Apple Computer paradoxically exists as both one of America's greatest successes and failures, having ignited the personal computer industry but also representing opportunities lost. Founded in 1976 by Steve Jobs and Steve Wozniak, Apple saw early success with products like the Apple II but struggled against competition from IBM PCs in the 1990s until Jobs' return in 1996. Jobs reinvigorated Apple with innovative designs like the iMac and strategic partnerships while transitioning the company to focus more on software and digital lifestyle products and services. However, Apple remains a relatively small player dependent on new hits while addressing whether it can continue competing against dominant Windows PCs.

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Apple Computer, Inc.: People and DesignCreate Apple’s Future
Apple Computer paradoxically exists as both one of America’s greatest successes
and one of its greatest failures to achieve potential. It ignited the personal computer
industry in the 1970’s (1), bringing such behemoths as IBM and Digital Equipment
almost to their knees. At the same time, Apple is an example of opportunities lost. It
represents a fascinating microcosm of American business as it continues to utilize its
strengths while reinventing itself.
Corporate History (2)
The history of Apple Computer is a history of passion among its founders,
employees, and loyal users. A pair of Stevens, who from an early age had an interest in
electronics, started it. Steven Wozniak and Steven Jobs initially utilized their skills at
Hewlett Packard and Atari, respectively. Wozniak constructed his first personal
computer, the Apple I, and along with Jobs, created Apple Computer on April 1, 1976.
However, it wasn’t until 1977 and the introduction of the Apple II, with its plastic
case and color graphics, that Apple really took off. The addition of a floppy drive in early
1978 added to the popularity of the new computer. By 1980, the release of the Apple III
found the company with several thousand employees and Steven Jobs at the helm.
Early on, Apple Computer exhibited an extreme emphasis on new and innovative
styling in its computer offerings. Jobs took a personal interest in the development of new
products, including the Lisa and the legendary MacIntosh, with its graphical interface and
3.5 inch floppy disk.
The passion that Apple is so famous for was clearly evident in the design of the
MacIntosh (Mac). Project teams worked around the clock to develop the machine and its
graphical user interface (GUI) operating system (Mac OS). Based loosely on a design

2. developed by the Xerox Palo Alto Research Center, the use of graphical icons to create
simplified user commands was immensely popular.
When IBM entered the personal computer market, Jobs recognized the threat
posed and realized that it was time for Apple to “grow up” and be run in a more business-
like fashion. In early 1983, he persuaded John Sculley, then president of Pepsi-Cola, to
join Apple as president. The two men clashed almost from the start, with Sculley
eventually ousting Jobs from the company.
The launch of the Mac, with its increased speed from a Motorola chip and its
expandability, reinvigorated Apple’s sales once again. In tandem with the LaserWriter,
the first affordable PostScript laser printer for the Mac, and Pagemaker, one of the first
Desktop Publishing programs, the Mac was an ideal solution for inexpensive publishing.
However, by the 1990s the proliferation of IBM PCs and clones was saturating the
personal computer market. In addition, Microsoft launched Windows 3.0, a greatly
improved version of the Wintel operating system for use on IBM PCs and clones. While
in 1991, Apple had contemplated licensing its Mac operating system to other computer
manufacturers and making it run on Intel-based machines, the idea was nixed by then
chief operating officer (COO) Michael Spindler.
Innovative Designto the Rescue
Apple continued to rely on innovative design to remain competitive. In the 1990s,
Apple introduced a very popular notebook computer line, along with the unsuccessful
Newton personal digital assistant. Sculley, having lost interest in the day-to-day
operations of Apple, was eventually forced out and replaced with Michael Spindler.
Spindler oversaw a number of innovations, including the PowerMac family, the
first Macs to be based on the PowerPC chip, an extremely fast processor that was 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. In addition, Apple

3. finally licensed its operating system to a number of Mac-cloners, but never in significant
numbers.
After a difficult time in the mid-1990s, Spindler was replaced with Gil Amelio,
the former president of National Semiconductor. This set the stage for one of the most
famous returns in corporate history.
Jobs’ Return
After leaving Apple, Steven Jobs started NeXT computer, an advanced personal
computer with a sleek, innovative design. However, with its proprietary software, the
device never caught a large following. Jobs then co-founded Pixar computer-animation
studios in the late 1980s. It co-produced a number of movies with Walt Disney Studios,
including the popular Toy Story. (3)
In late 1996, Apple announced the purchase of NeXT and Jobs returned to Apple
in an unofficial capacity as advisor to the president. However, when Gil Amelio resigned,
Jobs accepted the role of “interim CEO” (i CEO) of Apple Computer and wasted no time
in making his return felt.
Jobs announced an alliance with its former rival, Microsoft. In exchange for $150
million in Apple Stock, Microsoft and Apple would have a 5-year patent cross-license for
their graphical interface operating systems. He revoked licenses allowing the production
of Mac clones, and started offering Macs over the web through the Apple Store.
In addition to many new product offerings, Jobs introduced the iMac, with a
revolutionary see-through design that has proved popular among consumers. This was
followed shortly by the iBook, a similar-type portable computer. Apple once again was
viewed as an industry innovator, with its revolutionary designs and innovations. (4)
Unfortunately, Apple remains a relatively small player in the computer industry.
While its products are wildly popular among a dedicated set of users, it still commands

4. only a little over five percent of the total computer market. It remains locked in constant
boom-or-bust cycles, dependent on its ability to turn out a stream of new product hits.
What Does the Future Hold?
Apple is faced with a stark reality: Can it continue to offer both hardware and
software solutions in a rapidly changing technology environment? Its early decision to
keep its technology proprietary, as opposed to IBM’s decision to support an open
architecture system, has proved to be a costly strategy to support in the long run.
Some argue that Apple should reinvent itself once again, and this time it should
concentrate on software. Apple is gradually admitting that it can no longer afford to fight
the Wintel system, the combination of Microsoft’s Windows operating system and the
Intel processor. Apple’s new product introductions fail to attract many present non-Mac
users — just 15 per cent of its revenues come from Wintel customers. (5)
Apple is betting that its new operating system, the Mac OS X, will be a big hit
with computer users. It is the largest update in the operating system since it was first
released in the mid-1980s. Recognizing the need to attract new Mac users rather than just
recycle present Apple enthusiasts, Apple is emphasizing the compatibility of their system
with Windows. “The transition to a Mac is easy in part because you’ll continue to use the
same applications you already know … Word, PowerPoint and Excel … And, thanks to
exclusive features, the Mac versions improve on their Windows counterparts. Office
documents are fully compatible between Mac and Windows, so you can share everything
from spreadsheets to presentations. …[T]he Mac is at home on PC networks … making
the business of sharing files and printers with PCs entirely painless.”(6)
Part of Apple’s new corporate strategy, developed in the face of a massive slow-
down in the technology industry, involves taking advantage of the explosion of personal
electronic devices — CD-players, MP3 players, digital cameras, DVD-players, etc.—
by initially building Mac-only applications that add value to those devices. Just as

5. iMovies adds tremendous value to Digital Cameras, iDVD adds value to DVD-players,
and iTunes adds value to CD and MP3 players. However, Apple recognizes the size of
the PC market that is not being reached and has made iPod and iTunes into Windows
compatible products. In its first week, iTunes sold 1.5 million songs and captured 80
percent of the market share of legal music downloads. It is Apple’s hope that making
Apple products the “Digital Hub” of the new “Digital Lifestyle” will revitalize Apple’s
sales and guarantee the long-term security of the company. (7)
Apple is also eyeing the global market and in November 2003, opened its first
store in Japan. With five floors of Apple products and applications located in Japan’s
Ginza, it offers an experience to rival that of the Sony store in the same shopping area.
Apple is hoping to develop a global presence and to attract new users internationally. (8)
Review Questions
1. Why is Apple not a dominant provider of personal computers?
2. Evaluate Apple in the context of the new economy. Can Apple survive?
3. Should the firm provide its operating system to run on both Apple and PC systems?
4. What would you suggest Apple do to popularize the Apple computer line?
You Do the Research
1. Look at the Apple homepage’s Top 10 reasons to switch, what do these indicate about
Apple’s strategy?
2. Locate five sources on the Web that discuss Apple and the history of the personal
computer market.
Case Endnotes
1. Apple Computer homepage, http://www.apple.com.
2. Ibid.
3. Pixar homepage, http://www.pixar.com/.
4. Apple Computer homepage, op. cit.

6. 5. Tam, Pui-Wing. “Apple Seeks New Image as Producer of ‘Killer Apps,’” Wall Street
Journal, January 5, 2001: B1& B4.
6. “Top 10 Reasons to Switch,” Apple Computer homepage, op. cit.
7. Apple Computer homepage, op. cit.
8. Ibid.