In 1997, Apple Computer was in deep trouble. The company that had pioneered the personal computer (PC) market with its easy-to-use Apple II in 1978 and introduced the first graphical user interface (GUI) with the Macintosh in 1984 was bleeding red ink. Apple’s worldwide market share, which had been fluctuating between 7% and 9% since 1984, had sunk to 4%. Sales were declining. Apple was on track to lose $378 million on revenues of $7 billion, on top of a $740 million loss in 1996. In July 1997, the cofounder of the company, Steve Jobs, who had been fired from Apple in 1985, returned as CEO. At an investor conference, Michael Dell, CEO of Dell Computer, was asked what Jobs should do as head of Apple. Dell quipped “I’d shut it down and give the money back to shareholders.” By 2008, the situation looked very different. Apple was on track to book record sales of more than $32 billion and net profits of close to $4.7 billion. The stock price, which had traded as low as $6 a share in 2003, was about $170, with the market capitalization at $140 billion, which far surpassed that of Dell Computer which was about $41 billion. Driving the transformation were strong sales of Apple’s iPod music player, music downloads from the iTunes store, an Apple’s iPhone. In addition, strong sales of Apple’s iMac laptop and desktop computers had lifted Apple’s market share in the United States PC business to 8.5%, up from a low of under 3% in 2004. Apple now ranked third in the United States PC market behind Dell with 32% and HP 25%. Moreover, analysts were predicting that the halo effect of the iPod and iPhone, together with Apple’s adoption of Intel’s microprocessor architecture, would drive strong sales going forward. To emphasize the broadening product portfolio of the company, Apple had dropped “computer” from its name. For the first time in 20 years, it looked as if Apple, the perennial also-run, might be seizing the initiative. But questions... [continues]
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