APPLE COMPUTER INC.

Apple Computer is best known for its Macintosh personal computers (PCs), including the colorful iMac desktop and iBook laptop, which are designed to facilitate easy access to the Internet. Although the firm's new product releases in the late 1990s garnered media attention and boosted sales, Apple's share of the worldwide PC market had dwindled to less than three percent by 2001.

EARLY HISTORY

Stephen G. Wozniak and Steven P. Jobs founded Apple Computer Co. in April of 1976. The partners launched operations by making and selling a computer circuit board, dubbed the Apple I. The machine had no keyboard, case, sound, or graphics. Computer retailing chain Byte Shop ordered 50 Apple I units a month later, and Jobs used his parents' garage as a temporary manufacturing site. Mike Markkula, a former marketing executive for both Intel Corp. and Fairchild Semiconductor, paid $250,000 for a 33-percent stake in Apple and helped Jobs to create a long-term business plan. In 1977, the firm unveiled the Apple II—the first PC to offer color graphics capacity. The new machine also included a keyboard, power supply, case, and 4KB of standard memory. That year, the company's sales reached $1 million.

Apple's earliest venture into online technology came in 1978 when it began offering Apple II users a telephone-based connection service to Dow Jones. Just two years after its inception, the company became one of the fastest growing companies in the United States. Sales grew tenfold and the firm's dealer network grew to include roughly 300 distributors. Employees were required to give up their typewriters in favor of PCs in 1979. The firm also released the Apple II Plus, which offered 48KB of memory, and the first Apple printer, known as the Silentype. In an effort to tap into the school market, Apple established the Apple Education Foundation. Sales of the Apple II jumped 40 percent, reaching 35,000 units, and thecompany's employees totaled 250.

In 1980, Apple released the Apple III, its most advanced machine to date. Boasting a new operating system, a built-in disk controller, and four peripheral slots, the Apple III was priced at $3,495—nearly double the price of its predecessors. To bolster international sales, Apple constructed a manufacturing plant in Ireland and a European support center in the Netherlands. EDUNET, an online network serving professionals in higher education and research fields, adopted the Apple II as its network access PC. Apple also established Apple Seed, a computer program designed to promote computer literacy among elementary and high school students. That year, the firm conducted its initial public offering (IPO), selling 4.6 million shares at $22 apiece. The IPO was the largest in U.S. corporate history since Ford Motor Co. first listed its shares in 1956. At that time, employees exceeded 1,000. With a dealer network of 800 distributors in the United States and Canada, and an another 1,000 distributors overseas, Apple had the farthest reach of any major player in the computer industry.

In 1981, Apple established offices in both France and England. Of the firm's 40 new product releases that year, the most notable were the Apple Language Card, which increased the compatibility of Apple II machines with programs written in languages such as Pascal and Fortran; the IEEE-488 interface card, which allowed Apple II units to work with more than 1,400 scientific and technical instruments; and Profile, a 5MB hard disk. In 1982, Apple became the first PC company to attain sales of $1 billion. Competition intensified as more than 100 companies started manufacturing PCs. Apple unveiled its dot matrix printer that year. In 1983, Apple introduced the Apple IIe and Apple III Plus PCs; the ImageWriter printer and other peripheral devices; and AppleWorks, a suite of products including word processing, spreadsheet, and database software. The firm was ranked 411 on the Fortune 500 list. To further entrench itself in schools, Apple launched the "Kids Can't Wait" program, through which it gave 10,000 computers to schools in California.

ADVENT OF THE MACINTOSH

Apple shipped its blockbuster Macintosh machine in 1984, after first advertising it on television during the Super Bowl. Initial versions of the Macintosh retailed for $2,495, while the more powerful Macintosh 512KB was priced at $3,195. That year, the firm established the Apple University Consortium, which included 24 major colleges and universities that collectively agreed to use the Macintosh for educational programs and to spend $61 million over a three-year period. Other product releases included 300-and 1200-baud modems, the Scribe printer, and the Apple IIc. Shortly after roughly 2,000 dealers ordered 52,000 Apple II machines at a conference titled "Apple II Forever," Apple stopped making the Apple III machine due to continued engineering glitches. By the year's end, more than 400,000 Apple IIc machines had been sold.

The LaserWriter printer—priced at roughly $7,000—made its debut in 1985, as did the AppleTalk Personal Network. Northern Telecom and Apple began working together to connect Macintosh computers via telephone lines. An inventory glut prompted the firm to shut down manufacturing plants for one week. The firm also permanently closed three of its six plants and laid off 20 percent of its work force, or roughly 1,200 employees. As a result, Apple posted its first-ever quarterly loss, and Jobs resigned to start a new computer venture. The AppleLink telecommunications network went online that year, connecting Apple employees, dealers, and suppliers to Apple information libraries, as well as to each other via e-mail. Apple also created the Education Advisory Council, allowing leaders in education to take part in the development of Apple's school programs and related products.

By 1986, more than 200,000 AppleTalk local area computer networks were in place. Internationally, Apple had extended its reach to 80 countries. Earnings rebounded, growing 151 percent to reach a record high. The following year, new product releases included desktop communications products, such as the AppleTalk PC Card and the AppleShare file server, as well as an updated version of Apple IIe and the next generation of Macintosh PCs. Apple also founded Claris, an independent software manufacturer.

The late 1980s were marked by a series of strategic alliances with other leading technology firms. For example, Digital Equipment Corp. and Apple began working together to integrate Macintosh personal computers and AppleTalk networks with VAX systems. In 1988, Apple shipped a Unix-based version of Macintosh II. Apple and Quantum Computer Services created AppleLink-Personal Edition, an online communication and information service designed specifically for Apple II computer owners. The firm also worked with Texas Instruments to integrate Macintosh II with Texas Instruments' Explorer Lisp coprocessor board. The joint venture with Texas Instrument proved to be one of Apple's largest value-added reseller agreements for the Macintosh line. That year, Apple filed suit against Microsoft Corp. for allegedly using the "look and feel" of the Macintosh operating system as the basis for its increasingly popular Windows platform. Apple's lawyers requested that Microsoft either pay royalties or simply stop selling Windows. Net income exceeded $400 million on revenues of roughly $4 billion.

In 1989, Apple released several new networking and communication products designed to enhance the communication capabilities of Apple machines. For example, the IIGS System Software 5.0 was the first 16-bit operating system for an Apple PC that operated over the AppleTalk network system. Sales climbed to $5.28 billion. In response to intense competition, Apple reduced its prices in 1990 and introduced a series of low-cost Macintosh PCs. The following year, it shipped several low-cost printers. Apple also asked the Federal Communications Commission (FCC) to allow computers to send and receive information over radio waves. The FCC granted permission for this type of electronic communication, and the decision fostered the development of a new class of data communications known as Data Personal Communications Services.

In 1991, in an effort to steal market share back from Microsoft, IBM and Apple forged an alliance to develop a new operating system that would make computers easier to use and also increase compatibility between IBM and Apple machines. By then, roughly 90 percent of worldwide PCs used Microsoft's Windows platform, and Apple had broadened its litigation against Microsoft. However, a judge ruled in favor of Microsoft in 1992 after deciding that the appearance of the Macintosh operating system was not protected by Apple's copyrights. Apple appealed the decision, but the Supreme Court refused to hear Apple's case.

In 1993, Apple ranked as the world's second-largest PC maker, behind Microsoft. Sales exceeded $7 million, and employees totaled roughly 15,000. The following year, the firm unveiled its PowerPC microprocessor. In the mid-1990s, sales began to slow and inventory mounted, prompting Apple to cut its prices by up to 25 percent. As Microsoft continued to gain market share, many firms stopped developing new software for the Macintosh. Units shipped fell from 4.6 million in 1995 to 3.7 million in 1996 as market share decreased to 5.2 percent, compared to 10 percent in the late 1980s. Management shakeups also plagued the firm. Market share tumbled to 3.2 percent in 1997, and Apple posted a $1.1 billion loss. The firm then purchased NeXT Software Inc. from original Apple founder Steve Jobs, who agreed to serve as an advisor to Apple. Shortly thereafter, Jobs was reinstated as Apple's CEO.

INTERNET STRATEGY

The iMac, a PC designed to make Internet access as straightforward as possible, was launched in 1998. Available in a variety of bright colors, the iMac housed its monitor and hard drive in a single unit. The new machine's popularity boosted the performance of Apple, which earned $309 million in its first profitable year since 1995. According to a March 1999 article in Microprocessor Report, the iMac's "box-to-Internet" approach did two things for Apple. "It rekindled the public's love for Apple, and it delivered the most approachable, friendly personal computer yet." In 1999, Apple released a laptop version of the iMac called the iBook.

The iMac was a key component of Jobs's strategy to gain Internet dominance by offering an easy-touse machine along with a series of free Internet services known as iTools. These iTools included 20MB of online storage space, content filters for parents, e-mail and greeting card services, and a World Wide Web site rating system called iReview. In additional to the new machines and free services, Apple also released a new operating system, Mac OS X, in 2001. As stated by Charles Haddad in BusinessWeek Online, "Based on Unix, OS X has supercharged Internet and networking capabilities. It could be the thread that ties together all the other pieces of Jobs's plan." However, deteriorating PC sales and a weak North American economy began to undercut sales and earnings at Apple in 2001. The firm's lackluster performance, along with its steadily dwindling market share, led many analysts to question Apple's future performance.