Apple Computer Inc.

founded: 1977

Contact Information:

headquarters: 1 infinite loop cupertino, ca 95014-2084 phone: (408)996-1010 fax: (408)974-9974 toll free: (800)my-apple email: [email protected] url: http://www.apple.com

OVERVIEW

Apple Computer Inc. is one of the world's leading computer companies. The company designs, builds, and markets computers, peripheral equipment, and software for homes, businesses, educational institutions, and the government. Apple also provides customers with multimedia and connectivity solutions. Apple was a pioneer in the field of personal computers with its easy-to-use, object-based Apple Macintosh—the bulk of Apple's net sales come from the sale of this line. This user-friendly computer interface "for the rest of us" has since spawned competitive imitations, namely Microsoft's Windows '95. In 1997 Apple began fighting back to recapture users lost to dominant IBM-compatible computers running the Windows operating system. By 2002 the company had returned to profitability under co-founder and CEO Steve Jobs, thanks to its Unix platform OSX operating system, the popular Titanium Powerbook G-4, and ultra-spaceage design of the flat screen iMac desktop models.

COMPANY FINANCES

Apple Computer returned to profitability in 2001 and 2002, shaking off an earlier slump when customers rejected its G-4 cube release. The company earned $40 million in the second quarter of 2002 on revenues of $1.5 billion. In the second quarter of 2001, Apple earned a comparable $43 million. Second quarter sales of 813,000 Macintosh computers in 2002 represented an 8 percent gain over second quarter 2001 shipments. The company's stock price in spring 2002 was $26.11 per share, down from around $28.00 in 1998. For the years 1993 through 1997, Apple stock had a five-year high of $65.25 per share, and $12.75 was its five-year low.

ANALYSTS' OPINIONS

Steve Jobs' return to Apple as CEO in the 1990s was applauded by some and criticized by others, but few could voice complaints in the 2000s as the company co-founder brought the company back to profitability. Many praise his pioneering work in taking object-oriented technology to the World Wide Web and see the creation of the OSX operating system as Apple's best selling point.

Analysts also gave kudos to Jobs and Apple for opening 27 walk-in Apple Computer super stores in the United States to augment its already strong Internet sales.

Apple's presence in the education markets and in the offices of graphics professionals has always been high, but by 2002 the company still found itself with only a 3 to 5 percent market share of the higher-growth corporate and consumer markets. Still, there was hope. "Apple now boasts operating margins of about 30 percent—triple or quadruple the average for the temporarily downtrodden PC biz," according to a 2002 article for Business Week Online. The article continued, "Apple's too-small market presence in the higher-growth corporate and consumer markets reflects a new for significant speed and options to be incorporated in the next line of PowerMac models which seem like relatively old plugs in the Apple stable where flashy steeds such as iMacs and G-4 Titanium Powerbooks also reside."

Cited as positives for the company were its strong position in the education and desktop publishing markets where Mac Addict graphics designers rule, as well as Apple's significant progress in reducing staff and operating costs. This, and its improved financial position in 2002 (including healthy cash flow of $4.3 billion in 2002), helped improve Apple's outlook for the remainder of the 2000s, although analysts warned that the company could falter if a significant new product bombs the way the G-4 desktop cube once did.

HISTORY

Steve Jobs and Stephen Wozniak, two college dropouts, built the first Apple computer in Jobs' garage in 1976. This microcomputer, the Apple I, was a bare-bones creation with no monitor, casing, or keyboard. These were later added, as were software and ports for third-party peripherals. On January 3, 1977, Apple Computer Inc. was incorporated. In 1980 with the sale of more than 130,000 Apple IIs and $117 million under its belt, the company went public at $22 per share. After a 1981 plane crash, Wozniak returned briefly but ultimately left the company, reappearing on the scene many years later in 2002 with his new company offering wireless technology innovations.

In 1984 Apple revolutionized microcomputing with the introduction of its Macintosh (Mac) personal computer. Unlike other computers on the market, the Mac interface allowed users to forgo the ubiquitous text commands, instead opting for a system whereby the user would control operations by clicking and dragging on-screen "icons."

According to some accounts, Jobs originally opposed the Mac and only embraced it (dismissing its very proponents and taking the credit himself) after the dismal market failure of his Lisa system. After a volatile power struggle within the company, Apple's board of directors voted unanimously to replace Jobs with former PepsiCo executive, John Sculley. Soon thereafter, Apple entered the desktop publishing market with the Mac Plus and LaserWriter printer. In 1987 Apple founded a software company, later named Claris, then replaced by File-Maker.

FAST FACTS: About Apple Computer Inc.

Ownership: Apple is a publicly owned company traded on NASDAQ, the Tokyo Stock Exchange (under symbol AAPLE), and the Frankfurt Stock Exchange (symbol APCD).

Ticker Symbol AAPL

Officers: Steven P. Jobs, CEO and Co-founder, 46; Fred D. Anderson, CFO, 57, 2001 salary $657,039; Timothy D. Cook, EVP of Worldwide Sales and Operations, 41, 2001 salary $452,219, 2001 bonus $500,000; Nancy R. Heinen, SVP, Gen. Counsel, and Sec., 45

Employees: 9,603

Chief Competitors: Apple Computer's main competitors in the electronic computer industry include Hewlett-Packard, Dell, Gateway, Intel, and IBM. Networking and software competitors include Microsoft, Novell, and Sun Microsystems.

The rise of archnemesis Microsoft took larger and larger bites out of Apple's market share, and the company soon had to contend with a comparable opponent with a similar product. Complicating matters was the fact that Apple would not license its software to other computer manufacturers, a move that did not improve the company's marketability. Widespread competition in the PC market often made IBM clones more economical, with software widely available. In 1994 the company released its Power Mac computer, though sales did not live up to expectations. In 1995 the company was forced to shut down its online service, eWorld. In 1996 Apple brought in a new CEO, Gilbert Amelio.

Widely regarded as the force behind the successful turnaround at National Semiconductor, Amelio immediately announced major changes at Apple. He divided the company into seven divisions, each responsible for its own success or failure. Nonetheless, under this new organizational structure, divisions were more accountable to top management, which would have tighter control over the company's actions. Soon thereafter, Amelio announced the purchase of Jobs' company, NeXT software. Jobs would return to Apple as a consultant and soon, in a display of fireworks, Amelio was out and Jobs was in as CEO. Under Jobs, Apple introduced its Unix platform OSX operating system and marketed such products as the unsuccessful G-4 cube and the highly popular, stylized G-4 Titanium Powerbooks, iMacs and iPod digital players to take the once-foundering company back to respectability and profitability in 2001 and 2002.

STRATEGY

Analysts generally agree that the challenge facing Apple and its highly visible CEO Steve Jobs in the 2000s is a strong need for the continued improvement of the Mac OSX operating system and the addition of the iPhoto application. What's needed is a strong counterpunch to Microsoft's lawsuit-weakened midsection that can see Apple Computer taking a sweeter market share of the corporate and consumer sales market as it already has in its self-claimed 25 percent market share of the educational sales market. Apple has failed to deliver software for business with anywhere the regularity of the software coming out for Windows-based PCs, begrudgingly putting the popular Microsoft Office on its Apple products.

Apple's primary strategy during the late 1990s was to maintain and augment its market share in the personal computer industry while developing and expanding similar endeavors such as personal interactive products, client/server systems, online services, and the licensing of its Macintosh operating system. The company's original strategy of not licensing the operating system to other developers, or authorizing the production of Mac clones, came back to haunt it.

In 1994 the company made an about face, licensing three companies to produce Macintosh clones and, in turn, lost some of its market share. That same year, it released its Power Mac, a much faster computer running on a PowerPC microchip, which allowed users to use software for several different platforms, including Windows. In order to spark the creation of more Mac-compatible software, Apple licensed the rights to its operating system (Mac OS) to IBM and Motorola in 1996. In 1997 then-interim CEO Steve Jobs announced the company was pursuing an alliance with Microsoft to offer a Mac version of Microsoft Office.

In 1997, in the interest of long-term viability, the company embarked on a major reorganization and draconian cost-cutting measures, including the layoffs of several thousand employees (almost a third of the company). It also brought Steve Jobs back as interim (and soon-to-be permanent) CEO, replacing Gil Amelio and resulting in yet another strategy shift for Apple Computer. These and other moves resulted in Apple's first profitable quarter in years (first quarter 1998). Jobs streamlined the organization, squelched Mac cloning, bear-hugged old nemesis Microsoft, forged a foothold in network computers costing less than $1,000, and (taking a cue from Dell Computer) started selling built-to-order systems over the Internet. Apple generates sales through catalogs, through regional retailers, and nationally through CompUSA.

In May 1998, Jobs announced that Apple was pursuing a new strategy focused on regaining market share in software development—developers who deserted the Macintosh operating system in favor of Windows during the mid- to late 1990s. Toward this goal, Jobs was scrapping the company's Rhapsody operating system except as a transition vehicle to the new Mac OSX (OS "10"). Rhapsody would have allowed the Mac's operating system to run software for chips made by Intel, IBM, and Motorola as well as Apple, but would have required software developers to rewrite old Macintosh code from scratch. The new system, OSX, would have features such as hardware memory protection, more efficient multi-tasking, and faster networking. It also would not require programmers to rewrite old code from scratch. Jobs' strategy was supported by Microsoft, Adobe, and Macro-media executives, who were happy to be able to write applications that worked on both the old and new Mac systems. In the wake of Jobs' announcement, Apple's stock price rose to $39.9, the highest it reached in a year.

INFLUENCES

Apple's comfortable advantage was eclipsed in the late 1980s when Microsoft released its Windows operating system. The Windows graphical interface was in many ways similar to the look and feel of the Macintosh—so similar that Apple decided to sue, albeit unsuccessfully. In the mid-1990s, with Windows running on more affordable IBM clones, Apple's earnings began to fall. The company's problems included shrinking revenues, defecting executives, market-stealing clone sales, and troubled products, such as its discontinued Newton handheld computers. However, Apple owners remain the industry's most loyal repurchasers. And Macintosh computers still had a niche in educational institutions and design shops. Designers specializing in Web page design and graphic arts especially liked the Mac systems, making the company a major Internet products provider.

CURRENT TRENDS

While third-party software designed for Windows abounded, Macintosh-compatible software was much harder to come by. In 2002 Apple Computer was offering a few more items than it had in the past, but not enough to draw standing ovations from analysts. In Java server applications for the Internet, Apple offered powerful WebObjects 5.1. The OSX operating system was upgraded to OSX.1, which benefits those using popular digital peripherals such as DV camcorders, MP3 players, and digital cameras, but another upgrade is sorely needed to satisfy the Mac Addict graphics designers and art directors who have remained loyal to the company through some mighty thin years. If there is one area that Jobs has failed, say analysts, it is in bringing software designers into the fold to remedy the great lack of Macintosh-compatible software products. The 1990s saw a boom in the commercialization of the Internet. Customers by the millions were joining the online market, an area in which Apple hoped to shine. One of the company's major efforts to do so was the forming of its WebObjects Consulting Group, which was formed around WebObjects, Apple's leading Web application development platform. The consulting group provides in-depth consulting for businesses on strategic web-based solutions for database publishing, digital asset management, and e-commerce.

CHRONOLOGY: Key Dates for Apple Computer Inc.

1976:

Steven (Steve) Jobs and Stephen Wozniak build the first Apple computer in Jobs' Santa Clara Valley, California, garage

1977:

Apple Computer Inc. is incorporated

1980:

Apple Inc. goes public at $22 per share

1984:

Introduces the Macintosh personal computer

1985:

Jobs leaves Apple and creates a new computer company, NeXT Incorporated

1988:

Apple reorganizes into four operating divisions and the company brings suits against Microsoft and Hewlett-Packard for copyright infringement of its operating system

1991:

PowerBook notebook is introduced, gaining 21 percent market share in less than six months

1992:

Most of its lawsuit against Microsoft and Hewlett-Packard is dismissed

1994:

The Power Mac is released

1996:

Apple brings in new CEO Gilbert Amelio

1997:

NeXT is purchased, bringing Jobs back to Apple as a consultant and interim CEO; Apple's board ousts Amelio in July, and Jobs surprises industry by agreeing to release Mac version of Microsoft Office

1998:

Apple dumps its Claris division and puts the operation into a new Apple unit called FileMaker; Jobs announces release of popular G-3 Powerbook laptop and iMac desktop model with attractive design

1999:

Apple Computer Inc. releases Mac OSX Server operating system for its Unix strength in a Macintosh environment for the Web

2000:

Jobs transitions from interim head to formally take over as CEO; Apple releases cube G-4, which proves to be a huge company loss for the year

2002:

Apple puts releases a digital music player called the iPod and gives iMac a facelift with flat-panel display; the company posts second straight year of profitability with a $40 million posting in the second quarter of 2002

PRODUCTS

New products offered at Apple include the 10-gigabyte hard drive iPod capable of holding some 2000 songs, the smart and sleek iMac line, and the immensely popular (especially with students) G-4 Powerbooks. In March 2002 Apple Computer took the sheet off Bluetooth wireless-data standard, a low-bandwidth, open-specification solution that runs off the OSX operating system to wire-lessly connect (cable-absent) computers and printers and/or personal digital assistants. According to Apple, "Bluetooth also enables short-range wireless voice and data connectivity between desktop and laptop computers, personal digital assistants (PDAs), mobile phones, printers, scanners, digital cameras and even home appliances." The first iMac, a Macintosh computer designed for consumers, came out in 1998. "Reception from the Macintosh community and computer industry as a whole to the iMac has been reminiscent of the rollout of the first Macintosh in 1984, which also featured a breakthrough design for its time," said Andy Gore of Mac-world magazine. The popular G-4 desktop models and G-4 Titanium Powerbooks being sold in the 2000s are more powerful, greatly evolved products developed back in 1997-1998 that included Apple's G3 Powerbooks and the Power Macintosh G3.

CORPORATE CITIZENSHIP

Apple is an active corporate citizen. In 2002 Apple remained an important contributor to the Computer Learning Project, an enterprise that helps schools earn credits to purchase state-of-the-art hardware and software for schools. Since the early 1980s, the company has donated computer products to schools and nonprofit groups. Its grants have provided for the collaboration of K-12 schools with schools of education to strengthen teacher training. Volunteer organizations are using donated Apple products to serve their communities. At its key sites around the world, the company has established Community Affairs teams to ensure a proactive community presence. In June 1998, Apple pledged up to $1 million in network software and training to Los Angeles County schools through the county Office of Education's Technology Learning program.

GLOBAL PRESENCE

With headquarters in Cupertino, California, Apple has manufacturing facilities in Singapore and Ireland. It also has distribution facilities in the United States, Canada, Australia, Europe, Singapore, and Japan. The company has business, education, government, scientific, and consumer entertainment customers in more than 140 countries. In 2002 Apple's main revenue sales were in North and South America, followed by Europe, Middle East, Africa, and then Japan. In terms of geography, Apple's three selling territories are known as Apple Americas, Apple Europe, and Apple Pacific. In May 2002, Apple offered the Worldwide Developer Conference at the San Jose, California, Convention Center in an attempt to spur global interest in the OSX operating system.

EVEN MAC ADDICTS DEMAND APPLE AGAIN "THINK DIFFERENT"

"Macworld 2001 will live in infamy—for completely and totally wasting the biggest billboard and bus-stop shelter ad campaign New York has ever seen," wrote Lukas Hauser for Wired News, expressing the general opinion that Apple Computer advertising hasn't had a winner since the late 1990s. Instead, Apple Computer seems to have placed all its marketing eggs in promoting its high profile Apple Stores, popping up in America at something-less-than-Taco Bell-like numbers of about twenty a year. The best Apple has done in the 2000s was its March 2001 TV commercial to promote Mac custom CD burning, which featured the likes of musical artists Barry White, George Clinton, Liz Phair, Steve Harwell (Smashmouth), De La Soul, Lil' Kim, Ziggy Marley, Chuck Berry, Dwight Yoakam, Exene Cervenka, and Deep Dish.

Way back in September 28, 1997, Apple Computer, Inc. introduced its first major ad campaign in a decade. The "Think Different" campaign uses photographs of major figures in recent history, along with the simple line, "Think Different." Each person is someone who was considered a "rebel," "misfit," or pioneer. They did things differently and wound up changing the world. Although none of the people in the pictures are identified, they are symbols for change.

The campaign honors creative geniuses who have touched the lives of many people through the things they have done. Figures past and present include astronaut Neil Armstrong, fighter Muhammad Ali, inventor Thomas Edison, singer-activist Joan Baez, physics' genius Albert Einstein, singers John Lennon and his singer-wife Yoko Ono, pilot Amelia Earhart, comedians Lucille Ball and Desi Arnaz, activist Rosa Parks, and Muppets creator Jim Henson. Although many advertising campaigns today use celebrities to promote their products, Apple is using celebrity figures in a way that honors their spirits and accomplishments.

Apple Computer, Inc.'s Steve Jobs said, "Think Different celebrates the soul of the Apple brand—that creative people with passion can change the world for the better," and with people like Mahatma Ghandi and Pablo Picasso in ads for Apple, who can argue with that?

EMPLOYMENT

In 2001 and 2002, Apple cut a small number of employees, but for the most part kept its labor force intact at a time when the rest of Silicon Valley computer hardware and software companies were faced with wholesale layoffs in view of a stagnant economy. Apple Computer was back to 10,176 employees in 2001 after declining sales led to mass employee cuts in the late 1990s. In 1996, the company laid off 1,800 workers. In 1997 the company began more major layoffs—this time more than 2,000 of its remaining 11,000 full-time employees. The layoffs were a crucial part of Apple's plan to slash operating expenses by 20 percent. The company refocused, however, and in 1998, under returning CEO Steve Jobs, was hiring employees to fill positions needed to pursue Apple's new technical goals, satisfy customer needs, and identify new markets. In the first half of 1998, the company hired more than 600 new employees and employed 9,049 people worldwide.

As part of its corporate culture, Apple considers the work environment critical. The corporate workspace is open, and informal meeting areas are located throughout offices for meetings or just relaxing with colleagues. Some offices are even furnished with pool tables, ping pong tables, and basketball and volleyball courts. At Apple's headquarters, a coffee shop, fitness center, company store, and bookstore are all available onsite. For offices that do not have fitness facilities, reimbursement for fitness memberships is available as a benefit to employees. Other benefits offered by Apple include bonus programs, stock purchase plans, and 401(k) plans. The company also provides health benefits, profit sharing, tuition reimbursement, and substantial discounts on Apple computer equipment.

SOURCES OF INFORMATION

Bibliography

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"apple pledges up to $1 million in network software and training to los angeles county schools." apple computer inc. press release, 3 june 1998. available at http://www.apple.com/pr/library/1998/.

"apple worldwide community affairs: a letter from gilbert amelio." apple computer inc., 1997. available at http://www2.apple.com/communityaffairs.

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For an annual report:

on the internet at: http://www.apple.com/investor/annualreports.htmlor telephone: (408)974-3123 or write: apple investor relations, 1 infinite loop, ms 301-4ir, cupertino, ca 95014

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. apple computer inc.'s primary sics are:

3571 electronic computers

5045 computers, peripherals and software

7372 prepackaged software

7379 computer related services, nec

also investigate companies by their north american industry classification codes, also known as naics codes. apple computer inc.'s primary naics codes are:

334111 electronic computer manufacturing

334119 other computer peripheral equipment manufacturing

511210 software publishers