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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.
Interbrand's Best Global Brands survey ranked Apple as the world's #1 brand for the first time in 2013, toppling Coca-Cola from the top spot after 13 years, with an estimated brand value of $98.3bn, up 28% on the year before. That valuation has more than doubled over the next five years, reaching $215bn in 2018. Kantar's Brandz survey puts Apple in 2nd place in 2016 (behind Google) with a valuation of $228.5bn. Both surveys use different measurement criteria.
Who handles advertising? Click here for Agency Account Assignments for Apple from Adbrands. Apple declared advertising expense in fiscal 2015 of $1.8bn, having doubled over a period of four years. No figures have been declared since then.
See IT Sector index for other companies.
As a result of the huge popularity of the iPod, the iPad and especially the iPhone, Apple has made an extraordinary comeback from near-death in the 1990s. These products have not only repeatedly reaffirmed Apple's cool status and its cultural relevance, but also reignited sales of the company's core computer products. In fiscal 2005, Apple finally manage to regain a level of financial strength it had not experienced since the glory days of 2000, with revenues and profits at record levels. It continued to hit new heights every year until 2016, when it reported its first decline in year-on-year growth for 15 years. There was a significant rebound during 2017, but not quite enough to surpass 2015's record highs.
That 2016 plateau was hardly a surprise. Apple's extraordinary growth had already lasted for much longer than expected. Market sentiment first turned against Apple at the end of 2012 because of the relentless competition, mainly from Samsung, but this threat was soon dissipated by the continuing global fever for newer versions of the iPhone, and ever more spectacular financial results. From summer 2013, the continuing rise of Apple's share price seemed unstoppable. In 2015, the company's market value was almost $775bn, then a record for any company in history. Even after a couple of temporary reversals, that figure has continued to trend upwards, topping $890bn by late 2017. Apple remains unarguably the leading force within the global technology industry in terms of product development and design.
For years, there were just two major computer platforms in the global industry: Apple's Macintosh and the "personal computer" or PC. The latter used to be called IBM-compatible, as a result of IBM's near-disastrous decision to allow its technology to be cloned by other manufacturers. That move lost IBM its dominance in personal computing by allowing thousands of other companies into the market, but it also established IBM-developed technology as the standard.
Fearing a similar fate, Apple refused for years to license its own core operating system, but the end result was largely the same. Instead of being overtaken by its own clones, it was instead swamped by IBM's. That could never have happened had it not been for another dreadful corporate error, when in 1985 Apple allowed a much smaller software company then called Micro-Soft to use aspects of its graphical user interface. This effectively provided the foundation for the Windows operating system, which came close to causing Apple's collapse a decade later.
The key factor in Apple's survival during those years was its close relationship with the creative community. Apple has long been the platform of choice for graphic designers, and the company has remained at the forefront of development of applications for digital video production and editing, special effects, audio production and sound design. Its lead in this field and the loyalty it has always commanded from users are among the brand's greatest strengths. Historically, schools, colleges and universities have also played a large part in the company's development, and were essential to its survival at its low point. In 2002, as much as one-fifth of Apple's combined revenues was derived from the education market. Those times are long-gone. Apple computers now have a huge following globally. They remain without question the most stylish and luxurious in the market, and sales have risen strongly on the back of the company's ever-strengthening profile, in many cases to customers whose first experience of the business was through an iPhone or iPod.
All Apple's computer hardware is badged under the Mac (formerly Macintosh) brand name. At the top of the range, targeted predominantly at corporate customers, are the company's servers and high-end Mac Pro desktops. The company produces (slightly) less expensive and even more stylish iMac desktops and MacBook Pro and MacBook Air notebooks for the consumer and educational market. (A lower-priced desktop model, the eMac, was discontinued in 2007). In 2005 the group attempted to exploit rising sales of its computers with the Mac Mini, a stripped-down desktop computer priced at under $500, and sold without a monitor, mouse or keyboard. Sales of that line were never more than modest. Sales of Mac computers hit a new high in ye 2015 of 20.59m units, before falling back the following year. A strong recovery during fiscal 2017 failed to beat 2015's volumes, although revenues from Mac computers reached a new high of $25.85bn. In calendar 2016, Apple was the #5 computer manufacturer worldwide, and #3 in the US after HP and Dell.
The company's software division creates the core Apple OS X operating system, along with numerous component cations including the Safari web browser, multimedia cation Quicktime (also widely used on the PC platform) and other consumer cations include video editing suite iMovie, photo editor iPhoto, productivity suite iWork and others. For the professional community, the company produces sophisticated video authoring and editing software Final Cut, visual effects application Shake, and photography tool Aperture. Total software sales are modest compared to the group's hardware.
Yet the group's core computer hardware and software products are now eclipsed by its other far more widely used devices. The introduction of the iPod in 2001 marked the beginning of Apple's transformation from a computer company to a much more wide-ranging technology developer. Its huge success provided Apple with several key benefits. The move to make it compatible with PCs as well as Macs allowed Apple to extend its influence deep into what had previously been enemy territory. At the same time, it effectively relaunched the Apple brand, causing sales of Mac computers to rise sharply in its wake. But its key benefit was to provide the platform for the launch of what may well ultimately be seen as Apple's single greatest triumph, the introduction of the iPhone, which almost single-handedly revolutionised the nature of the mobile phone market. It too spawned the iPad, which has had a seismic effect of its own on the computing sector.
The launch of the iPhone and iPad has also created an entirely new industry segment, through users' apparently insatiable desire for apps, self-contained software programs designed specifically to run on these devices. That demand has proved a boon to smaller software developers, as well as a valuable additional revenue stream for Apple itself, which sells those programs through the iTunes App Store. That in turn prompted the launch of an inhouse sales unit to sell mobile advertising on the iPad, iPhone and iPod Touch devices. The iAd sales platform launched during 2010, but did not run smoothly. It was eventually shut down in 2016. Apple was also one of the first companies to actively market cloud computing services to its customers to provide a seamless link between its various desktop and mobile devices. The next logical step was the introduction of a mobile payments system for the iPhone and iPad, and this too followed in 2014 in the form of Apple Pay.
The iPhone and associated products contributed more than half of Apple's combined revenues for the first time in the year ending September 2012. Since then, sales of iPhone have defied expectations, continuing to grow exponentially as a result of the release of new products, such as the 5s and 5c in 2013, and iPhone 6 and larger-screened iPhone 6 Plus at the end of 2014. A key development that year was the company's breakthrough into the previously restrictive Chinese market. Strong demand in China elsewhere pushed unit sales of iPhone to new highs. In fiscal 2015, volumes of iPhone soared by a further 37% to an extraordinary 231.2m units.
Inevitably, though, what goes up must come down. An element of saturation in the global smartphone market, combined with the emergence of a new wave of Chinese manufacturers offering similar products at a significantly cheaper price led to a sudden slowdown during 2016, especially in China. Units for fiscal 2016 slipped year-on-year for the first time, falling 8% to 211.9m devices. A recovery during ye 2017 lifted volumes back to 216.76m, with revenues of $141.31bn.
A similar double whammy of saturation and competition had already taken some of the shine off the iPad, sales of which peaked in ye 2013 at over 70m units. That decline slowed slightly during 2017, but the general trend remains downwards, with total volumes of 43.75m units and sales of $19.22bn. Unit sales of the iPod - which has been supplanted by the iPhone as a personal music device - have fallen even more sharply. Most iPod models were discontinued during 2017, with only the iPod Touch still available for sale.
Needless to say, the development of iPhone and iPad has not been without a few obstacles. Most of the original generation of smartphone developers, such as Nokia and Blackberry, were entirely wrong-footed and saw their share of the rapidly growing market collapse. Other companies, such as the old Sony Ericsson or LG, were too slow to develop equivalent devices and were also brushed aside. However, one key challenger did emerge. Ironically Samsung is also a key supplier of the components which form the guts of the iPhone. Its Galaxy handsets and tablets remain the main global rival to iPhone and iPad, and it became the leading smartphone manufacturer ahead of Apple in 2012. In an attempt to slow Samsung's growth, Apple issued a series of lawsuits in different countries around the world, alleging patent infringement and blatant copying of design and technology. A US court found in favour of Apple in 2012, awarding damages of $1bn against Samsung. (That amount is still subject to revision as a result of various appeals and counter-appeals). Yet despite this and other legal victories, Samsung has now successfully developed enough of its own proprietary technology to avoid future clashes. Since then, though, Samsung too has come under increasing pressure from low-cost competitors
According to market watcher IDC, Apple was the global #2 in 2015 with sales of 232m units, equivalent to 16.2% share of the global smartphone market. Samsung's volumes were 325m units, or 22.7% share. However, the successful launch of iPhone 7 allowed Apple to claw back the global lead in 4Q 2016 with 18.3% global share (to Samsung's 18.1%).
In the tablet market, Apple still leads but its margin has been steadily cut, and that process has been exacerbated by a sharp slowdown in total sales. Overall share had reduced from 52% in 4Q 2011 to 24.4% for full year 2016, according to IDC. However, Apple remained well ahead of Samsung (at 15.2%), Amazon (6.9%), Lenovo (6.3%) and Huawei (5.6%).
However, even as Apple's hardware business seemed to reach a plateau in 2016, its strength as a retailer of its own physical products, and perhaps more significantly of other companies' digital content, continues to grow. Apple already has an enormously successful physical retail operation. Historically, most Apple dealers worldwide were independently owned, merely franchised to sell Apple products. However, during 2001 the company began opening its own stores, first in its domestic market and then globally. These shrines to all things Apple serve as a playground for computer users as well as an invaluable support centre.
By September 2018, there were more than 500 Apple Stores worldwide, just over half of them in the US, and the rest in 18 international markets including Canada, China, Japan, the UK and Italy. Judged by revenues per square foot of retail space, Apple Stores are the world's most successful retail environments by a considerable margin. Average annual revenues per sq foot in the US exceed $5,545, almost twice the next most lucrative retailer, Tiffany. Apple's own direct retail channels account for 25% of total group revenues.
Even more dynamic than its physical network is the group's still rapidly expanding digital sales channel, led by the iTunes virtual store, selling video content, music and apps. This is the engine behind what became Apple's second biggest income stream in fiscal 2016. Revenues from what Apple calls Services jumped by 22% that year to $24.35bn, overtaking both iPad and Mac, and rose by another 23% in ye 2017 to $29.98bn.
As a result of Apple's boundary-breaking innovation, there is always considerable speculation regarding what might be its next frontier. For years the company was rumoured to be developing a reinvention of the traditional home TV, perhaps incorporating a wireless streamed service and a voice-operated operating system. The group already markets Apple TV, arguably one of its less successful products, which allows content to be streamed from online services or other devices within the home environment. However, there were indications in 2015 that the company's focus had switched from TV hardware development towards a more sophisticated streaming content delivery service.
An unusual diversification in 2014 was the acquisition of premium music accessories brand Beats Electronics, best known for its high quality headphones. A deal was concluded in May 2014, in which Beats was acquired for a handsome $3bn in cash and stock. The company's leaders Dr Dre and Jimmy Iovine both joined Apple's executive team. Though these stylish devices fit neatly with Apple's other products, a main attraction of the business appears to have been its curated streaming service Beats Music, repositioned as a complement to iTunes. In 2015, the group relaunched Beats as a DJ-hosted radio station and also unveiled a new self-select subscription-based streaming media service under the name Apple Music. At the end of 2017, Apple took further steps to enhance its music offering with the acquisition for an estimated $400m of music recognition service Shazam. In early 2018 it will launch a Siri-powered home speaker, the HomePod, along similar lines to Amazon's Echo and other devices.
Another unusual direction was the development of the company's Apple Watch, a venture into wearable technology. Launched in Spring 2015, the Watch pairs with iPhone to provide a handy wrist-mounted communications system. Sales got off to a strong start, but consumer interest flagged significantly during 2016. For 3Q 2016, researcher IDC estimated a 72% plunge in sales of Apple Watch compared to the year-ago quarter. Yet here too, demand seems to have rebounded during 2017. Sales figures were not disclosed but Apple said volumes jumped by 50% year-on-year in the final quarter of fiscal 2017.
Also in 2015, rumours emerged that the group was experimenting with development of its own electric vehicle. The group is understood to have assembled a huge inhouse team to work on this project, code-named Titan. However by late 2016 there was evidence that the inhouse vehicle had been mothballed, and that the company is instead working on self-driving technology that can be licensed to a separate manufacturer.
Apple's overall financial performance has been nothing short of spectacular in recent years. Prior to the launch of iPod in 2001, revenues bounced up and down for several years, peaking at just under $8bn in 2000 before falling sharply by a third a year later. The iPod triggered a sharp upward trend after that, one that has been exaggerated further by the iPhone and now iPad. For the year to September 2011 alone, revenues jumped by an extraordinary 66% to $108.2bn while net income leapt 85% to $25.9bn. Those levels would have seemed entirely impossible even five years earlier.
In summer 2011, Apple became for the world's most valuable corporation for the first time, with its market capitalisation exceeding that of oil giant ExxonMobil at over $376bn. Almost incredibly, Apple's share price continued to defy gravity in the months following Steve Jobs' death, rising at an even faster rate than before his demise, and consolidating its lead as the world's most valuable company. In Spring 2012, the company's valuation exceeded the extraordinary level of $600bn, and continued to rise over the following months.
However the fierce competitive pressure from Samsung began to show itself in the company's full year results for the first time. Revenues for the year to September 2012 continued to soar, rising 45% to $156.51bn - a record level for any technology company - while net income rocketed 61% to $41.73bn. However, by now, Apple had to some extent become a victim of its own success. Investors were worried by lower than expected volumes for iPad sales in the final quarter, slipping profit margins and a lack of completely new devices in favour of upgrades of existing products. That caused a sharp fall in Apple's share price. The following year, that increasing pressure on price and margins, resulted in an 11% decline in full-year profits to $37.04bn, although revenues for the year to Sept 2013 rose by 9% to a new high of $170.9bn.
The following year witnessed a renewed surge in growth. For the year to Sept 2014, group revenues rose 7% to another high of $182.80bn, while net income climbed by the same margin to $39.51bn, still slightly below 2012's peak. The year after was even better. For the first quarter alone revenues rocketed 30% to $74.6bn, while net income soared 38% to $18.0bn. For just three months! That represented the largest quarterly profit in corporate history, and more than most of the Top 500 US companies had made in the past five years combined. For the full year to 2015, revenues soared to an astronomical $233.72bn, while net income reached $53.39bn, the highest annual profit ever recorded by any corporation.
Yet, as had been widely expected, for the year to 2016, Apple finally reported its first decline in annual performance since 2001 as a result of the slowdown in sales of iPhone, and to a lesser extent the impact of currencies. Revenues for the year to September slipped almost 8% to $215.64bn, while net earnings were down 14% to $45.69bn. All reporting regions except Japan showed a decline in both revenues and operating profit.
There was a significant rebound in year ending 2017, though not enough to beat 2015's peak. Revenues and earnings both rebounded by 6% to $229.23bn and $48.35bn respectively. The US accounted for 37% of revenues, or $84.8bn. Greater China was the next biggest market at $44.8bn (down from a high of $58.7bn in 2015), followed by Japan ($17.7bn). Despite dividends and stock buybacks, Apple is sitting on an ever-increasing cash pile of almost $269bn at the end of fiscal 2017, having more than doubled in four years. This alone generated $5.2bn in interest income.
Total sales for the year to Sept 2018 set a new record of $265.6bn, up 16% against the previous year. Net income jumped 23% to $59.5bn, including an additional lift from lower tax rates.
The driving force behind Apple for more than 30 years was co-founder and CEO Steve Jobs. As if further proof were needed of Jobs' magic touch, at least since 1997, for 15 years or so he was also the CEO of animation studio Pixar. He sold Pixar to distribution partner Disney in 2006 for $7.5bn, becoming Disney's largest individual shareholder, with a stake of just over 7%. Renowned for his obsessive pursuit of technological brilliance, for arrogance and a fearsome temper, and for his tyrannical involvement in every aspect of his company from product design to menu choices in the cafeteria, he became the living embodiment of Apple. This repeatedly led to questions of what the business would be like without him, especially once its sales had soared to $70bn or more. When, during 2007, there seemed a strong possibility that Jobs might be implicated in a stock option backdating scandal, one analyst predicted that his forced resignation would cause a 20% fall in Apple's share price. In fact, Jobs escaped blame and that forecast was not put to the test. (Two senior advisors were, however, implicated and were forced to resign).
More serious though was the question of Jobs' health. In 2003, just as Apple was beginning to take off for the second time in the wake of iPod, Jobs was diagnosed with pancreatic cancer, almost always an untreatable illness which leads to a speedy demise. Fortuitously, Jobs' form of pancreatic cancer appeared to be a rare operable strain, and he sailed through the ensuing surgical procedure. However concerns remained. During 2008, Apple's share price fell sharply after Jobs was seen to have lost a significant amount of weight. These fears were temporarily assuaged by assurances that all was well, only to reoccur at the end of the year when Jobs cancelled plans to fill his usual slot at the annual Macworld conference.
Under pressure from investors, Jobs admitted in January 2009 that he was suffering from a mysterious but, it was claimed, not a life-threatening "hormone imbalance". Less than two weeks later, he issued a further announcement that his health issues were "more complex than originally thought", and that he would take a six month leave of absence to fight his illness. In June 2009 it was revealed Jobs had successfully undergone a liver transplant during his leave of absence, and was ready to return to work. He returned to the company late summer. In January 2011, however, Jobs took another medical leave of absence, with no prospective return date scheduled. In August, he stepped down as CEO, becoming chairman instead. He died on October 5th 2011, aged just 56.
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.
Last full revision 2nd November 2017
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