Apple (US)

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Apple has turned out to be the greatest corporate comeback story of modern times. Despite being the first (if not the only) company ever to make computers cool, Apple was gradually squeezed towards the margins of the industry during the 1990s by the combined force of the ubiquitous PC and Microsoft's Windows. But after a difficult decade, when the company's long-term future sometimes looked bleak, the business experienced an extraordinary resurrection after 2001. Initially carving out a new niche for itself in downloadable music, Apple became not just cool again, but cooler than ever before. The huge success of the iPod music player had a significant knock-on effect on sales on Mac computers, but it was nothing compared to extraordinary popularity of its successor, the iPhone, which has almost singlehandedly reinvented the business of wireless communications. The subsequent launch of iPad ushered in a completely new age of mobile computing, driving the company's market value to heights that would have been unthinkable even ten years earlier. The untimely death of presiding genius Steve Jobs did nothing to halt Apple's extraordinary rise, and the unstoppable global demand for iPhone has established Apple as the world's most valuable corporation and most widely respected technology developer.

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Adbrands Company Profiles provide a detailed analysis of the history and current operations of leading advertisers, agencies and brands worldwide, and include a critical summary which identifies key strengths and weaknesses. Adbrands Account Assignments tracks account management for the world's leading brands and companies, including details of which advertising agency handles which accounts in which countries for major markets. Subscribers may access the following website links:

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Adbrands Weekly Update 2nd Feb 2017: Apple returned to growth in the final three months of last year, the company's fiscal 1Q, after three straight quarters of declining sales. That was all thanks to iPhone 7, which pushed revenues to a new quarterly high of $78.4bn. Indeed latest figures from IDC show Apple overtaking Samsung in the final quarter to regain the lead in global smartphones for the first time in five years. (Samsung remains #1 for the year as a whole). "We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch," said CEO Tim Cook. "Revenue from Services grew strongly over last year, led by record customer activity on the App Store, and we are very excited about the products in our pipeline." However stiff competition on pricing did still prompt a decline in reported profits, down 2.5%. China, too, remains weak, with sales down 12% against the year-ago quarter (though they almost doubled compared to the three months to September 2016). In his conference call with analysts, Cook highlighted the services business - and especially paid-for digital content - as an area of particular interest to the company. He did not rule out using Apple's mammoth $246bn cash pile to acquire a content company, along similar lines to AT&T's proposed deal for Time Warner, and said the company aims to double revenues from its services business by 2020 to $50bn.

Adbrands Weekly Update 18th Jan 2017: Ads of the Week: "Stroll". The jury may still be out on Apple's AirPods, but their ads at least are lovely. Here's the best of the new crop from TBWA\Media Arts Lab, featuring Marian Hill's track "Down", and some rather nice moves from dancer Lil Buck. Isn't it incredible what the combination of old school monochrome and cutting edge, essentially invisible CGI, can achieve when paired as beautifully as this? And some splendid location scouting. The picturesquely downbeat urban environment is actually Mexico City. (But don't tell President-elect Trump!).

Adbrands Weekly Update 18th Jan 2017: Apple has been in talks with TV and movie producers about launching its own scripted media content for subscribers to Apple Music. According to a report in the WSJ, the tech giant is not planning to rival Netflix or Amazon in terms of breadth of content, but sees a limited selection of high quality proprietary content as a viable way of building subscription revenues. It is especially keen to differentiate its own streaming music service from rivals such as Spotify, which still has a much higher audience of paying subscribers. Apple has already acquired rights to an extended version of Carpool Karaoke, from The Late Late Show with James Corden, and has commissioned a semi-autobiographical series about rap star Dr Dre, now an Apple employee following the company's acquisition of his Beats business.

Adbrands Weekly Update 3rd Nov 2016: Ads of the Week: "Dive". There's more than a touch of Southern Comfort's "Whatever's Comfortable" campaign to the Apple's latest iPhone 7 spot, from Apple and TBWA\MAL, highlighting the device's sound system and waterproofing. We wouldn't normally choose to watch an ad featuring an old bloke in tight trunks, but there's something strangely hypnotic about this. It's also significantly more quirky than we're used to with Apple's usually self-reverent marketing. The pool, in case you're wondering, is Barcelona's iconic Piscina Municipal de Montjuic.

Adbrands Weekly Update 27th Oct 2016: As had been widely expected, Apple reported the first decline in annual performance since 2001 as a result of the slowdown in sales of iPhone. Revenues for the year to September slipped almost 8% to $215.6bn, while net earnings were down 14% to $45.7bn. Shipments of all the group's hardware products fell in the final quarter compared to the year ago period. Mac computers were hardest hit, down 14% in volumes and 17% in revenues, but iPhone wasn't far behind with units falling by 5% and revenues by 13%. The company didn't break out sales for Apple Watch, but researcher IDC's latest figures for the global smartwatch market estimated a 72% plunge in sales for the most recent quarter against the year before. Another key contributor to Apple's decline was the abrupt halt to expansion in China, where revenues slumped by 30% in the final quarter. Offsetting these declines, though, was a sharp increase in revenues from services, primarily streamed content but also Apple Pay and licensing income. That business jumped 24% in 4Q, beating both Mac and iPad to become the second largest revenue generator after iPhone. A big move into content could be on the horizon. It was revealed this week that Apple already made a tentative acquisition approach to Time Warner earlier this year, and CEO Tim Cook said the company is watching the media sector with intense interest. "We are open to acquisitions of any size that are of strategic value where we can deliver better products to our customers and innovate more," said CEO Tim Cook. Despite the recent decline, Apple forecast a return to growth for the current quarter, traditionally its most lucrative of the year. However it has delayed the launch of its controversial wireless headphones known as AirPods. No firm reason was given. "We don't believe in shipping a product before it's ready, and we need a little more time before AirPods are ready for our customers," said a company spokesperson.


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Background

Free for all users | see full profile for current activities: Apple founders Steve Wozniak and Steve Jobs first met in the early 1970s. Wozniak was an engineer at Hewlett-Packard, but in his spare time he designed illegal gadgets which allowed users to tap into the phone network and make long-distance calls for free. Jobs, working at HP during summer vacation from school, helped him sell a few to friends. In 1974, after some time at games developer Atari and a holiday in India, Jobs met up with Wozniak again. At the time, the information technology revolution was just beginning. Intrigued by the idea of developing a machine which could make computing power available to anyone, Wozniak and Jobs began designing their first computer in Jobs' parents' garage. Initially they tried to sell their invention to Hewlett Packard, but the company turned them down. Instead they set out to market the computer themselves, setting up their own company in early 1976 under the name Apple. There are a variety of explanations given for the choice of name. The official version is that apples were Jobs' favourite fruit and he had spent one enjoyable summer working on an apple farm in Oregon. Unofficially, the name was a tribute to The Beatles, Jobs' favourite band, who named their management company and record label Apple Corp.

After selling 50 Apple I computers to a local shop, Wozniak began designing an even more powerful machine. The Apple II arrived towards the end of the year. Again, the pair tried to sell their product, this time to another manufacturer, Commodore. Once again they were turned down. However early the following year Wozniak and Jobs were able to secure investment from Xerox, who put in $1m of funds in return for a share in the company. More significantly, they allowed Apple's small team of engineers to study some new software they had tried unsuccessfully to market. Xerox's PARC system was the first ever Graphical User Interface (GUI), using icons to represent files, bitmapped graphics and even a primitive pointing device described quaintly as a "mouse". Many of the features we now take for granted were present in this early software. However Xerox management didn't understand it and - crucially - few computers were powerful enough to make it work properly. Astonished by what Xerox's team had produced, Jobs recruited several of PARC's main developers and demanded that they incorporate a similar approach into an Apple system.

Meanwhile, the computer revolution was gathering steam. The Apple II had become a big success during 1979, especially in schools and colleges, rapidly becoming the biggest selling personal computer in this fast growing market. In 1980 the Apple III was launched, selling from upwards of $4,000. A year later 1981 IBM unveiled its first personal computer, which proved to be an enormous success. The publicity it generated also boosted Apple, with the two companies seen very much as dual champions of the new computer revolution. Apple's revenues soared, jumping from under $8m in 1978 to almost $120m. In 1982 Apple went public in an exceptionally successful IPO. Steve Wozniak was already tiring of corporate life, and perhaps also his brilliant but often insufferable partner. He left the company in 1983 in order to go back to university.

The most significant development in the fast-expanding industry was still yet to come. Although the company's main focus had been its Apple II and Apple III computers, Apple's engineers had also been experimenting behind the scenes with the PARC GUI software. They built a prototype GUI computer in 1981, known as the Apple Lisa, but it was hugely expensive at $10,000 a machine. Now however, helped by huge advances in computer technology, they were able to refined the system further, making a GUI machine which was smaller and much cheaper. Introduced in the still stunning "1984" commercial produced by ad agency Chiat/Day (see TBWA profile for more) and directed by Ridley Scott, the Apple Macintosh was launched in January 1984. It caused a real revolution in the way that consumers perceived computers. Apple's developers had taken Xerox's graphical system and greatly improved it, creating an exceptionally intuitive and straightforward operating system. The company also underlined its pioneering approach by taking a deliberate dig in its advertising at the restrictions of IBM's system. IBM was already renowned for the mantra, "THINK", first coined by its founder Thomas Watson. Apple summed up their approach with a new version: "Think Different".

However the triumph of the Macintosh computer was soon undermined by a bitter power battle within Apple's management. In 1983, after the departure of Steve Wozniak, Apple's directors appointed John Sculley, former president of PepsiCo, as the company's president & CEO. Already notorious for his arrogance and furious temper, Jobs had by now according to many accounts become "uncontrollable", intent on turning Apple into a consumer products company with or without the backing of Sculley and the Apple board. At the time, such a plan was unthinkable (though not of course 25 years later). Jobs and Sculley soon fell out, and these wrangles developed into a series of furious arguments. In 1985 Jobs attempted to orchestrate a secret coup to force Sculley out of the company. The latter retaliated, asking Apple's management team to decide which of the pair they would back. In the end they selected the more statesmanlike Sculley over difficult Jobs. In May 1985, the company's co-founder and principal architect was stripped of all operational responsibility at Apple, although he was allowed to keep the title of chairman. Shortly afterwards he resigned from the company.

Unfortunately Sculley then made what was to prove arguably the most unfortunate decision of his career. Apple was already contracting out some software development to a small company named Microsoft, which had developed an operating system for IBM. Towards the end of 1985, in a renewal of this contract, Sculley also granted Microsoft permission to use some of Apple's graphical user technology for GUI software of their own. (IBM had made exactly the same error by allowing Microsoft permission to develop its own form of DOS). The first version of Windows had already been launched that year, a primitive attempt to emulate the Apple system without breaking any patents. The injection of some of Apple's own technology into Windows was to prove the turning point for Microsoft. Version 2.0 of Windows, released in 1988, was a huge improvement, and now began to undermine the entire USP of the Apple platform over PC. Almost immediately Apple issued Microsoft with a lawsuit for infringing copyright, but the case was eventually dismissed after five years of wrangling because of the permissions granted in Sculley's 1985 deal. Sculley himself departed Apple almost immediately afterwards.

At the same time the company was on the receiving end of a lawsuit from Apple Corp, the management company which handled the business affairs of the surviving members of the Beatles. Despite official claims that the company had been named innocently after Steve Jobs' favourite fruit, there was also plenty of evidence that he had used the name as a homage to the celebrated pop group. The apparent breach had first come to the attention of Apple Corp in 1979, but the two sides had then amicably agreed a private arrangement which allowed the computer company to continue using the name provided there was no involvement in music technology. However the new Apple IIe launched in 1985 was capable of recording and playing digital music. This contravened the original agreement with Jobs. The suit was finally settled out of court with a reported $26.5m payment by Apple Computer.

While Apple continued to improve upon its range of products during the 1980s, ousted founder Steve Jobs was establishing not one but two new careers. In 1986 he set up NeXT Inc, intending to shake up the industry all over again with a new range of even more revolutionary computers. He also paid Star Wars producer George Lucas $10m to buy a small film company which was developing computer animated shorts. NeXT's first computer was launched in 1988, and a further four models were introduced over the following years, but the company proved to be a spectacular failure. NeXT closed down its computer hardware business in 1993 after several years of huge losses, and turned its attention to software instead, launching an object-oriented programming system called Nextstep. However this too failed to take off. Jobs' other project, now renamed Pixar Studios, fared much better. In 1991, Pixar agreed a partnership with The Walt Disney Company under which Pixar agreed to deliver a series of five animated movies for which Disney would manage worldwide marketing and distribution. Toy Story, released in 1995, was the first ever feature film produced entirely on computer. A huge worldwide success, it was the highest-grossing film in the US that year, and one of Disney's biggest ever hits.

Meanwhile, the 1990s had proved a difficult time for Apple. As a result of the popularity of Windows software and falling prices for IBM-compatible machines, Apple had lost its dominance of the market by the end of the 1980s. The company had also introduced a series of innovative but flawed new products, including the Apple Newton PDA (launched 1993, withdrawn 1997) and home multimedia system Pippin (a partnership with Bandai, launched 1994, dissolved 1998). More importantly, facing enormous competitive pressure from the PC platform, the company agreed to make concessions to the rival platform to improve cross-platform communication, commissioning Motorola, and later IBM, to produce PowerPC microprocessors. It also licensed its operating system to other developers for the first time, allowing US competitor Power Computing and others to develop their own Mac clones. This had a further negative effect on sales.

In an ironic reversal, Apple Computer's new CEO Gil Amelia agreed in 1996 to acquire Steve Jobs' NeXT Computer for $430m. Shortly afterwards, Jobs was reinstated as Apple's chairman, and eventually replaced Amelia as CEO. With Apple now heading deeper into losses and even towards bankruptcy, Jobs announced a complete restructuring of the business, shutting down unprofitable lines (like the Newton), terminating third-party licenses of the Apple operating system, and championing a revamp of the company's computers with a new emphasis on stylish, cutting edge design from an inhouse team supervised by British-born Jonathan Ive. The new Power Mac G3, introduced in 1997, paved the way for this exciting new look, which came into its own with the 1998 launch of the iMac, which quickly became the fastest-selling computer in history. The stunning new machines threw out the rules for how computers should look, brightly coloured or even multicoloured instead of plain beige. For the first time since Apple Macintosh's debut almost 15 years earlier, computers had become design objects again. Crucially Jobs also negotiated a truce with Microsoft. The software giant acquired a small investment stake in Apple for $150m. In return, Apple agreed to bundle Microsoft's Internet Explorer with all of its new products, and agreed to endorse an Apple version of Microsoft's Office software.

It was beginning to look like a new golden age for Apple after the dark days of the early 1990s. These new machines chimed perfectly with the dotcom boom, in which style and "cool" took precedence over more mundane requirements like financial solvency. Unfortunately the chill economic wind which followed quickly after the internet boom also took its toll on Apple's finances. Following a record year in 2000, the company saw its revenues for 2001 plummet by a third within the space of a single year. Nevertheless Apple continued to stay on the cutting edge of computer design, with products such as the LCD iMac, introduced in 2002, which looked more like a cross between an anglepoise lamp and a plasma screen than a traditional computer.

As the professional market continued to shrink for Apple, the company pushed aggressively into the consumer sector, with a particular focus on digital music downloads. Apple launched the iPod MP3 player in 2001, supported by the accompanying iTunes operating system. In 2003, the company announced a further move into this area, negotiating agreements with several major record companies to make digital downloads available from a custom-built iTunes online store. Initially around 200,000 tracks were made available, with more to follow. Also in 2003, Jobs shocked financial analysts by suggesting that the company could also be interested in acquiring record company giant Universal Music. The idea was quickly retracted, but there seemed little doubt that Apple saw online music as being an important element in its new business plan.

The launch of iTunes led to a renewed skirmish with the former Beatles' business holdings company, Apple Corp, which issued a new lawsuit in summer 2003. Although Apple Computer had already chosen not to provoke Apple Corp by branding iTunes with the Apple name, it did use its familiar bitten-apple logo on the service. Apple Corp demanded that the logo be removed, and also called for damages and compensation. The huge success of the iPod and the iTunes service over the following three years merely added impetus to that wrangle, which finally came to court in London in March 2006. However the judge eventually ruled in favour of Apple Computer, and dismissed the former Beatles' suit.

Apple was also involved a year later in a legal skirmish with Cisco Systems, after it announced the forthcoming launch of its iPhone mobile handset. The iPhone trademark was, it transpired, already registered to Cisco. The two companies quickly reached an agreement in February 2007 to share the trademark and work together to develop its profile.

In the mean time, in a further bid to boost profit margins, Apple announced plans to change its supplier of processor chips from IBM and Freescale, who had supplied the PowerPC chips then used in Apple's desktop and notebook systems. Instead, from 2006, Intel became the main supplier of Apple's processors. That move signalled the effective end of the long-running battle between the two opposing camps of Apple and "Wintel" (Windows and Intel). Even more significant was the subsequent move by Apple to release a patch allowing Mac users to run standard Windows software on their machines.

The iTunes music store firmly established the iPod as the coolest new-tech gadget of the year, and local online stores were opened for customers in several European countries during 2004. By early 2008, iTunes had become the second largest music retailer in the US, trailing only Walmart. Despite the subsequent launch of numerous rival music players and download services, none provided a challenge compelling enough to rival Apple's offer. Perhaps the most notable failure was Microsoft's Zune device, launched in 2006 and eventually discontinued five years later because of lack of demand. Another threat was the growing restlessness of record companies over the dominance of iTunes, and Apple's apparent inflexibility on pricing and other issues. The record groups made repeated attempts to support or even set up a rival service which might reduce iTunes' power, but these attempts also eventually fizzled out, countered by moves by Apple to appease their more serious objections, notably an agreement towards the end of 2008 to drop digital rights management of tracks and also introduce variable pricing.

From this point onwards, Apple's technology has developed in an almost seamless straight line. The launch of a video iPod opened a whole new revenue stream with the sale of music videos, TV episodes and feature length movies. In 2008, Apple agreed a deal with most of the major Hollywood studios to start selling video downloads of movies on the same day they are released on DVD. The iPod also provided the platform for a jump into a whole new market. The addition of wireless connectivity transformed the iPod into the iPhone, launched in the US at the end of June 2007. Like other so-called "smart" phones then being marketed by the likes of Nokia or Blackberry, this combined a mobile phone handset with a web browser, music and video player. But unlike rival products at the time, it was far more compact and stylish, plainly designed to appeal to the wider consumer market rather than merely high-end business users.

Although demand for the iPhone was intense from the start, the real breakthrough for the device was the launch of a 3G version in July 2008, with faster and more efficient voice and data communications, as well as built-in GPS. The iPhone was rolled out to almost 70 markets by the end of 2008. During 2009, the various exclusivity agreements tieing the device to individual mobile carriers were systematically relaxed allowing competing services to offer the iPhone to their customers. At the same time availability was rolled out to an ever larger number of countries, establishing the iPhone as a truly global device. More sophisticated versions of the iPhone have also followed and these in turn paved the way for a new device.

The iPad tablet computer, which launched in March 2010, was in effect a larger version of the iPhone, with a 10-inch touch screen and a wide range of bundled software, not just iPhone-style apps, but also iBooks, a new service intended to revolutionise the e-reader market. First year sales for the iPad were an astonishing 7.5m units, generating revenues of $5.0bn. Just one year later, the company launched iPad 2, thinner and lighter than its predecessor, and complete with two cameras, one front one back, like the newer iPhones. Several improved versions of the iPad have been launched since, offering higher resolution screens, faster processors and more sophisticated connectivity. In November 2012, the company also launched a long-rumoured "mini" version with a smaller screen and lower price, designed to head off growing competition from other tablets introduced by Samsung, Google and Amazon.See full profile for current activities


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