Apple Inc. in 2010

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APRIL 13, 2010


Apple Inc. in 2010

On April 4, 2010, Apple Inc. launched its eagerly anticipated iPad amid great hype. The multimedia computer tablet was the third major innovation that Apple had released over the last decade. CEO Steve Jobs had argued that the iPad was another revolutionary product that could emulate the smashing success of the iPod and the iPhone. Expectations ran high. Even The Economist displayed the release of the iPad on its magazine cover with Jobs illustrated as a biblical figure, noting that, “The enthusiasm of the Apple faithful may be overdone, but Mr. Jobs’s record suggests that when he blesses a market, it takes off.”1

The company started off as “Apple Computer,” best known for its Macintosh personal computers (PCs) in the 1980’s and 1990’s. Despite a strong brand, rapid growth, and high profits in the late 1980s, Apple almost went bankrupt in 1996. Then Jobs went to work, transforming “Apple Computer” into “Apple Inc.” with innovative non-PC products starting in the early 2000’s. In fact, by 2010, the company viewed itself as a “mobile device company.”2 In the 2009 fiscal year, sales related to the iPhone and the iPod represented nearly 60% of Apple’s total sales of $43 billion.3 Even in the midst of a severe economic recession, revenues and net income both soared (see Exhibits 1a through 1c). Meanwhile, Apple’s stock was making history of its own. The share price had risen more than 15fold since 2003 (See Exhibit 2).

By almost any measure, Apple’s turnaround was a spectacular accomplishment. Yet Steve Jobs knew that no company in the technology industry could relax. Challenges abounded. In 2009, for example, iPod sales were falling. At the same time, Microsoft introduced Window 7, which led to a resurgence in PC sales. Even though Macintosh sales had grown faster than the industry in recent years, Apple’s share of the worldwide PC market had remained below 5% since 1997 (see Exhibit 3). In addition, there was great uncertainty about the iconic CEO’s health. Jobs had taken medical leave for a liver transplant in 2009, following treatment for pancreatic cancer a few years earlier. Many wondered—would Jobs remain at Apple and could the company thrive without him? Finally, would the iPhone continue its march to dominate smartphones in the face of growing competition from Google, RIM, and Nokia? And would Apple’s newest creation, the iPad, take the company to the next level?

Professor David B. Yoffie and Research Associate Renee Kim prepared this case. This case derives from earlier cases, including “Apple Inc., 2008,” HBS No. 708-480, by Professor David B. Yoffie and Research Associate Michael Slind, and “Apple Computer, 2006,” HBS No. 706-496 by Professor David B. Yoffie and Research Associate Michael Slind. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

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Apple Inc. in 2010
Apple’s History

Steve Jobs and Steve Wozniak, a pair of 20-something college dropouts, founded Apple Computer on April Fool’s Day, 1976.4 Working out of the Jobs family’s garage in Los Altos, California, they built a computer circuit board that they named the Apple I. Within several months, they had made 200 units and taken on a new partner—A.C. “Mike” Markkula, Jr., who was instrumental in attracting venture capital as the experienced businessman on the...
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