Apple is currently the world’s largest company, but it hasn’t always been plain sailing. Established on 1 April, 1976, Apple has moved from late-CEO and co-founder Steve Jobs’ garage, to offices in 317 locations around the world, plus 361 Apple Stores. The past 11 years has seen Apple redefine consumer electronics and become a household name. With Apple at the height of its success, we look back over the past 36 years to see what made it the company it is today.
1976: Jobs, Wozniak and Sculley
Apple goes from strength to strength but a new CEO leads to a power struggle
Today Apple Inc. is the world’s most valuable company. The iPad, iPhone and Mac are now a huge success. However, things could have turned out quite differently. Speaking in 1998, Apple co-founder and late-CEO Steve Jobs said: “Without Blue Box, there would have been no Apple.”
Blue Box? Apple’s story has its roots in US counter-culture, as hippy college dropout Jobs was into Buddhism, vegetarianism and technology. That last interest led him to take a part-time job at Hewlett-Packard in 1972, with friend Steve Wozniak (‘Woz’), who would later become another Apple co-founder. Together they eventually joined the Homebrew Computer Club, a regular meeting of engineering hobbyists. They struck a good balance, Wozniak said. “I was shy, he was outward.” In latter years, “I created, he sold.” “Woz was the first person I met who knew more about electronics than I did,” Jobs said.
Woz and Jobs founded Apple with third partner, Ron Wayne, in 1976. Along the way they learned the secrets of Blue Box phone phreaking from venerable programmer and phone phreak, John Draper, aka, Captain Crunch. Highly illegal (Draper went to jail three times for it), this was a way of tricking the telephone network into delivering free calls. Jobs said this taught both men about how to think about networks and computer machines.
Wozniak, it emerged, was an engineering genius. He saved the cash to design his own computer, based on the MOS Technology 6502 chip. Jobs took the prototype to local computer store The Byte Shop, sold 50 units and Apple was in business. The Steves worked day and night to build those machines; 200 were eventually made. This was followed by the more successful Apple II and Apple III. Apple III – aimed at taking on IBM in the business environment – had a fatal flaw. Jobs had refused to fit a fan as he wanted heat to dissipate through the system chassis. It didn’t work.
Damaged by overheating, thousands of Apple III’s were recalled. But this didn’t stop Apple’s initial public offering on 12 December, 1980 from generating record-setting capital. More than 40 Apple employees left work as wage-earners and returned the next day as millionaires.
However, Jobs soon committed his first big error. Jobs and the company board felt Apple needed a business-class executive to lead it. “Do you want to sell sugared water for the rest of your life or come with me and change the world?” he asked Pepsi president, John Sculley, as he wooed him to the role. Sculley joined Apple as CEO in 1983. Things started well enough, but Sculley was unable to handle Jobs’ unconventional management and product development style and a power struggle ensued.
Asked to resign in 1985 aged just 30, Jobs said: “I feel like somebody just punched me in the stomach and knocked all my wind out.” That same year, Microsoft quietly introduced Windows 1.0. Jobs moved on to found NeXT Software and in 1986 he acquired Pixar animation studios from George Lucas for under $10m.
1985-97: Sculley, Spindler and Amelio
The trio of leaders who followed in Jobs’ footsteps enjoyed limited success in the role
By the time Sculley took over, Apple had developed a highly politicised product-based management. Through a series of painful redundancies, (which Steve Wozniak called “a time of desperation”) Sculley created a more focused corporate structure, winning Apple’s staff loyalty with a legendary speech where he said, “Apple beats with two hearts – our Californian heart and the heart of the local company.”
Two-hearted Apple now offered two platforms: the text-based and affordable Apple II range and the GUI-based Macintosh.
The Apple IIc was replaced with the mouse-controlled Apple IIgs shortly after the launch of the Mac. Sculley wanted to get rid of the II range, but its success underwrote Apple’s whole business way into the early 90s when they were finally binned.
Meanwhile, the Macintosh prevailed. Successive models, including the Mac Plus, Mac SE, Mac Classic and Mac LC, carried the torch into the next decade. Sculley’s well-received PowerBook debuted in 1991. Developed with Sony, this became the blueprint for what a notebook could be. People marvelled at its inclusion of a trackball, an industry first. The PowerBook generated $1bn in sales in its first year, hinting at the future importance of mobile products.
Times were good. Between 1987-89, Apple’s sales grew by more than $2bn. Then, in 1990, they rose by just $10m. Apple’s strategy of releasing high-end products with high-profit margins was beginning to fail in the face of much stiffer competition. As the decade began Microsoft – which had forced Apple to licence GUI technologies in a deal agreed by Sculley – introduced Windows 3.0. Apple shipped System 7.
Microsoft’s talent for strong-arm marketing damaged the poorly marketed Apple. It didn’t help that Sculley’s Apple now offered multiple Macs for multiple markets with very little to differentiate the machines. Apple’s inventory management was poor, its strategic direction fuzzy and its move to adopt the PowerPC chip gave Windows-based competitors a technical advantage. Failure in the enterprise market and growing Windows market share put the writing on the wall.
In 1993 – the same year the much-loved but ahead-of-its-time Newton PDA shipped – Apple’s board forced Sculley out while promoting European president, Michael Spindler, to CEO. Spindler slashed 15 per cent of the workforce and licensed the Mac OS to third-party firms including Radius, Motorola and Power Computing, ushering in the age of the Mac clones. He also led Apple’s search for a takeover. But after a deal to merge with Sun failed, Spindler was out. He was replaced by National Semiconductor CEO and Apple board member, Gil Amelio, in 1996.
1997: The return of Jobs
With Jobs back in the hot seat, the iMac is launched, propelling Apple to new heights
Apple was haemorrhaging cash; Mac OS was dated while Copland, its internal attempt at developing a next-generation OS, was failing; its organisation was a mess; takeover talks were doomed.
CEO Gil Amelio created short-term funding, cut superfluous product development and set to work on Mac OS 8 while searching for a next-generation OS. At one point he considered adopting Windows NT, before choosing Steve Jobs and NeXT, which Apple acquired for $400m in 1996. Jobs finally returned to Apple with the deal in late 1996.
“It’s perfect,” said IDG’s Bob Metcalfe in 1996. “The new team at Apple has Amelio and [chief technology officer] Ellen Hancock. They are extremely competent, but they lack one thing: charisma. Steve adds that to the mix.” Within a year both Amelio and Hancock were out and Jobs had taken over as interim CEO, becoming full CEO in 2000.
Jobs began restructuring and closed the clone business. “We have to let go of this notion that for Apple to win, Microsoft has to lose,” he told a stunned Macworld Expo 1997 crowd, announcing a $150m deal with Microsoft to include Internet Explorer with Mac OS and to make Office for Mac. Apple also launched its first online store, the Apple Store, based on NeXT’s webObjects application server. Every connected Apple product now had a store built-in.
The turnaround really began with the launch of the iMac in 1998. This all-in-one Mac turned heads with its translucent plastic design, built-in modem and lack of floppy drive. Sales blazed. One million sold in a year – 43 per cent to people new to Apple’s platform – delivering three profitable quarters in a row. In 1999, Apple introduced the clamshell iBook notebook, instantly creating a new market for WiFi with AirPort technology. Apple’s British-born chief designer, Jonathan Ive, also wooed the professional market with the powerful and uniquely-designed Power Mac range. Beautiful design bought Apple time.
Meanwhile, the OS team were actively developing Mac OS X (Rhapsody). Based on NeXT software, Apple made sure to put aesthetics inside the future of the Mac interface. “We made the buttons on the screen look so good you’ll want to lick them,” said Jobs, discussing the Aqua user interface. Years later we learned the object-based interface was all about touch, not taste. Mac OS X 10.0 Cheetah, launched in March 2001, was followed by the faster and more complete 10.1 Puma in September that year.
The move to the new OS accelerated when at Apple’s Worldwide Developers Conference in 2002, Jobs presided over a mock funeral for OS 9. “Mac OS 9 isn’t dead for our customers yet, but it’s dead for [developers],” he said. “Today we say farewell to OS 9 for all future development and we focus our energies on developing for Mac OS X.”
Perhaps the most important product was the smallest. Saying “Listening to music will never be the same again,” Jobs introduced the US$399 iPod in October 2001. Digital music fans snapped-up 400,000 in the first year. The iPod halo began illuminating the new Apple century.
2002-11: The iTunes-iOS juggernaut
Mac sales surge thanks to the “iPod halo” and the launch of the iPhone in 2007
The iPod used Apple’s iTunes music software to sync music with a user’s Mac. Purchased as SoundJam from Casady & Greene, iTunes acquired iTunes Store support in April 2003. This proved a success. Apple is now the world’s biggest music retailer and has sold well in excess of 10 million songs. Jobs knew it would work. “It will go down in history as a turning point for the music industry,” he told Fortune. “This is landmark stuff. I can’t overestimate it.”
Since the Blue Box days, Apple’s Steve Jobs understood the nature of the network. In a 1985 Playboy interview he remarked: “The most compelling reason for most people to buy a computer for the home will be to link it into a nationwide communications network.” The internet was that network. It informed his iMac introduction, iBook and iTunes Store launch. In that same interview he also said: “The developments will be in making the products more and more portable,” he said. “Maybe the merging of the telephone and personal computer.”
Apple’s internet service, iTools, now MobileMe, helped bolster Jobs’ other great idea: consumer-friendly creative software for photography, video and music creation. Introduced as free software with each new Mac purchase, iLife meant the Mac offered something no other platform could match. Meanwhile, the success of the iPod and iTunes drove interest in Apple sky-high. In 2004, Needham & Co analyst Charles Wolf warned that Mac sales would “surge” through the “iPod halo”.
Now a consumer electronics company, Apple continued to develop the Mac, introduced the now discontinued Xserve and moved to the G5 processor and the new unified Mac designs we still enjoy. Then came the Intel switch.
Meanwhile, the rumours were intensifying. Two key strands emerged from within the analyst community: the first that Apple was developing a phone; the second that it was working on a tablet computer. While both took years to emerge (ignoring Apple’s early work with Motorola on an ill-fated ‘iTunes phone’), Apple eventually delivered on both counts, launching the iPhone in 2007 and the iPad in 2010.
“Every once in a while a revolutionary product comes along that changes everything. It’s very fortunate if you can work on just one of these in your career,” said Jobs. “Apple’s been very fortunate in that it’s introduced a few of these.” The iPhone delivered on Jobs’ Playboy interview predictions. US technology writer David Pogue called the device “the most sophisticated, outlook-challenging piece of electronics to come along in years”. The iPod halo meant millions of users worldwide wanted an iPhone, putting Apple almost immediately into the top five global smartphone-makers.
The iPhone is powered by a stripped-down version of Mac OS X, called iOS. Four years on and iOS is heading for version 5, boasts a huge developer army and a highly successful App Store, which has sold over 10 billion apps. Based on the next evolution of the mouse and keyboard, the touch-controlled iPhone also paved the way for the launch of the iPod touch and the industry-transforming iPad.