Mac II. Built with expandablity in mind, the Mac II made the Macintosh line a viable, powerful family of computers. Apple was a "Wall Street darling" again, (Rolling Stone) shipping 50,000 Macs a month. It seemed in 1989 that Windows would be a flop, and the Mac would be riding high for the next decade.

It didn't. By 1990 the market was saturated with PC-clones of every conceivable configuration, and Apple was the only company selling Macs. In late May, Microsoft rolled out Windows 3.0, which could run on virtually all of the PC-clones in the world. Apple was in trouble.

Apple's top idea for a solution was to license the Mac OS. While many believed it would erode the quality of the Mac, or that it would create even more competition, it was becoming clear that Apple could not provide both the hardware and the software to drive an industry. There was also talk of porting the OS to run on Intel-based machines.

It was Michael Spindler, Apple's new COO, who nixed the idea, saying that it was "too late to license."

n late 1991, Apple released its first generation of PowerBooks, which were an instant success. Work was being done on a new type of computer, the Personal Digital Assistant (PDA), which Apple called the Newton. Sculley took an immediate interest in the Newton, and drove the Newton to completion in August 1993. The first generation of Newtons had extremely poor hand-writing recognition (2.1 MB), and did not sell particularly well.

Sculley began to lose interest in the day to day operations of Apple. Eventually the Apple Board of Directors decided they'd had enough. In June of 1993, They relieved Sculley of his position as CEO, putting Spindler in the big chair. Sculley remained with the company as chairman for several months and then resigned.

CH.6

1993-1996

Spindler, by all accounts, was the wrong man for the job. A fairly impersonal man, Spindler's office was nearly impossible to get into. However, in his two and a half years as CEO, Spindler oversaw several accomplishments.

In 1994 Apple announced the PowerMac family, the first Macs to be based on the PowerPC chip, an extremely fast processor co-developed with IBM and Motorola. The PowerPC processor allowed Macs to compete with, and in many cases surpass, the speed of Intel's newer processors.

Spindler also decided to license the Mac OS to several companies, including Power Computing, one of the more successful Mac-clone makers. But many believe the Apple was too restrictive in its licensing agreements, and only a handful of companies ever licensed the Mac OS.

Apple's worst problem wasn't selling computers--it was building them. By June 1995 Apple had $1 billion dollars in backorders--and did not have the parts to build them. Apple's problems were added to by the late-summer release of Windows '95, which mimicked the Mac GUI better than ever.

Apple took its worst plunge ever in the winter of 1995-96. Misjudging the market, Apple pushed low-costPerformas over mid-range PowerMacs, and failed to make a profit at all. Apple posted a $68 million loss for that quarter. In January 1996, Spindler was asked to resign as CEO and was replaced by Gil Amelio, the former president of National Semiconductor.

CH.7

1996-1997

Amelio made a strong effort to bring Apple back to profitability, but his efforts would prove to be largely unsuccessful. Following his first 100 days as CEO, Amelio announced broad changes in the corporate structure of the company. The company was to be split into 7 separate divisions, each responsible for its own profit or loss. He has also made an effort to keep developers and customers better informed about the day-to-day affairs of the company. Although the company announced a staggering $740 million loss for Q1 1996, they brought that loss down to $33 million for Q2, beating all estimates by the best financial experts. In Q3 Apple profited nearly $30 million, again astounding financial experts, who had predicted a loss of as much. (Apple lost considerably more in Q4.)

In late december 1996, Apple made an industry-shattering announcement that it would be acquiring NeXT, and that Steven Jobs would be returning to the fold. The merger was brought about in order to acquire NeXTstep, which was to become the basis for Apple's next-generation OS, Rhapsody, which was slated for a 1998 release

The Newton department was spun off into a wholly-owned subsidiary, Newton, Inc.

In early July 1997, Apple announced the resignation of Gil Amelio, following another multi-million dollar quarterly loss. This came as a surprise to nearly everyone, and at this time a new CEO has yet to be announced. The Executive Board reportedly felt that Amelio had done all he could for Apple, and that while he had been responsible for a number of improvements at Apple, he could do no more. In the meantime Fred Anderson, Apple's CFO, has been put in charge of day-to-day operation, and Steve Jobs was given an "expanded role" at Apple for the interim.

CH.8

1997-2000

Jobs' presence was known almost as quickly as NeXT was acquired. The degree of Jobs' "expanded role" soon became quite clear. With no CEO and Apple Stock lower than it had been in 5 years, there were many decisions to be made, and not much time to make them. Jobs began to make striking changes in the structure of Apple, including the canceling of the Newton spin-off. (The Newton was discontinued several months later.) The time and place for the most ground breaking announcements, however, would be MacWorld Boston in August 1997.

Jobs, who by now was being referred to as "interim CEO," made the keynote speech, and spoke of the company's upcoming aggressive advertising campaign, upcoming new Macs, and Rhapsody. He also announced an almost entirely new Board of Directors, including Larry Ellison, CEO of Oracle. But he saved the best for last. In a ground breaking decision, Jobs announced an alliance with Microsoft. In exchange for $150 million in Apple Stock, Microsoft and Apple would have a 5-year patent cross-license and, more importantly, a final settlement in the ongoing GUI argument. Microsoft agreed to pay an unreleased sum of additional funds to quiet the allegations that it had stolen Apple's intellectual property in designing its Windows OS. Microsoft also announced that Office '98, its popular office package, would be available for the Mac by years end.

These announcements gave Apple new life, but Jobs was not finished. There was one more big obstacle to tackle: Clones. Jobs felt that Clone Vendors such as Power Computing were cutting into Apple's high-end market, where they traditionally made the most profit. Clones had failed to effectively expand the MacOS market, instead taking customers away from Apple. Jobs remedied this apparent failure of the Clone experiment by all but pulling its plug. In early Fall 1997, Apple announced its intention to buy out Power Computing's MacOS license, and much of its engineering staff. Power went out of business several months later, with Apple taking over its product support. Apple also bought out its MacOS licences from Motorola and IBM. Umax was allowed to stay in the game, but with the tacit understanding that it would fill the low-end market, with machines selling for under $1000. Umax sold its remaining inventory of Macs, and is now selling "Wintel" boxes.

On November 10, 1997, Apple held another press conference, in which Jobs announced further changes to Apple's corporate strategy. Apple would now sell computers direct, both over the web and the phone, as Power Computing had done so well in the past. Jobs also announced two new Apple machines: the PowerMac G3, and the PowerBook G3.

The Apple Store was a runaway success, and within a week was the third-largest eCommerce site on the web. At MacWorld San Francisco in January, Jobs announced that Apple had, for the first time in more than a year, had a profitable First Quarter--to the tune of $44 Million. This far eclipsed analysts' projections, and sent Apple's stock back into the 20s. In April 1998, Jobs announced another profitable quarter ($57 Million), which came as a big surprise to nearly everyone. Jobs kept momentum moving, and in early May announced a newPowerBook G3, an Educational Apple Store, and an entirely new Mac design--the iMac. The iMac would be Apple's answer to the low-end consumer question, with more than enough computing power for most people, at an affordable price. Later that month, in his keynote at the WWDC, Jobs announced a dramatic shift in Apple's OS direction. Mac OS X would merge OS 8 and Rhapsody--Apple's upcoming version of NeXTStep--into one robust OS, with all the features of a modern OS and backward compatibility with most OS 8 applications

In July 1998, Jobs announced that Apple had profited for the 3rd consecutive quarter--to the tune of $101 million. This helped to push Apple's stock to several 52-week highs in just a few days. The iMac was the best-selling computer in the nation for most of the fall, and it drove Apple sales well beyond most predictions. In the fall, Jobs announced another profitable quarter, making a full year of profitability. In January 1999, Jobs announced a 5th consecutive profitable quarter, with year-over-year growth, and a sleek new PowerMac G3.

In July 1999, Steve Jobs filled the final quadrant in the "Apple Product Matrix"--The consumer portable--when he introduced the iBook. Based on the same principles that had made iMac such a hot sell a year earlier, the iBook brought style to the low-end portable market. Several months later, Jobs announced the PowerMac G4, a significant new professional desktop machine. Apple's stock had risen all summer, and by mid-September was trading at an all-time high, in the high 70s.

n a dramatic Keynote at MacWorld Expo SF in January 2000, Jobs unveiled Apple's new Internet strategy: a suite of mac-only internet-based applications called "iTools" and an exclusive partnership with Earthlink as Apple's recommended ISP. Jobs also announced that he would be dropping the "interim" from his title, becoming the permanent CEO of Apple. Apple's sales continued to rise, as did the stock price, which had climbed to 130 by early March.

In July 2000, Apple announced a slew of new machines, including the PowerMac G4 Cube, which added a fifth category to Apple's four-corner product strategy. The Cube was Apple's answer to those who wanted an iMac without a monitor, as well as challenge to the computing industry to continue to minimize the size of computers while increasing their visual appeal. The Cube was the biggest gamble Jobs had made since the release of the iMac. It would turn out to be a resounding failure.

CH.9

1997-2000

n July 1999, Steve Jobs filled the final quadrant in the "Apple Product Matrix"--The consumer portable--when he introduced the iBook. Based on the same principles that had made iMac such a hot sell a year earlier, the iBook brought style to the low-end portable market. Several months later, Jobs announced the PowerMac G4, a significant new professional desktop machine. Apple's stock had risen all summer, and by mid-September was trading at an all-time high, in the high 70s.

In a dramatic Keynote at MacWorld Expo SF in January 2000, Jobs unveiled Apple's new Internet strategy: a suite of mac-only internet-based applications called "iTools" and an exclusive partnership with Earthlink as Apple's recommended ISP. Jobs also announced that he would be dropping the "interim" from his title, becoming the permanent CEO of Apple. Apple's sales continued to rise, as did the stock price, which had climbed to 130 by early March.

CH.10

2000-2004

The second half of 2000 was rocky for Apple. Slower sales (both for Apple and the industry as a whole), combined with a misunderstanding of the consumer market resulted in the first unprofitable quarter in three years. One factor in this decline was the G4 Cube, which sold poorly due primarily to its high price compared to Apple's other products. Another factor was Apple's decision to include DVD-ROM drives in their consumer and professional machines instead of CD-RW drives. As a result, Apple missed sales opportunities to customers who wanted to burn their own CDs. Apple began to rectify these problems in late 2000, when it cut prices on the entire PowerMac line. Apple took the next step in January of 2001, when it announced a new line of PowerMacs, with either CD-RW drives or a new "SuperDrive" which could read and write both CDs and DVDs. Apple also announced two new application: iDVD, a DVD-authoring program, and iTunes, which allowed users to encode and listen to MP3 songs, and then burn them to CDs.

All this was part of Apple's new corporate strategy, developed in the face of a massive slow down in the Technology industry: Apple would take advantage of the explosion of personal electronic devices--CD-players, MP3 players, digital cameras, DVD-players, etc.--by building Mac-only applications that added value to those devices. Just as iMovie had added tremendous value to Digital Cameras, iDVD would add value to Digital Cameras and to DVD-players, and iTunes would add value to CD and MP3 players. It was Apple's hope that making the Mac the "Digital Hub" of the new "Digital Lifestyle" would revitalize Apple's sales and guarantee the long-term security of the company.

In May 2001, Steve Jobs announced that Apple would be opening a number of retail stores across America, selling not only Apple computers, but various third-party "digital lifestyle" products, such as mp3 players, digital still and video cameras, and PDAs. Apple also announced a major update to the iBook line, a smaller and lighter design that borrowed heavily from the PowerBook G4. In July, Apple refreshed iMacs and G4, and "suspended production" of the G4 Cube, ending months of speculation as to how Apple would deal with the Cube's resounding failure in the marketplace.

The Fall of 2001 brought new revisions to the PowerBook G4 and iBook lines, the latter of which had sold extremely well during the summer. In late October, Apple announced its first non-computer product in several years, the iPod. The iPod was a small hard-drive-based digital music player, and represented Apple's first hardware addition to its "digital hub" strategy. At $399, the iPod faced a similar challenge to the woeful G4 Cube: it favored style and form-factor over price. Apple was taking another gamble by charging a premium for the iPod's superior design and small size.

In January 2002, Apple reinvented the consumer desktop, again, when it released its flat panel iMac. It also announced iPhoto, a new software package aimed at improving the digital camera user experience. Apple rolled through the first half of 2002, showing profits through the first two quarters.

Apple stumbled in the second half of 2002, however, largely due to macroeconomic conditions. With fewer PC purchases being made, Apple scrambled to keep itself fresh in a shrinking marketplace. In June, Apple introduced its "Switchers" ad campain, which would grow to be one of the most popular and successfull of Apple's history. Based on non-scripted monologues of real people, the Switchers campain made the strongest case yet for Macs in a PC world.

In July 2002, Steve Jobs announced that the free iTools service would be rolled into a new subscription-based "dotMac" service. Combined with the newly announced iCal and iSync, dotMac was aimed at futher centralizing the Mac in the high-tech lifestyle. In January 2003, Apple released iLife, a bundled software package that included iTunes, iPhoto, iMovie and iDVD, for $50. (all but iDVD could be freely downloaded from Apple's site), in a play to further push the digital-hub concept into the consumer space.

Apple's financial troubles continued throughout 2002. In October, it announced a quarterly loss of $45 million, due to weak PowerBook and PowerMac sales. In 2003, however, Apple began to recover, and to build for the future. In January, Apple announced two new PowerBook G4 models, a 12" model similar to existing 12" iBooks, and a giant, wide-screen 17" model, aimed squarely at the graphic design market. Apple also announced that it would be shipping its own Web Browser, Safari, in an apparent attempt to depend less on Microsoft for what was widely believed to be an inferior product.

The new PowerBooks sold well, and sales of flat panel iMacs remained steady, but Apple was still in trouble in the professional desktop market. Motorola's development and production of the G4-family of processors continued to lag well behind Apple's expectations. It appeared that the G4 processor had hit a dead end. Apple worked to remedy the situation by developing a new processor with IBM, and in June 2003 came to fruition with the release of the PowerMac G5. The G5 chip, based on IBM's Power4 chip, was a 64-bit processor, meaning it could address more memory and process larger numbers than its 32-bit G4 cousin. The PowerMac G5 represented a hugh shift for Apple, who redesigned the motherboard and case from scratch. Unlike the PowerMac G4, which was based strongly on existing G3 hardware, the G5 was all new, and fast. Though supplies were constrained, the G5 sold well and did much to improve Apple's bottom line.

Meanwhile, the iPod was beginning to take off. In April of 2003, Apple unveiled the iTunes Music Store, which would sell individual songs through the iTunes application, for 99 cents each. These songs could be played only on Macs or iPods, but Apple felt that by offering an easy to use, no-nonsense music service, it could make significant inroads to the digital music market. Apple did their homework: when announced, the iTunes Music Store already had the backing of the five major record labels, and a catalog of more than 200,000 songs.

In October 2003, Apple released iTunes for Windows. While the iPod had been available for Windows for some time, it had used third-party software which failed to provide the unique user experience that iTunes/iPod integration allowed. With the release of a stable, user-friendly Windows version of iTunes, which included both iPod and Music Store integration, Apple was poised to take the digital music industry by storm. Apple cemented its position with the January 2004 release of the iPod mini, which while smaller in capacity than the original iPod, was smaller than many cellphones.

In the first year alone, the iTunes Music Store sold more than 70 million songs, and by July this number had increased to more than 100 million. The iTunes Music Store had a 70% market share among all legal online music download services. iPods had moved from expensive toys to must-have Christmas presents, and Apple found itself in the position of having a monopoly for the first time in several decades.

Imprint

Publication Date: 08-27-2014

Dedication:

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