Technology > Apple
Macintosh, IoS, HomePod, iPod, iTunes, iPad, Apple Watch...
3 April 2010
Top right: Apple CEO Steve Jobs
Related > iPad
9 April 2010
Apple's style USA
40 years of Apple - in pictures
From the first Apple computer,
Steve Jobs leaving and returning,
the iMac and the MacBook Air
to the iPod, iPhone, iPad and Watch,
Apple’s is a rich history
tablet computer > Apple's iPad
services > cloud
storage, app store and streaming music
streaming service >
Apple Music USA
USA > Apple unveils
streaming service Apple Music
and 24-hour radio stations
UK June 2015
Apple's App Store UK
Apple's music store > iTunes
home speaker > HomePod USA
The top 50 iPad apps UK
It's the apps
that bring the iPad to life.
If you want to read a book,
watch a movie, make a video call,
paint a picture or just browse on the sofa,
there's an app for you.
We pick the best
The Guardian iPad edition
iPad competitors USA
iPad mini UK
Apple watch USA
Apple > Smartwatch USA
Apple > iWatch / smartwatch
Apple watch USA
Apple vs Microsoft
Apple vs Samsung
Apple Owes Ireland $14.5 Billion In Taxes,
European Commission Says
NPR August 30, 2016
How Apple Sidesteps Billions in Taxes
http://www.npr.org/templates/story/story.php?storyId=185839228 - May 21,
Apple > China
Child labour uncovered in Apple's supply chain
Internal audit reveals 106 children
employed at 11 factories
products in past year
Apple > chief executive > Tim Cook
Apple co-founder > Steve Wozniak
mobile payments > Apple Pay
Apple's new iOS 9 feature, called, simply, News
USA June 2015
Apple > Foxconn
the contract manufacturer
that assembles the
iPhones and iPads in China
Apple's Chinese workers treated 'inhumanely, like machines'
Apple iCloud UK
Apple’s New Mac Pro desktop computer
Apple's Mac UK
Apple's original Mac computer
was released in January 1984.
Apple 1 UK
How Apple Sidesteps
Billions in Taxes
April 28, 2012
The New York Times
By CHARLES DUHIGG
and DAVID KOCIENIEWSKI
RENO, Nev. — Apple, the world’s most profitable technology
company, doesn’t design iPhones here. It doesn’t run AppleCare customer service
from this city. And it doesn’t manufacture MacBooks or iPads anywhere nearby.
Yet, with a handful of employees in a small office here in Reno, Apple has done
something central to its corporate strategy: it has avoided millions of dollars
in taxes in California and 20 other states.
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just
200 miles away, to collect and invest the company’s profits, Apple sidesteps
state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
Setting up an office in Reno is just one of many legal methods Apple uses to
reduce its worldwide tax bill by billions of dollars each year. As it has in
Nevada, Apple has created subsidiaries in low-tax places like Ireland, the
Netherlands, Luxembourg and the British Virgin Islands — some little more than a
letterbox or an anonymous office — that help cut the taxes it pays around the
Almost every major corporation tries to minimize its taxes, of course. For
Apple, the savings are especially alluring because the company’s profits are so
high. Wall Street analysts predict Apple could earn up to $45.6 billion in its
current fiscal year — which would be a record for any American business.
Apple serves as a window on how technology giants have taken advantage of tax
codes written for an industrial age and ill suited to today’s digital economy.
Some profits at companies like Apple, Google, Amazon, Hewlett-Packard and
Microsoft derive not from physical goods but from royalties on intellectual
property, like the patents on software that makes devices work. Other times, the
products themselves are digital, like downloaded songs. It is much easier for
businesses with royalties and digital products to move profits to low-tax
countries than it is, say, for grocery stores or automakers. A downloaded
application, unlike a car, can be sold from anywhere.
The growing digital economy presents a conundrum for lawmakers overseeing
corporate taxation: although technology is now one of the nation’s largest and
most valued industries, many tech companies are among the least taxed, according
to government and corporate data. Over the last two years, the 71 technology
companies in the Standard & Poor’s 500-stock index — including Apple, Google,
Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on
average, was a third less than other S.& P. companies’. (Cash taxes may include
payments for multiple years.)
Even among tech companies, Apple’s rates are low. And while the company has
remade industries, ignited economic growth and delighted customers, it has also
devised corporate strategies that take advantage of gaps in the tax code,
according to former executives who helped create those strategies.
Apple, for instance, was among the first tech companies to designate overseas
salespeople in high-tax countries in a manner that allowed them to sell on
behalf of low-tax subsidiaries on other continents, sidestepping income taxes,
according to former executives. Apple was a pioneer of an accounting technique
known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by
routing profits through Irish subsidiaries and the Netherlands and then to the
Caribbean. Today, that tactic is used by hundreds of other corporations — some
of which directly imitated Apple’s methods, say accountants at those companies.
Without such tactics, Apple’s federal tax bill in the United States most likely
would have been $2.4 billion higher last year, according to a recent study by a
former Treasury Department economist, Martin A. Sullivan. As it stands, the
company paid cash taxes of $3.3 billion around the world on its reported profits
of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose
what portion of those payments was in the United States, or what portion is
assigned to previous or future years.)
By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on
its booked profits of $24.4 billion, a tax rate of 24 percent, which is about
average for non-tech companies.
Apple’s domestic tax bill has piqued particular curiosity among corporate tax
experts because although the company is based in the United States, its profits
— on paper, at least — are largely foreign. While Apple contracts out much of
the manufacturing and assembly of its products to other companies overseas, the
majority of Apple’s executives, product designers, marketers, employees,
research and development, and retail stores are in the United States. Tax
experts say it is therefore reasonable to expect that most of Apple’s profits
would be American as well. The nation’s tax code is based on the concept that a
company “earns” income where value is created, rather than where products are
However, Apple’s accountants have found legal ways to allocate about 70 percent
of its profits overseas, where tax rates are often much lower, according to
Neither the government nor corporations make tax returns public, and a company’s
taxable income often differs from the profits disclosed in annual reports.
Companies report their cash outlays for income taxes in their annual Form 10-K,
but it is impossible from those numbers to determine precisely how much, in
total, corporations pay to governments. In Apple’s last annual disclosure, the
company listed its worldwide taxes — which includes cash taxes paid as well as
deferred taxes and other charges — at $8.3 billion, an effective tax rate of
almost a quarter of profits.
However, tax analysts and scholars said that figure most likely overstated how
much the company would hand to governments because it included sums that might
never be paid. “The information on 10-Ks is fiction for most companies,” said
Kimberly Clausing, an economist at Reed College who specializes in multinational
taxation. “But for tech companies it goes from fiction to farcical.”
Apple, in a statement, said it “has conducted all of its business with the
highest of ethical standards, complying with applicable laws and accounting
rules.” It added, “We are incredibly proud of all of Apple’s contributions.”
Apple “pays an enormous amount of taxes, which help our local, state and federal
governments,” the statement also said. “In the first half of fiscal year 2012,
our U.S. operations have generated almost $5 billion in federal and state income
taxes, including income taxes withheld on employee stock gains, making us among
the top payers of U.S. income tax.”
The statement did not specify how it arrived at $5 billion, nor did it address
the issue of deferred taxes, which the company may pay in future years or decide
to defer indefinitely. The $5 billion figure appears to include taxes ultimately
owed by Apple employees.
The sums paid by Apple and other tech corporations is a point of contention in
the company’s backyard.
A mile and a half from Apple’s Cupertino headquarters is De Anza College, a
community college that Steve Wozniak, one of Apple’s founders, attended from
1969 to 1974. Because of California’s state budget crisis, De Anza has cut more
than a thousand courses and 8 percent of its faculty since 2008.
Now, De Anza faces a budget gap so large that it is confronting a “death
spiral,” the school’s president, Brian Murphy, wrote to the faculty in January.
Apple, of course, is not responsible for the state’s financial shortfall, which
has numerous causes. But the company’s tax policies are seen by officials like
Mr. Murphy as symptomatic of why the crisis exists.
“I just don’t understand it,” he said in an interview. “I’ll bet every person at
Apple has a connection to De Anza. Their kids swim in our pool. Their cousins
take classes here. They drive past it every day, for Pete’s sake.
“But then they do everything they can to pay as few taxes as possible.”
Escaping State Taxes
In 2006, as Apple’s bank accounts and stock price were rising, company
executives came here to Reno and established a subsidiary named Braeburn Capital
to manage and invest the company’s cash. Braeburn is a variety of apple that is
simultaneously sweet and tart.
Today, Braeburn’s offices are down a narrow hallway inside a bland building that
sits across from an abandoned restaurant. Inside, there are posters of
candy-colored iPods and a large Apple insignia, as well as a handful of desks
and computer terminals.
When someone in the United States buys an iPhone, iPad or other Apple product, a
portion of the profits from that sale is often deposited into accounts
controlled by Braeburn, and then invested in stocks, bonds or other financial
instruments, say company executives. Then, when those investments turn a profit,
some of it is shielded from tax authorities in California by virtue of
Braeburn’s Nevada address.
Since founding Braeburn, Apple has earned more than $2.5 billion in interest and
dividend income on its cash reserves and investments around the globe. If
Braeburn were located in Cupertino, where Apple’s top executives work, a portion
of the domestic income would be taxed at California’s 8.84 percent corporate
income tax rate.
But in Nevada there is no state corporate income tax and no capital gains tax.
What’s more, Braeburn allows Apple to lower its taxes in other states —
including Florida, New Jersey and New Mexico — because many of those
jurisdictions use formulas that reduce what is owed when a company’s financial
management occurs elsewhere. Apple does not disclose what portion of cash taxes
is paid to states, but the company reported that it owed $762 million in state
income taxes nationwide last year. That effective state tax rate is higher than
the rate of many other tech companies, but as Ms. Clausing and other tax
analysts have noted, such figures are often not reliable guides to what is
Dozens of other companies, including Cisco, Harley-Davidson and Microsoft, have
also set up Nevada subsidiaries that bypass taxes in other states. Hundreds of
other corporations reap similar savings by locating offices in Delaware.
But some in California are unhappy that Apple and other California-based
companies have moved financial operations to tax-free states — particularly
since lawmakers have offered them tax breaks to keep them in the state.
In 1996, 1999 and 2000, for instance, the California Legislature increased the
state’s research and development tax credit, permitting hundreds of companies,
including Apple, to avoid billions in state taxes, according to legislative
analysts. Apple has reported tax savings of $412 million from research and
development credits of all sorts since 1996.
Then, in 2009, after an intense lobbying campaign led by Apple, Cisco, Oracle,
Intel and other companies, the California Legislature reduced taxes for
corporations based in California but operating in other states or nations.
Legislative analysts say the change will eventually cost the state government
about $1.5 billion a year.
Such lost revenue is one reason California now faces a budget crisis, with a
shortfall of more than $9.2 billion in the coming fiscal year alone. The state
has cut some health care programs, significantly raised tuition at state
universities, cut services to the disabled and proposed a $4.8 billion reduction
in spending on kindergarten and other grades.
Apple declined to comment on its Nevada operations. Privately, some executives
said it was unfair to criticize the company for reducing its tax bill when
thousands of other companies acted similarly. If Apple volunteered to pay more
in taxes, it would put itself at a competitive disadvantage, they argued, and do
a disservice to its shareholders.
Indeed, Apple’s decisions have yielded benefits. After announcing one of the
best quarters in its history last week, the company said it had net profits of
$24.7 billion on revenues of $85.5 billion in the first half of the fiscal year,
and more than $110 billion in the bank, according to company filings.
A Global Tax Strategy
Every second of every hour, millions of times each day, in living rooms and at
cash registers, consumers click the “Buy” button on iTunes or hand over payment
for an Apple product.
And with that, an international financial engine kicks into gear, moving money
across continents in the blink of an eye. While Apple’s Reno office helps the
company avoid state taxes, its international subsidiaries — particularly the
company’s assignment of sales and patent royalties to other nations — help
reduce taxes owed to the American and other governments.
For instance, one of Apple’s subsidiaries in Luxembourg, named iTunes S.à r.l.,
has just a few dozen employees, according to corporate documents filed in that
nation and a current executive. The only indication of the subsidiary’s presence
outside is a letterbox with a lopsided slip of paper reading “ITUNES SARL.”
Luxembourg has just half a million residents. But when customers across Europe,
Africa or the Middle East — and potentially elsewhere — download a song,
television show or app, the sale is recorded in this small country, according to
current and former executives. In 2011, iTunes S.à r.l.’s revenue exceeded $1
billion, according to an Apple executive, representing roughly 20 percent of
iTunes’s worldwide sales.
The advantages of Luxembourg are simple, say Apple executives. The country has
promised to tax the payments collected by Apple and numerous other tech
corporations at low rates if they route transactions through Luxembourg. Taxes
that would have otherwise gone to the governments of Britain, France, the United
States and dozens of other nations go to Luxembourg instead, at discounted
“We set up in Luxembourg because of the favorable taxes,” said Robert Hatta, who
helped oversee Apple’s iTunes retail marketing and sales for European markets
until 2007. “Downloads are different from tractors or steel because there’s
nothing you can touch, so it doesn’t matter if your computer is in France or
England. If you’re buying from Luxembourg, it’s a relationship with Luxembourg.”
An Apple spokesman declined to comment on the Luxembourg operations.
Downloadable goods illustrate how modern tax systems have become increasingly
ill equipped for an economy dominated by electronic commerce. Apple, say former
executives, has been particularly talented at identifying legal tax loopholes
and hiring accountants who, as much as iPhone designers, are known for their
innovation. In the 1980s, for instance, Apple was among the first major
corporations to designate overseas distributors as “commissionaires,” rather
than retailers, said Michael Rashkin, Apple’s first director of tax policy, who
helped set up the system before leaving in 1999.
To customers the designation was virtually unnoticeable. But because
commissionaires never technically take possession of inventory — which would
require them to recognize taxes — the structure allowed a salesman in high-tax
Germany, for example, to sell computers on behalf of a subsidiary in low-tax
Singapore. Hence, most of those profits would be taxed at Singaporean, rather
than German, rates.
The Double Irish
In the late 1980s, Apple was among the pioneers in creating a tax structure —
known as the Double Irish — that allowed the company to move profits into tax
havens around the world, said Tim Jenkins, who helped set up the system as an
Apple European finance manager until 1994.
Apple created two Irish subsidiaries — today named Apple Operations
International and Apple Sales International — and built a glass-encased factory
amid the green fields of Cork. The Irish government offered Apple tax breaks in
exchange for jobs, according to former executives with knowledge of the
But the bigger advantage was that the arrangement allowed Apple to send
royalties on patents developed in California to Ireland. The transfer was
internal, and simply moved funds from one part of the company to a subsidiary
overseas. But as a result, some profits were taxed at the Irish rate of
approximately 12.5 percent, rather than at the American statutory rate of 35
percent. In 2004, Ireland, a nation of less than 5 million, was home to more
than one-third of Apple’s worldwide revenues, according to company filings.
(Apple has not released more recent estimates.)
Moreover, the second Irish subsidiary — the “Double” — allowed other profits to
flow to tax-free companies in the Caribbean. Apple has assigned partial
ownership of its Irish subsidiaries to Baldwin Holdings Unlimited in the British
Virgin Islands, a tax haven, according to documents filed there and in Ireland.
Baldwin Holdings has no listed offices or telephone number, and its only listed
director is Peter Oppenheimer, Apple’s chief financial officer, who lives and
works in Cupertino. Baldwin apples are known for their hardiness while
Finally, because of Ireland’s treaties with European nations, some of Apple’s
profits could travel virtually tax-free through the Netherlands — the Dutch
Sandwich — which made them essentially invisible to outside observers and tax
Robert Promm, Apple’s controller in the mid-1990s, called the strategy “the
worst-kept secret in Europe.”
It is unclear precisely how Apple’s overseas finances now function. In 2006, the
company reorganized its Irish divisions as unlimited corporations, which have
few requirements to disclose financial information.
However, tax experts say that strategies like the Double Irish help explain how
Apple has managed to keep its international taxes to 3.2 percent of foreign
profits last year, to 2.2 percent in 2010, and in the single digits for the last
half-decade, according to the company’s corporate filings.
Apple declined to comment on its operations in Ireland, the Netherlands and the
British Virgin Islands.
Apple reported in its last annual disclosures that $24 billion — or 70 percent —
of its total $34.2 billion in pretax profits were earned abroad, and 30 percent
were earned in the United States. But Mr. Sullivan, the former Treasury
Department economist who today writes for the trade publication Tax Analysts,
said that “given that all of the marketing and products are designed here, and
the patents were created in California, that number should probably be at least
If profits were evenly divided between the United States and foreign countries,
Apple’s federal tax bill would have increased by about $2.4 billion last year,
he said, because a larger amount of its profits would have been subject to the
United States’ higher corporate income tax rate.
“Apple, like many other multinationals, is using perfectly legal methods to keep
a significant portion of their profits out of the hands of the I.R.S.,” Mr.
Sullivan said. “And when America’s most profitable companies pay less, the
general public has to pay more.”
Other tax experts, like Edward D. Kleinbard, former chief of staff of the
Congressional Joint Committee on Taxation, have reached similar conclusions.
“This tax avoidance strategy used by Apple and other multinationals doesn’t just
minimize the companies’ U.S. taxes,” said Mr. Kleinbard, now a professor of tax
law at the University of Southern California. “It’s German tax and French tax
and tax in the U.K. and elsewhere.”
One downside for companies using such strategies is that when money is sent
overseas, it cannot be returned to the United States without incurring a new tax
However, that might change. Apple, which holds $74 billion offshore, last year
aligned itself with more than four dozen companies and organizations urging
Congress for a “repatriation holiday” that would permit American businesses to
bring money home without owing large taxes. The coalition, which includes
Google, Microsoft and Pfizer, has hired dozens of lobbyists to push for the
measure, which has not yet come up for vote. The tax break would cost the
federal government $79 billion over the next decade, according to a
Fallout in California
In one of his last public appearances before his death, Steven P. Jobs, Apple’s
chief executive, addressed Cupertino’s City Council last June, seeking approval
to build a new headquarters.
Most of the Council was effusive in its praise of the proposal. But one
councilwoman, Kris Wang, had questions.
How will residents benefit? she asked. Perhaps Apple could provide free wireless
Internet to Cupertino, she suggested, something Google had done in neighboring
“See, I’m a simpleton; I’ve always had this view that we pay taxes, and the city
should do those things,” Mr. Jobs replied, according to a video of the meeting.
“That’s why we pay taxes. Now, if we can get out of paying taxes, I’ll be glad
to put up Wi-Fi.”
He suggested that, if the City Council were unhappy, perhaps Apple could move.
The company is Cupertino’s largest taxpayer, with more than $8 million in
property taxes assessed by local officials last year.
Ms. Wang dropped her suggestion.
Cupertino, Ms. Wang said in an interview, has real financial problems. “We’re
proud to have Apple here,” said Ms. Wang, who has since left the Council. “But
how do you get them to feel more connected?”
Other residents argue that Apple does enough as Cupertino’s largest employer and
that tech companies, in general, have buoyed California’s economy. Apple’s
workers eat in local restaurants, serve on local boards and donate to local
causes. Silicon Valley’s many millionaires pay personal state income taxes. In
its statement, Apple said its “international growth is creating jobs
domestically, since we oversee most of our operations from California.”
“The vast majority of our global work force remains in the U.S.,” the statement
continued, “with more than 47,000 full-time employees in all 50 states.”
Moreover, Apple has given nearby Stanford University more than $50 million in
the last two years. The company has also donated $50 million to an African aid
organization. In its statement, Apple said: “We have contributed to many
charitable causes but have never sought publicity for doing so. Our focus has
been on doing the right thing, not getting credit for it. In 2011, we
dramatically expanded the number of deserving organizations we support by
initiating a matching gift program for our employees.”
Still, some, including De Anza College’s president, Mr. Murphy, say the
philanthropy and job creation do not offset Apple’s and other companies’
decisions to circumvent taxes. Within 20 minutes of the financially ailing
school are the global headquarters of Google, Facebook, Intel, Hewlett-Packard
“When it comes time for all these companies — Google and Apple and Facebook and
the rest — to pay their fair share, there’s a knee-jerk resistance,” Mr. Murphy
said. “They’re philosophically antitax, and it’s decimating the state.”
“But I’m not complaining,” he added. “We can’t afford to upset these guys. We
need every dollar we can get.”
Additional reporting was contributed
by Keith Bradsher in Hong
Siem Eikelenboom in Amsterdam, Dean Greenaway
in the British
Scott Sayare in Luxembourg
and Jason Woodard in Singapore.
How Apple Sidesteps Billions in Taxes,
and Speed to New iPad
March 7, 2012
The New York Times
By NICK WINGFIELD
SAN FRANCISCO — Apple updated the iPad on Wednesday with a
high-definition screen, a faster wireless connection and several other
refinements, all packaged in a device without any major design changes.
As recent history has shown, though, Apple may not need a bold overhaul of the
look of its tablet computer to attract waves of new buyers.
The company said the new iPad would go on sale on March 16 at a starting price
of $499, unchanged from the last generation of iPads. The product will have a
screen that provides a comparable level of clarity to the iPhone’s “retina
display,” with higher resolution than conventional high-definition televisions,
according to Apple executives.
“That is distinctive and is a kind of leapfrog above existing and announced
products,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein & Company.
And in a sign that Apple intends to more seriously protect its share of the
tablet market, which is expected to get more competitive this year, the company
said it would continue to sell its second-generation iPad, dropping the price to
$399 from $499.
At a company event, Apple also showed a new version of Apple TV, the company’s
$99 set-top box for accessing Internet video, which streams movies in the
sharpest of the high-definition video formats, called 1080p.
The initial reaction to the tablet computer was mixed, as has frequently been
the case of late with Apple’s new iterations. Apple’s stock price was about flat
in regular trading, ending up 43 cents higher, at $530.69, a 0.1 percent gain.
The new tablet, called simply the new iPad, with no numbers or letters after the
name, is an effort to keep growth chugging along in a two-year-old business that
has turned into a major franchise for the company. Apple’s $9.15 billion in iPad
sales over the holiday quarter was almost double the amount of revenue Microsoft
reported from its Windows software and not far from Google’s total revenue as a
company during the same period.
Speaking from the same stage where Steven P. Jobs, the company’s late chief
executive, introduced the second-generation iPad almost exactly a year ago, the
company’s new chief executive, Timothy D. Cook, said the iPad last quarter
outsold the number of personal computers sold by any individual manufacturer.
“In many ways, the iPad is reinventing portable computing and outstripping the
wildest predictions,” Mr. Cook said.
The new iPad, the third generation of the device, is nearly indistinguishable
from its predecessor, though it is slightly heavier and thicker. The most
visible of its changes is the screen, which can display text and images that
appear as sharp as they would on a printed page. The company said the screen has
more than 3.1 million pixels, or four times more than the current iPad.
It will also operate on the fourth-generation cellphone network technology known
as LTE. In the United States, the new iPad will work on AT&T’s and Verizon’s
networks to get data.
The iPad will also allow users to dictate e-mail, though Apple did not introduce
an iPad version of Siri, a voice-command virtual-assistant feature that proved
popular on the iPhone 4S.
Last fall, Apple disappointed some pundits and enthusiasts by making mostly
incremental enhancements with the iPhone 4S. That product ended up squashing
doubts to become a smash hit, leading to record sales over the holidays. During
that time, Apple, based in Cupertino, Calif., solidified its lead as the most
valuable company in the world, with a market capitalization of almost a
half-trillion dollars, well ahead of its nearest rival, Exxon Mobil.
At times, Apple has wowed people by radically rethinking the design of its
products. Several years ago, it overhauled its MacBook Air with a drastically
thinner case. It gave the iPhone 4 a novel, hard-edged case that looked very
different from the design of early iPhones.
Charles Wolf, an analyst at Needham & Company, said those kinds of radical
redesigns did not happen every year, partly because the smaller components and
other underlying technologies that made them possible did not change at that
pace. Mr. Wolf said he believed that more of Apple’s innovation was happening in
software because it was not as encumbered by the development of outside
technologies in that area.
“I always look at Apple as a software company,” he said.
The new iPad may show how durable Apple’s hold on the tablet market is. For most
of the two years the iPad has been on sale, Apple has faced a phalanx of
competitors from Hewlett-Packard, Research in Motion, Samsung and Motorola, yet
none has established a firm beachhead in the tablet business. A few of those
competitors, like H.P., gave up.
In a recent survey of American consumers with tablets by Forrester Research, 73
percent said they owned an iPad. That is a sharp contrast to the smartphone
business, where Apple’s market share has steadily eroded as phones based on
Google’s Android operating system have swept the market. Phones with Android
software accounted for 51.6 percent of smartphone shipments worldwide in the
fourth quarter, compared with 23.4 percent for the iPhone, according to Canalys,
a research firm.
Sarah Rotman Epps, an analyst at Forrester, said the iPad had maintained its
grip on the market because most consumers bought it through retail stores rather
than wireless carriers. “Android smartphones are selling like hot cakes because
that’s what the carriers push,” she said. “With tablets, carriers are not the
main destination for tablets.”
The new iPad, though, is likely to face more serious challenges to the product’s
dominance than in the past. Over the holidays, Amazon is estimated to have sold
more than five million of its Kindle Fire, a smaller tablet that has attracted a
new group of consumers to the category with a $199 price tag.
Later this year, the first tablet devices to use Windows 8, a new operating
system from Microsoft, are expected to hit the market. The software has been
redesigned by Microsoft to take advantage of touch-screen devices.
Apple sold 15.4 million iPads over the holiday quarter and has sold 55 million
iPads in total since they first went on sale in 2010.
Mr. Cook told the audience Wednesday that Apple had sold 315 million iOS devices
through the end of 2011 and that iPads, iPhones and iPods were now responsible
for 75 percent of the company’s revenue. The chief criticism that some stalwarts
of the PC industry have leveled at the iPad is that the device is not well
suited for creating content, even if it is good for consuming it.
Apple, though, sought to undermine that argument with a number of new apps.
Those include a new version of its Mac software for editing digital photographs,
iPhoto. A new version of Apple’s GarageBand music software lets up to four
people play together in a virtual band with iPads that are connected wirelessly.
Apple Adds Sharper Screen and Speed to New
iPad, NYT, 7.3.2012,
As New iPad Debut Nears,
Some See Decline of PCs
March 5, 2012
The New York Times
By NICK WINGFIELD
The chief executive of Apple, Timothy D. Cook, has a
prediction: the day will come when tablet devices like the Apple iPad outsell
traditional personal computers.
His forecast has backing from a growing number of analysts and veteran
technology industry executives, who contend that the torrid growth rates of the
iPad, combined with tablet competition from the likes of Amazon.com and
Microsoft, make a changing of the guard a question of when, not if.
Tablet sales are likely to get another jolt this week when Apple introduces its
newest version of the iPad, which is expected to have a higher-resolution
screen. With past iterations of the iPad and iPhone, Apple has made an art of
refining the devices with better screens, faster processors and speedier network
connections, as well as other bells and whistles — steadily broadening their
An Apple spokeswoman, Trudy Muller, declined to comment on an event the company
is holding Wednesday in San Francisco that is expected to feature the new
Any surpassing of personal computers by tablets will be a case of the computer
industry’s tail wagging the dog. The iPad, which seemed like a nice side
business for Apple when it was introduced in 2010, has become a franchise for
the company, accounting for $9.15 billion in revenue in the holiday quarter, or
about 20 percent of Apple’s total revenue. The roughly 15 million iPads Apple
sold in that period was more than twice the number it sold a year earlier.
In the fall, Amazon introduced the iPad’s first credible competitor in the $199
Kindle Fire. Although Amazon does not release sales figures for the device, some
analysts estimate it sold about four million in the holiday quarter. Later this
year, tablets from a variety of hardware manufacturers based on Windows 8, a
new, touch-screen-friendly operating system from Microsoft, could further propel
“Tablets are on fire, there’s no question about that,” said Brad Silverberg, a
venture capitalist in Seattle at Ignition Partners and a former Microsoft
executive, who hastened to add that he was speaking mainly of the iPad, which
dominates current sales.
Tablets are not there yet. In 2011, PCs outsold tablets almost six to one,
estimates Canalys, a technology research company. But that is still a
significant change from 2010, the iPad’s first year on the market, when PCs
outsold tablets 20 to one, according to Canalys. For the last two years, PC
sales were flat, while iPad sales were booming. The Kindle Fire and Barnes &
Noble’s Nook gave the market an additional lift over the holidays. Apple is
banking on the tablet market. Its iPad brought in nearly 40 percent more revenue
during the holidays than Apple’s own computer business, the Macintosh, did.
“From the first day it shipped, we thought — not just me, many of us thought at
Apple — that the tablet market would become larger than the PC market, and it
was just a matter of the time that it took for that to occur,” Mr. Cook of Apple
said recently at a Goldman Sachs investor conference.
Gene Munster, an analyst at Piper Jaffray, estimated that Mr. Cook’s prediction
would come true in 2017, but others contend tablets will be on top sooner than
For example, in a blog post on Friday, Horace Dediu, an analyst with Asymco in
Finland, made a detailed argument that tablet sales would pass traditional PC
sales in the fall of 2013. His projections rest heavily on an assumption that
Apple will face more serious competition in the tablet market from Amazon’s
Kindle Fire, Windows 8 and a wave of other devices based on Google’s Android, an
operating system that has been mostly successful in the smartphone market.
Tim Bucher, an entrepreneur who has held senior positions at Apple, Microsoft
and Dell, said tablet sales would “absolutely” pass those of PCs, a trend he
argued would become even more pronounced as a younger, tablet-savvy generation
“I think the older generation does not pick up on the way of interacting with
the new devices,” Mr. Bucher said, contrasting older people with the next
generation. “I don’t know how many YouTube videos there are out there showing
everyone from babies to animals interacting with iPads.”
Where does that change leave the PC, the lowly machine that defined computing
At a technology conference in 2010, Steven P. Jobs, then Apple’s chief
executive, heralded what he called the post-PC era and compared personal
computers to the trucks that prevailed in the automobile industry until society
began moving away from its agrarian roots. PCs are “still going to be around and
have a lot of value,” said Mr. Jobs, who died in October. “But they’re going to
be used by one out of X people.”
Even Mr. Cook in his recent speech said he was not predicting the demise of the
PC industry, although he did say the iPad was cannibalizing some computer sales,
more Windows PCs than the much smaller market for Macs. One category of PCs
where that is especially true is netbooks, the inexpensive notebook computers
that have had a steep decline in shipments in the last couple of years. “What
the iPad is doing is taking growth away from the PC market that would have gone
to a secondary or tertiary device,” said Mr. Dediu. “It’s not so much people are
going to drop PCs. They’re going to add this additional device.”
Traditional PCs are not standing still. Boxy desktop computers are an
ever-diminishing part of the PC business, while Apple’s MacBook Air and a
category of Windows laptops with Intel processors called ultrabooks have
reinvented traditional clamshell notebooks as superthin devices that turn on
instantly like tablets.
Microsoft’s introduction of Windows 8 promises to shake up computer designs
further. Microsoft and its hardware partners have shown laptops with keyboards
that can be swiveled around or removed altogether, turning them into tablets.
“The tablet and PC markets are all going to blur,” said Tim Coulling, an analyst
at Canalys. “We’re going to see a lot of form-factor innovation. We’ll be
asking, What is a tablet and what is a traditional PC?”
As New iPad Debut Nears, Some See Decline
of PCs, NYT, 5.3.2012,
Confronting a Law Of Limits
February 24, 2012
The New York Times
By JAMES B. STEWART
These days, it’s hard to find a superlative that adequately
describes Apple. But maybe simplest is best: biggest.
Measured by market capitalization, Apple is the world’s biggest public company.
This week it solidified its lead over Exxon Mobil, the previous titleholder, as
Apple’s shares hit a record high of $526.29, which gave it a market
capitalization of just under $500 billion. Apple becomes only the 11th company
to reach the top spot since 1926, according Howard Silverblatt, a senior index
analyst for Standard & Poor’s.
Apple’s first-quarter earnings of more than $13 billion accounted for more than
6 percent of all earnings for the S.& P. 500, according to Mr. Silverblatt.
Sales for the quarter that ended Dec. 31 included an astonishing 37.04 million
iPhones and 15.43 million iPads and totaled $46.33 billion, up 73 percent from
the year before. Earnings more than doubled. Compare that with this week’s
earning from the tech giants Hewlett-Packard (down 44 percent) and Dell (down 18
Apple shares have surged 68 percent from their low point in June, and it’s not
just Apple shareholders who have benefited. Apple is now such a large part of
the S.& P. 500 and the Nasdaq 100 indexes that it has buoyed millions of
investors who own shares of broad index funds and mutual funds. These investors
account for an estimated half of the American population. This week the Nasdaq
composite reached its highest level since 2000 and the S.& P. 500 hit levels not
seen since before the financial crisis.
Here is the rub: Apple is so big, it’s running up against the law of large
Also known as the golden theorem, with a proof attributed to the 17th-century
Swiss mathematician Jacob Bernoulli, the law states that a variable will revert
to a mean over a large sample of results. In the case of the largest companies,
it suggests that high earnings growth and a rapid rise in share price will slow
as those companies grow ever larger.
If Apple’s share price grew even 20 percent a year for the next decade, which is
far below its current blistering pace, its $500 billion market capitalization
would be more than $3 trillion by 2022. That is bigger than the 2011 gross
domestic product of France or Brazil.
Put another way, to increase its revenue by 20 percent, Apple has to generate
additional sales of more than $9 billion in its next fourth quarter. A company
with $1 billion in sales has to come up with just another $200 million.
Robert Cihra, an analyst who covers Apple at Evercore Partners, told me this
week that the law of large numbers as it applied to Apple had “been a concern
for years now.” But, he said, “over the past couple of years, they have actually
accelerated revenue growth. I don’t know that can continue indefinitely. If you
extrapolate far enough out into the future, to sustain that growth Apple would
have to sell an iPhone to every man, woman, child, animal and rock on the
The law of large numbers may explain why, even at its recent lofty stock price,
Apple looks like a bargain by most measures. The ratio of its share price to its
earnings, a common measure of a company’s stock value, is less than 11 based on
earnings projections for this year. That is well below the market’s average P/E
ratio of about 13. Apple shares are even being bought by so-called value
investors, who are usually confined to stodgier, low-growth but arguably
“The valuation on Apple stock right now is unjustifiably low,” Mr. Cihra said.
“If it weren’t so big, the P/E multiple would be a lot higher. They almost
doubled their earnings in calendar year 2011 and yet the stock is trading
currently at a P/E multiple of less than 11. It’s trading way below the market
average, even though it’s growing way above the market average. The multiple is
being compressed simply because investors are asking how it can get bigger.”
There may be sobering reasons for that. Other companies that have reached the
top appear to have been felled by Bernoulli’s law. Cisco Systems held the top
position and hit a market capitalization of $557 billion — larger than Apple’s —
in March 2000, at the peak of the technology bubble. Its market capitalization
today is about $100 billion, and shares are down nearly 80 percent since March
2000. In contrast with Apple, Cisco’s market value and sky-high 120 P/E ratio
were inflated by investor euphoria rather than actual results. But other
titleholders have met a similarly disappointing fate, although far less drastic.
Exxon Mobil, recently displaced by Apple as the biggest company by market value,
took over the top spot in 2006, seven years after the merger of Exxon and Mobil.
At the end of that year, its market capitalization was $447 billion. Today it’s
$35 billion lower. General Electric held the title for a number of years, most
recently in 2005, when its market capitalization was $370 billion. Today, it’s
just $205 billion. Microsoft was No. 1 in 2002 with a market capitalization of
$276 billion. Today, it’s $262 billion.
Of recent titleholders, the only one that has gained is I.B.M., whose market
capitalization of $65 billion ranked first in 1990. Today, it’s $229 billion.
Over the intervening 22 years, that is a compound rate of return of 11.2 percent
including dividends — impressive but hardly the growth rate Apple shareholders
have come to expect. Over the same period, an S.& P. 500 index fund returned 8.7
Can Apple escape a similar fate?
After never being a dominant force in personal computers, Apple surged to the
top of the S.& P. 500 by transforming the cellphone into a multitasking
smartphone, arguably the single most important technological advance so far in
the 21st century. It rolled over vaunted rivals like Nokia, Motorola and
Research in Motion with a combination of brilliant technology, dazzling design
and shrewd marketing backed by the singular vision of its late founder, Steve
Jobs. “Everyone truly needs it,” Mr. Cihra said of the smartphone. “It’s the
most transformative piece of technology in our lifetimes.”
Notwithstanding Apple’s huge size, Wall Street analysts are overwhelmingly
positive on the company’s prospects. Of 57 analysts who cover the company, 52
have a strong buy or buy recommendation. Only one recommends selling: Edward
Zabitsky, the chief executive and founder of ACI Research in Toronto, who
specializes in telecommunications and has been Apple’s reigning Cassandra for
years. He’s a favorite target of the Web’s “iPhone death watch,” which features
negative (and thus far wrong) projections about Apple.
“In all my years as an analyst, I’ve never gotten the kind of attention I’ve
gotten from my Apple call,” Mr. Zabitsky told me this week. “I’ve gotten e-mails
from everyone from radiologists to car repair people from all over North America
telling me I’m a fool. We’re just a research operation, so we’re not trying to
get any business from Apple. If we were, I doubt we’d get any.”
“Apple has created a tremendous ecosystem where there was none,” Mr. Zabitsky
acknowledges. But he says he thinks competition will erode Apple’s advantages as
computing shifts to the cloud. “The question isn’t whether this will happen, but
why and when. The company that understands this best is Microsoft. They’re
betting the farm on Web apps. They’ll be competing with Apple on every product.
Microsoft is big enough and motivated enough to make this happen.”
But Mr. Zabitsky remains a solitary voice.
“The reason Apple has been able to continue growing at a spectacular rate, even
as its revenue base has surpassed $100 billion, is because it targets the
world’s biggest markets,” Mr. Cihra said. He rates the stock a buy and projects
revenue for calendar year 2012 at $165 billion. “The simple fact is that they
still have a small share of huge markets — single-digit shares in both PCs and
Global mobile phone subscriptions neared six billion in 2011, with Apple’s share
of the handset market at 5.6 percent, according to the market intelligence firm
IDC. “There’s no mathematical reason Apple can’t keep growing at a premium rate
for at least several more years,” Mr. Cihra said. “At the end of the day,
there’s no good reason for market cap to be a ceiling.”
Apple fans are eagerly awaiting Apple’s next big thing. A voice-activated
television that upends TV the way Apple transformed music and cellphones? Maybe.
And Mr. Cihra may well be right that Apple investors have at least several years
of breathing room.
But history suggests that excessive enthusiasm can often precede a fall. At
Cisco’s peak, every Wall Street analyst covering the company rated it a strong
buy or buy. “Cisco continues to execute very well and demonstrates that it is in
a class by itself,” Seth Spalding, an analyst at Epoch Partners, wrote, joining
a chorus of analysts praising Cisco’s latest earnings — in November 2000.
Confronting a Law Of Limits, NYT,
Apple's history and milestones
Thu Oct 6, 2011
(Reuters) - Apple Inc co-founder Steve Jobs died on Wednesday
after a long battle with pancreatic cancer.
Here are some of Apple's milestones:
1976 - High-school buddies Steven Wozniak and Steve Jobs start Apple Computer.
Their first product, Apple I, built in circuit board form, debuts at "the
Homebrew Computer Club" in Palo Alto, California.
1977 - Apple II is unveiled, the first personal computer in a plastic case with
1983 - Apple starts selling the "Lisa," a desktop computer for businesses with a
graphical user interface, the system most users are familiar with today.
1984 - Apple debuts the Macintosh personal computer.
1985 - Jobs leaves Apple after a power struggle.
September 1997 - Jobs is named Apple's interim CEO after the company records
losses of more than $1.8 billion.
November 1997 - Jobs introduces a new line of Macintosh computers called G3, and
a website that lets people order directly from Apple.
1998 - Apple unveils the iMac desktop computer.
2001 - Apple introduces the iPod.
2003 - The iTunes Store opens, allowing users to buy and download music,
audiobooks, movies and TV shows online.
August 2004 - Jobs announces he underwent successful surgery to remove a
cancerous tumor from his pancreas.
January 2007 - Apple introduces the iPhone.
2008 - Apple opens its App Store as an update to iTunes.
January 2009 - Jobs takes leave for health reasons. COO Cook leads the company
in the interim.
June 2009 - Jobs returns to the company after undergoing a liver transplant.
April 2010 - Apple begins selling the iPad, a 10-inch touchscreen tablet, and
has an 84 percent share of the tablet market by year's end.
January 17, 2011 - Jobs announces that he will take another medical leave.
March 2, 2011 - Apple launches the iPad 2.
August 9, 2011 - Apple briefly edges past Exxon Mobil Corp to become the most
valuable U.S. company.
August 24, 2011 - Jobs steps down as CEO and is replaced by Tim Cook, Apple's
chief operating officer.
October 5, 2011 - Jobs dies at age of 56 after battle with pancreatic cancer.
(Compiled by Paritosh Bansal, Liana B. Baker, Ilaina Jonas,
Matt Daily and Franklin Paul; Editing by Richard Chang)
history and milestones, NYT, 6.10.2011,
Dies at 56
The New York Times
By JOHN MARKOFF
Jobs, the visionary co-founder of Apple who helped usher in the era of personal
computers and then led a cultural transformation in the way music, movies and
mobile communications were experienced in the digital age, died Wednesday. He
The death was announced by Apple, the company Mr. Jobs and his high school
friend Stephen Wozniak started in 1976 in a suburban California garage.
A friend of the family said that Mr. Jobs died of complications from pancreatic
cancer, with which he waged a long and public struggle, remaining the face of
the company even as he underwent treatment. He continued to introduce new
products for a global market in his trademark blue jeans even as he grew gaunt
He underwent surgery in 2004, received a liver transplant in 2009 and took three
medical leaves of absence as Apple’s chief executive before stepping down in
August and turning over the helm to Timothy D. Cook, the chief operating
officer. When he left, he was still engaged in the company’s affairs,
negotiating with another Silicon Valley executive only weeks earlier.
“I have always said that if there ever came a day when I could no longer meet my
duties and expectations as Apple’s C.E.O., I would be the first to let you
know,” Mr. Jobs said in a letter released by the company. “Unfortunately, that
day has come.”
By then, having mastered digital technology and capitalized on his intuitive
marketing sense, Mr. Jobs had largely come to define the personal computer
industry and an array of digital consumer and entertainment businesses centered
on the Internet. He had also become a very rich man, worth an estimated $8.3
Tributes to Mr. Jobs flowed quickly on Wednesday evening, in formal statements
and in the flow of social networks, with President Obama, technology industry
leaders and legions of Apple fans weighing in.
A Twitter user named Matt Galligan wrote: “R.I.P. Steve Jobs. You touched an
ugly world of technology and made it beautiful.”
Eight years after founding Apple, Mr. Jobs led the team that designed the
Macintosh computer, a breakthrough in making personal computers easier to use.
After a 12-year separation from the company, prompted by a bitter falling-out
with his chief executive, John Sculley, he returned in 1997 to oversee the
creation of one innovative digital device after another — the iPod, the iPhone
and the iPad. These transformed not only product categories like music players
and cellphones but also entire industries, like music and mobile communications.
During his years outside Apple, he bought a tiny computer graphics spinoff from
the director George Lucas and built a team of computer scientists, artists and
animators that became Pixar Animation Studios.
Starting with “Toy Story” in 1995, Pixar produced a string of hit movies, won
several Academy Awards for artistic and technological excellence, and made the
full-length computer-animated film a mainstream art form enjoyed by children and
Mr. Jobs was neither a hardware engineer nor a software programmer, nor did he
think of himself as a manager. He considered himself a technology leader,
choosing the best people possible, encouraging and prodding them, and making the
final call on product design.
It was an executive style that had evolved. In his early years at Apple, his
meddling in tiny details maddened colleagues, and his criticism could be caustic
and even humiliating. But he grew to elicit extraordinary loyalty.
“He was the most passionate leader one could hope for, a motivating force
without parallel,” wrote Steven Levy, author of the 1994 book “Insanely Great,”
which chronicles the creation of the Mac. “Tom Sawyer could have picked up
tricks from Steve Jobs.”
“Toy Story,” for example, took four years to make while Pixar struggled, yet Mr.
Jobs never let up on his colleagues. “‘You need a lot more than vision — you
need a stubbornness, tenacity, belief and patience to stay the course,” said
Edwin Catmull, a computer scientist and a co-founder of Pixar. “In Steve’s case,
he pushes right to the edge, to try to make the next big step forward.”
Mr. Jobs was the ultimate arbiter of Apple products, and his standards were
exacting. Over the course of a year he tossed out two iPhone prototypes, for
example, before approving the third, and began shipping it in June 2007.
To his understanding of technology he brought an immersion in popular culture.
In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party.
His worldview was shaped by the ’60s counterculture in the San Francisco Bay
Area, where he had grown up, the adopted son of a Silicon Valley machinist. When
he graduated from high school in Cupertino in 1972, he said, ”the very strong
scent of the 1960s was still there.”
After dropping out of Reed College, a stronghold of liberal thought in Portland,
Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a
reporter that taking LSD was one of the two or three most important things he
had done in his life. He said there were things about him that people who had
not tried psychedelics — even people who knew him well, including his wife —
could never understand.
Decades later he flew around the world in his own corporate jet, but he
maintained emotional ties to the period in which he grew up. He often felt like
an outsider in the corporate world, he said. When discussing the Silicon
Valley’s lasting contributions to humanity, he mentioned in the same breath the
invention of the microchip and “The Whole Earth Catalog,” a 1960s counterculture
Apple’s very name reflected his unconventionality. In an era when engineers and
hobbyists tended to describe their machines with model numbers, he chose the
name of a fruit, supposedly because of his dietary habits at the time.
Coming on the scene just as computing began to move beyond the walls of research
laboratories and corporations in the 1970s, Mr. Jobs saw that computing was
becoming personal — that it could do more than crunch numbers and solve
scientific and business problems — and that it could even be a force for social
and economic change. And at a time when hobbyist computers were boxy wooden
affairs with metal chassis, he designed the Apple II as a sleek, low-slung
plastic package intended for the den or the kitchen. He was offering not just
products but a digital lifestyle.
He put much stock in the notion of “taste,” a word he used frequently. It was a
sensibility that shone in products that looked like works of art and delighted
users. Great products, he said, were a triumph of taste, of “trying to expose
yourself to the best things humans have done and then trying to bring those
things into what you are doing.”
Regis McKenna, a longtime Silicon Valley marketing executive to whom Mr. Jobs
turned in the late 1970s to help shape the Apple brand, said Mr. Jobs’s genius
lay in his ability to simplify complex, highly engineered products, “to strip
away the excess layers of business, design and innovation until only the simple,
elegant reality remained.”
Mr. Jobs’s own research and intuition, not focus groups, were his guide. When
asked what market research went into the iPad, Mr. Jobs replied: “None. It’s not
the consumers’ job to know what they want.”
Steven Paul Jobs was born in San Francisco on Feb. 24, 1955, and surrendered for
adoption by his biological parents, Joanne Carole Schieble and Abdulfattah
Jandali, a graduate student from Syria who became a political science professor.
He was adopted by Paul and Clara Jobs.
The elder Mr. Jobs, who worked in finance and real estate before returning to
his original trade as a machinist, moved his family down the San Francisco
Peninsula to Mountain View and then to Los Altos in the 1960s.
Mr. Jobs developed an early interest in electronics. He was mentored by a
neighbor, an electronics hobbyist, who built Heathkit do-it-yourself electronics
projects. He was brash from an early age. As an eighth grader, after discovering
that a crucial part was missing from a frequency counter he was assembling, he
telephoned William Hewlett, the co-founder of Hewlett-Packard. Mr. Hewlett spoke
with the boy for 20 minutes, prepared a bag of parts for him to pick up and
offered him a job as a summer intern.
Mr. Jobs met Mr. Wozniak while attending Homestead High School in neighboring
Cupertino. The two took an introductory electronics class there.
The spark that ignited their partnership was provided by Mr. Wozniak’s mother.
Mr. Wozniak had graduated from high school and enrolled at the University of
California, Berkeley, when she sent him an article from the October 1971 issue
of Esquire magazine. The article, “Secrets of the Little Blue Box,” by Ron
Rosenbaum, detailed an underground hobbyist culture of young men known as phone
phreaks who were illicitly exploring the nation’s phone system.
Mr. Wozniak shared the article with Mr. Jobs, and the two set out to track down
an elusive figure identified in the article as Captain Crunch. The man had taken
the name from his discovery that a whistle that came in boxes of Cap’n Crunch
cereal was tuned to a frequency that made it possible to make free long-distance
calls simply by blowing the whistle next to a phone handset.
Captain Crunch was John Draper, a former Air Force electronic technician, and
finding him took several weeks. Learning that the two young hobbyists were
searching for him, Mr. Draper appeared one day in Mr. Wozniak’s Berkeley
dormitory room. Mr. Jobs, who was still in high school, had traveled to Berkeley
for the meeting. When Mr. Draper arrived, he entered the room saying simply, “It
Based on information they gleaned from Mr. Draper, Mr. Wozniak and Mr. Jobs
later collaborated on building and selling blue boxes, devices that were widely
used for making free — and illegal — phone calls. They raised a total of $6,000
from the effort.
After enrolling at Reed College in 1972, Mr. Jobs left after one semester, but
remained in Portland for another 18 months auditing classes. In a commencement
address given at Stanford in 2005, he said he had decided to leave college
because it was consuming all of his parents’ savings.
Leaving school, however, also freed his curiosity to follow his interests. “I
didn’t have a dorm room,” he said in his Stanford speech, “so I slept on the
floor in friends’ rooms, I returned Coke bottles for the 5-cent deposits to buy
food with, and I would walk the seven miles across town every Sunday night to
get one good meal a week at the Hare Krishna temple. I loved it. And much of
what I stumbled into by following my curiosity and intuition turned out to be
priceless later on.”
He returned to Silicon Valley in 1974 and took a job there as a technician at
Atari, the video game manufacturer. Still searching for his calling, he left
after several months and traveled to India with a college friend, Daniel Kottke,
who would later become an early Apple employee. Mr. Jobs returned to Atari that
fall. In 1975, he and Mr. Wozniak, then working as an engineer at H.P., began
attending meetings of the Homebrew Computer Club, a hobbyist group that met at
the Stanford Linear Accelerator Center in Menlo Park, Calif. Personal computing
had been pioneered at research laboratories adjacent to Stanford, and it was
spreading to the outside world.
“What I remember is how intense he looked,” said Lee Felsenstein, a computer
designer who was a Homebrew member. “He was everywhere, and he seemed to be
trying to hear everything people had to say.”
Mr. Wozniak designed the original Apple I computer simply to show it off to his
friends at the Homebrew. It was Mr. Jobs who had the inspiration that it could
be a commercial product.
In early 1976, he and Mr. Wozniak, using their own money, began Apple with an
initial investment of $1,300; they later gained the backing of a former Intel
executive, A. C. Markkula, who lent them $250,000. Mr. Wozniak would be the
technical half and Mr. Jobs the marketing half of the original Apple I Computer.
Starting out in the Jobs family garage in Los Altos, they moved the company to a
small office in Cupertino shortly thereafter.
In April 1977, Mr. Jobs and Mr. Wozniak introduced Apple II at the West Coast
Computer Faire in San Francisco. It created a sensation. Faced with a gaggle of
small and large competitors in the emerging computer market, Apple, with its
Apple II, had figured out a way to straddle the business and consumer markets by
building a computer that could be customized for specific applications.
Sales skyrocketed, from $2 million in 1977 to $600 million in 1981, the year the
company went public. By 1983 Apple was in the Fortune 500. No company had ever
joined the list so quickly.
The Apple III, introduced in May 1980, was intended to dominate the desktop
computer market. I.B.M. would not introduce its original personal computer until
1981. But the Apple III had a host of technical problems, and Mr. Jobs shifted
his focus to a new and ultimately short-lived project, an office workstation
computer code-named Lisa.
By then Mr. Jobs had made his much-chronicled 1979 visit to Xerox’s research
center in Palo Alto, where he saw the Alto, an experimental personal computer
system that foreshadowed modern desktop computing. The Alto, controlled by a
mouse pointing device, was one of the first computers to employ a graphical
video display, which presented the user with a view of documents and programs,
adopting the metaphor of an office desktop.
“It was one of those sort of apocalyptic moments,” Mr. Jobs said of his visit in
a 1995 oral history interview for the Smithsonian Institution. “I remember
within 10 minutes of seeing the graphical user interface stuff, just knowing
that every computer would work this way someday. It was so obvious once you saw
it. It didn’t require tremendous intellect. It was so clear.”
In 1981 he joined a small group of Apple engineers pursuing a separate project,
a lower-cost system code-named Macintosh. The machine was introduced in January
1984 and trumpeted during the Super Bowl telecast by a 60-second commercial,
directed by Ridley Scott, that linked I.B.M., by then the dominant PC maker,
with Orwell’s Big Brother.
A year earlier Mr. Jobs had lured Mr. Sculley to Apple to be its chief
executive. A former Pepsi-Cola chief executive, Mr. Sculley was impressed by Mr.
Jobs’s pitch: “Do you want to spend the rest of your life selling sugared water,
or do you want a chance to change the world?”
He went on to help Mr. Jobs introduce a number of new computer models, including
an advanced version of the Apple II and later the Lisa and Macintosh desktop
computers. Through them Mr. Jobs popularized the graphical user interface,
which, based on a mouse pointing device, would become the standard way to
But when the Lisa failed commercially and early Macintosh sales proved
disappointing, the two men became estranged and a power struggle ensued, and Mr.
Jobs lost control of the Lisa project. The board ultimately stripped him of his
operational role, taking control of the Lisa project away from, and 1,200 Apple
employees were laid off. He left Apple in 1985.
“I don’t wear the right kind of pants to run this company,” he told a small
gathering of Apple employees before he left, according to a member of the
original Macintosh development team. He was barefoot as he spoke, and wearing
That September he announced a new venture, NeXT Inc. The aim was to build a
workstation computer for the higher-education market. The next year, the Texas
industrialist H. Ross Perot invested $20 million in the effort. But it did not
achieve Mr. Jobs’s goals.
Mr. Jobs also established a personal philanthropic foundation after leaving
Apple but soon had a change of heart, deciding instead to spend much of his
fortune — $10 million — on acquiring Pixar, a struggling graphics supercomputing
company owned by the filmmaker George Lucas.
The purchase was a significant gamble; there was little market at the time for
computer-animated movies. But that changed in 1995, when the company, with Walt
Disney Pictures, released “Toy Story.” That film’s box-office receipts
ultimately reached $362 million, and when Pixar went public in a record-breaking
offering, Mr. Jobs emerged a billionaire. In 2006, the Walt Disney Company
agreed to purchase Pixar for $7.4 billion. The sale made Mr. Jobs Disney’s
largest single shareholder, with about 7 percent of the company’s stock.
His personal life also became more public. He had a number of well-publicized
romantic relationships, including one with the folk singer Joan Baez, before
marrying Laurene Powell. In 1996, a sister, the novelist Mona Simpson, threw a
spotlight on her relationship with Mr. Jobs in the novel “A Regular Guy.” The
two did not meet until they were adults. The novel centered on a Silicon Valley
entrepreneur who bore a close resemblance to Mr. Jobs. It was not an entirely
flattering portrait. Mr. Jobs said about a quarter of it was accurate.
“We’re family,” he said of Ms. Simpson in an interview with The New York Times
Magazine. “She’s one of my best friends in the world. I call her and talk to her
every couple of days.”
His wife and Ms. Simpson survive him, as do his three children with Ms. Powell,
his daughters Eve Jobs and Erin Sienna Jobs and a son, Reed; another daughter,
Lisa Brennan-Jobs, from a relationship with Chrisann Brennan; and another
sister, Patti Jobs.
Eventually, Mr. Jobs refocused NeXT from the education to the business market
and dropped the hardware part of the company, deciding to sell just an operating
system. Although NeXT never became a significant computer industry player, it
had a huge impact: a young programmer, Tim Berners-Lee, used a NeXT machine to
develop the first version of the World Wide Web at the Swiss physics research
center CERN in 1990.
In 1996, after unsuccessful efforts to develop next-generation operating
systems, Apple, with Gilbert Amelio now in command, acquired NeXT for $430
million. The next year, Mr. Jobs returned to Apple as an adviser. He became
chief executive again in 2000.
Shortly after returning, Mr. Jobs publicly ended Apple’s long feud with its
archrival Microsoft, which agreed to continue developing its Office software for
the Macintosh and invested $150 million in Apple.
Once in control of Apple again, Mr. Jobs set out to reshape the consumer
electronics industry. He pushed the company into the digital music business,
introducing first iTunes and then the iPod MP3 player. The music arm grew
rapidly, reaching almost 50 percent of the company’s revenue by June 2008.
In 2005, Mr. Jobs announced that he would end Apple’s business relationship with
I.B.M. and Motorola and build Macintosh computers based on Intel
By then his fight with cancer was publicly known. Apple had announced in 2004
that Mr. Jobs had a rare but curable form of pancreatic cancer and that he had
undergone successful surgery. Four years later, questions about his health
returned when he appeared at a company event looking gaunt. Afterward, he said
he had suffered from a “common bug.” Privately, he said his cancer surgery had
created digestive problems but insisted they were not life-threatening.
Apple began selling the iPhone in June 2007. Mr. Jobs’s goal was to sell 10
million of the handsets in 2008, equivalent to 1 percent of the global cellphone
market. The company sold 11.6 million.
Although smartphones were already commonplace, the iPhone dispensed with a
stylus and pioneered a touch-screen interface that quickly set the standard for
the mobile computing market. Rolled out with much anticipation and fanfare,
iPhone rocketed to popularity; by end of 2010 the company had sold almost 90
Although Mr. Jobs took just a nominal $1 salary when he returned to Apple, his
compensation became the source of a Silicon Valley scandal in 2006 over the
backdating of millions of shares of stock options. But after a company
investigation and one by the Securities and Exchange Commission, he was found
not to have benefited financially from the backdating and no charges were
The episode did little to taint Mr. Jobs’s standing in the business and
technology world. As the gravity of his illness became known, and particularly
after he announced he was stepping down, he was increasingly hailed for his
genius and true achievement: his ability to blend product design and business
market innovation by integrating consumer-oriented software, microelectronic
components, industrial design and new business strategies in a way that has not
If he had a motto, it may have come from “The Whole Earth Catalog,” which he
said had deeply influenced him as a young man. The book, he said in his
commencement address at Stanford in 2005, ends with the admonition “Stay Hungry.
“I have always wished that for myself,” he said.
has been revised to reflect the following correction:
Correction: October 5, 2011
An earlier version of this obituary incorrectly identified the city
Jobs graduated from high school.
It was Cupertino, not Los Altos.
misstated the year in which NeXT shifted its focus
from the education to the
business market as 1986.
The change occurred in 1993.
Steve Jobs, Apple’s Visionary, Dies at 56, NYT, 5.10.2011,
as Adding to Pollution in China
September 1, 2011
The New York Times
By DAVID BARBOZA
SHANGHAI — A Chinese environmental group has singled out Apple
for criticism, accusing the company’s Chinese suppliers of discharging polluted
waste and toxic metals into surrounding communities and threatening public
The group, the Institute of Public and Environmental Affairs in Beijing,
released a 46-page report Wednesday documenting what it said was pollution from
the dozens of “suspected” Apple suppliers throughout China.
The report, which the group said was based on visits to many of the factories’
regions, said that factories that the group suspected were Apple suppliers often
“fail to properly dispose of hazardous waste” and that 27 of the suppliers had
been found to have environmental problems.
An Apple spokesman said Wednesday that the company had been aggressively
monitoring factories in its supply chain with regular audits.
“Apple is committed to driving the highest standards of social responsibility
throughout our supply chain,” said Steve Dowling, a spokesman for Apple, which
is based in Cupertino, Calif.
He added: “We require that our supplier provide safe working conditions, treat
workers with dignity and respect, and use environmentally responsible
manufacturing processes wherever Apple products are made.”
Apple’s products have grown hugely popular in China, which already has the
world’s busiest Apple stores. But the company has also been dogged by challenges
here, though Apple does not typically disclose its list of suppliers.
Last year, one of Apple’s biggest suppliers was hit by a wave of worker suicides
at several of its mainland Chinese facilities. And in May, an explosion and fire
at a plant that made Apple products killed two people and injured more than a
dozen in the city of Chengdu, in southwest China.
Also earlier this year, Apple acknowledged that 137 workers at a Chinese factory
near the city of Suzhou had been seriously injured by a toxic chemical used in
making the signature slick glass screens of the iPhone.
But Apple is hardly the only company facing criticism over its Chinese supply
chain. In recent years, dozens of multinationals have been accused of using
Chinese factories that employed child labor, violated the country’s labor laws
and fouled its waterways.
Supply chain experts say brand-name companies generally do a better job of
monitoring and auditing their suppliers than smaller companies in China.
But most experts agree that while conditions have improved at many work sites,
labor violations and the discharge of toxic waste remain major problems.
Apple said it carried out its own regular audits of supplier factories. It
issues a report each year detailing problems it faced and explaining its
monitoring practices and how it induces suppliers to correct violations within
In many cases, Apple says that its audits are the first conducted by any company
on the facilities, and that many of those involve environmental audits.
But Ma Jun, the director of the Institute of Public and Environmental Affairs,
said Thursday that Apple had a poor environmental record and that the company
had been less responsive to the group’s investigations than other electronics
(Mr. Ma did say, however, that Apple had agreed to discuss the latest report.)
A similar report on Apple was issued by his group last January.
“Apple has made this commitment that it’s a green company,” Mr. Ma said by
telephone Thursday. “So how do you fulfill your commitment if you don’t consider
you have responsibility in your suppliers’ pollution?”
Gu Huini contributed research.
Apple Cited as Adding
to Pollution in China, NYT, 1.9.2011,
Promises Review After Suicides
May 26, 2010
The New York Times
By DAVID BARBOZA
SHENZHEN, China — Struggling to cope with a rash of suicides at his company’s
electronics factories here, the chairman of an electronics maker that supplies
Apple, Dell and Hewlett-Packard said Wednesday that he was doing everything
possible to find a solution.
“We are reviewing everything,” Terry Gou, the chairman of the Hon Hai Precision
Industry Group of Taiwan and one of Asia’s richest men, said after traveling
here from the company’s headquarters in Taiwan. He said the company was
reviewing labor practices, hiring psychiatrists and putting up safety nets on
“We will leave no stone unturned,” Mr. Gou said, “and we will make sure to find
a way to reduce these suicide tendencies.”
Mr. Gou spoke at a hastily organized news conference and media tour on the
campus of Foxconn Technology, the Hon Hai subsidiary that operates some of the
world’s biggest factories and produces a wide range of electronics for global
brands, including American computer makers.
Foxconn, which has about 420,000 employees on two campuses in Shenzhen, is known
for its military-style efficiency, the awesome scale of its production
operations and for manufacturing popular products like the Apple iPhone. But
this year the company has come under intense scrutiny because of a string of
suicides by distressed workers between the ages of 18 and 24.
The most recent took place early Tuesday, when a 19-year-old employee fell to
his death here. The police have already ruled the death a suicide.
It was the ninth suicide this year by an employee at one of Foxconn’s two
Shenzhen campuses, police said. Two additional workers survived suicide attempts
with serious injuries.
Apple, Dell and Hewlett-Packard say they were now investigating conditions at
Foxconn amid growing concern about the suicides. The companies say that all
their manufacturers are required to comply with international labor standards.
But several labor rights groups have called for an independent investigation
into the suicides and labor conditions at Foxconn, saying some deaths appear to
be suspicious. Some advocates have also accused the company of running huge
sweatshops that regularly violate Chinese labor laws and treat workers harshly.
Those assertions have been bolstered in recent weeks by China’s state-run
newspapers, which have published a series of sensational reports about the
suicides alongside exposés detailing the harsh conditions inside Foxconn
Some articles describe the heavy burdens workers face in trying to meet
Foxconn’s production quotas, cramped dormitories that sometimes house 10 to a
room and meager salaries of about $150 a month before overtime.
Foxconn executives, though, strongly defend the company’s labor practices and
the conditions on its huge campuses, which they say have modern dormitories,
swimming pools and shopping and recreational facilities.
While company executives acknowledge a sharp rise in the rate of suicides on the
Shenzhen campuses this year, they say the causes are largely because of China’s
social ills and personal problems that arise when migrant workers travel long
distances to find jobs.
Foxconn is still investigating the circumstances surrounding the suicides, but
company executives say they have no evidence they were caused by poor labor
“There is a fine line between productivity and regimentation and inhumane
treatment,” said Louis Woo, an aide to Mr. Gou at Hon Hai. “I hope we treat our
workers with dignity and respect.”
To help ease the crisis, Foxconn says, it has invited university scholars and
mental health experts to its campuses in recent weeks. At the news conference at
one campuses Wednesday, some of those experts said the rising number of suicides
may be the result of complex social factors, including the nation’s rising
income gap and even something known as suicide contagion — a tendency for
copycat suicides to occur after reports of other suicides.
Health experts say the suicide figures from Foxconn are troubling but far below
the national rate of about 14 per 100,000 in China, according to the World
Still, Mr. Gou, who rarely grants interviews and almost never allows journalists
to visit the campuses of Foxconn, made an unusual show of concern and openness
in Shenzhen on Wednesday, bowing several times at the news conference,
apologizing for the tragedies and asking mental health experts to help find a
solution. He even led dozens of journalists on a tour of Foxconn’s campus,
visiting dormitories, a campus hospital, a production line and an employee care
And he appealed to the media to stop sensationalizing the suicides at Foxconn,
which he said could fuel even more suicide attempts.
“I’m appealing to the press to take social responsibility,” he said. “Do not
sensationalize this. But later, he said Foxconn was re-examining the way it
operated. “We can be a better company,” he said.
Bao Beibei contributed research.
Promises Review After Suicides,
Just a Touch Away,
the Elusive Tablet PC
October 5, 2009
The New York Times
By BRAD STONE
and ASHLEE VANCE
SAN FRANCISCO — The high-tech industry has been working itself into paroxysms
of excitement lately over an idea that is not exactly new: tablet computers.
Quietly, several high-tech companies are lining up to deliver versions of these
keyboard-free, touch-screen portable machines in the next few months. Industry
watchers have their eye on Apple in particular to sell such a device by early
Tablets have been around in various forms for two decades, thus far delivering
little other than memorable failure. Nonetheless, the new batch of devices has
gripped the imagination of tech executives, bloggers and gadget hounds, who are
projecting their wildest dreams onto these literal blank slates.
In these visions, tablets will save the newspaper and book publishing
industries, present another way to watch television and movies, play video
games, and offer a visually rich way to enjoy the Web and the expanding world of
“Desktops, laptops — we already know how those work,” said Brian Lam, editorial
director of the popular gadget site Gizmodo, which reports and hypothesizes
almost daily about these devices. Tablets, he said, “are one of the last few
Tablet computers were first conceived as a way to supplant plain old paper, in
the same way that PCs replaced the typewriter.
In 1993, Apple’s Newton MessagePad, with its expansive screen and stylus pen,
became known less for its innovative features than for being lampooned in
“Doonesbury,” which ridiculed the device for its flawed handwriting recognition.
Steven P. Jobs killed the Newton when he returned to Apple in 1997.
Then in 2001, at Comdex, the industry trade show, Bill Gates introduced new
Windows software for tablets with a bold prediction: within five years, he said,
tablets “will be the most popular form of PC sold in America.” It didn’t happen,
of course. Tablets running Windows sell only a few hundred thousand units a
year, mostly in business fields like health care and financial services.
There were basic problems with these early tablets: they cost too much and did
not do enough.
“Software engineers got ahead of the hardware capabilities,” said Paul Jackson,
a consumer product analyst at Forrester Research. “But we may be finally getting
to the point where the dreams and aspirations of those designers are actually
meeting capable and reasonably priced technology.”
You can thank Moore’s Law and the immutable advance of technology for that.
Integrated microchips now combine wireless connectivity and support for features
like multimedia, GPS functions and rich graphics. They are also more
At the same time, the iPhone and its imitators have demonstrated that new
tactile touch screens work and that people are comfortable with them, in a way
they never got accustomed to using earlier tablets and stylus pens.
“We darn well should be about ready to take advantage of this stuff. It’s time,”
said Bill Buxton, a researcher at Microsoft who has been working on multitouch
systems for 20 years, and has a comprehensive collection of tablets and touch
screens he keeps in his office in Toronto.
The drumbeat of tablet product introductions has already begun. In June, Archos,
a French consumer electronics company, began selling a small touch-screen tablet
running Google’s Android software. Later this month, it will introduce another
tablet that runs on Microsoft’s Windows 7, which has built-in support for touch
“A road warrior doesn’t want to take a big clamshell netbook with him,” said
Frédéric Balaÿ, vice president for marketing at Archos.
The industry blog TechCrunch has also commissioned its own Web tablet, called
the CrunchPad, which it has said it will start selling later this year.
Despite its past bruises in the tablet business, Microsoft appears ready to try
again. In September, images of a booklike Microsoft device called Courier, with
two 7-inch color screens, surfaced on Gizmodo.
In an interview, Steven A. Ballmer, Microsoft’s chief executive, would not
discuss that product in particular, but said the company devises such prototypes
all the time, so it can take them to its hardware partners. Still, rumors of a
Microsoft tablet computer sparked interest. “I got an e-mail from some customer
who said, ‘I want that,’ ” Mr. Ballmer said.
Apple’s rumored tablet is the most highly anticipated of the lot. Analysts
expect Apple to introduce it early next year — a sort of expanded, souped-up
version of the iPod Touch, priced at around $700.
Last week, Apple rehired the original chief marketer of its old Newton, Michael
Tchao, who was working at Nike. Mr. Tchao’s former Apple colleagues believe he
will help market this new device.
Colin Smith, an Apple spokesman, declined to comment on the company’s
recruitment or product plans. But Apple’s tablet will most likely have little in
common with the Newton, which was essentially a personal digital assistant. The
new crop of tablets is being viewed as more flexible — gadgets that combine
elements of the iPhone, e-book readers like the Kindle and laptops.
Apple has been working on such a Swiss Army knife tablet since at least 2003,
according to several former employees. One prototype, developed in 2003, used
PowerPC microchips made by I.B.M., which were so power-hungry that they quickly
drained the battery.
“It couldn’t be built. The battery life wasn’t long enough, the graphics
performance was not enough to do anything and the components themselves cost
more than $500,” said Joshua A. Strickland, a former Apple engineer whose name
is on several of the company’s patents for multitouch technology.
Another former Apple executive who was there at the time said the tablets kept
getting shelved at Apple because Mr. Jobs, whose incisive critiques are often
memorable, asked, in essence, what they were good for besides surfing the Web in
The success of the iPhone may have partially helped to answer that question. As
of last month, developers had created 85,000 applications for the iPhone and
iPod Touch — video games, social networking software, restaurant finders and
more. Analysts believe that all those programs will immediately work on the new
tablet while developers begin to tailor new software for the larger screen.
Despite the preponderance of apps, there is still the persistent question of
whether regular people will really find a use for tablet computers. Smaller
cellphones are increasingly multipurpose and fit nicely in a jacket pocket. And
low-end laptops are inexpensive, run a full-fledged operating system and offer
the luxury of a keyboard.
“I can imagine something like the iPhone with a much bigger screen being a
gorgeous device with great capacity, but I don’t know where I would fit that
into my life,” said a former Apple executive, who declined to be named because
of Apple’s secrecy policies, but who anticipates an Apple tablet next year.
“Those are the debates that have been happening inside Apple for quite some
Just a Touch Away, the
Elusive Tablet PC,
A Window of Opportunity for Macs,
Soon to Close
September 16, 2007
The New York Times
By RANDALL STROSS
IF you’re the owner of a Windows PC who is looking for a replacement
computer, the choices are grim. You can step into the world of hurt that is
Vista, the latest version of Microsoft Windows that was released in January. Or
you can seek out a new machine that still comes loaded with the comparatively
ancient Windows XP.
Maybe, you might say, the moment has arrived to take a look at the Mac. You can
easily order one online, of course. But if you’d like to take a test-drive
before you commit, odds are that you’ll have to look far and wide for a store
that sells it. The Mac’s presence in the retail world remains limited, a shame
given the rare opportunity for Apple to gain market share that opened up when
The Mac’s worldwide market share was 3 percent as of June 2007, according to
Roger L. Kay, president of Endpoint Technologies Associates, a consulting firm
in Wayland, Mass. That forlorn number looks even worse compared with Apple’s
peak worldwide share of 14 percent in 1984, the year the Macintosh was
introduced and sales of Apple II computers were the company’s mainstay.
Mr. Kay noted that Apple’s share was as low as 2 percent as recently as early
2004. He said the increase to 3 percent may be a result of the “halo effect”
produced by the success of the iPod. It could also just as easily be attributed
to Apple’s simply offering better products at more competitive prices, he added.
Steven P. Jobs, Apple’s co-founder and chief executive, can hardly be satisfied
with a 3 percent share after more than 20 years of selling the Mac. Consider
whether Mr. Jobs would be able to deem the iPod a success if it had gained only
3 percent of the market for portable players. After all, he gave Microsoft’s
poor Zune exactly one month to succeed before he mocked the Zune’s 2 percent
market share at the Macworld conference in January.
The best time for gaining market share is when your main competitor stumbles
while introducing an entirely new version of its core product. Thanks to
Microsoft’s lumbering pace, Mr. Jobs had six years to look forward to the moment
when XP would be replaced by Vista.
When the long-awaited moment arrived, Vista turned out to be in as sorry a state
of semicompletion as Mr. Jobs could have hoped for. Many pieces of hardware that
customers already owned, like printers, turned out to be incompatible with the
new Vista models.
The spectacle of Microsoft’s customers scrambling to avoid buying machines with
Vista was a sight to be savored for those watching from Apple’s offices in
Cupertino, Calif. Dell had to retract its initial all-Vista policy and
reintroduce an XP option to appease distraught customers.
The Mac was seemingly well positioned for the moment in many ways. The
transition to Intel microprocessors was complete. The OS X Tiger was a sleek,
feature-rich, polished operating system. (Leopard, the next iteration, is
scheduled to be released in October.)
The I’m-a-Mac/I’m-a-PC commercials that began in 2006 found endless ways to draw
entertaining comparisons between the joys of owning a Mac and the hassles of
owning a PC. The evolution of the software industry also worked in the Mac’s
favor: users spent far more time within a browser, insulated from operating
system-specific software, and the Mac’s new Intel foundation made it easy to run
Windows applications speedily on a Mac.
The official line from Apple is that all has gone swimmingly. The company said
it shipped 1.52 million Macs in the first quarter of this year, up 35 percent
from the year-ago quarter. In the second quarter through June 30, it shipped
1.76 million Macs, up 32 percent from a year ago, an all-time quarterly record.
Funny thing, though: based on the ratio of Windows and Macs actually in use, no
gains can be seen for Apple.
The Mac’s share of personal computers has actually edged a bit lower since
Vista’s release in January, and the various flavors of Windows a bit higher,
according to Net Applications, a firm in Aliso Viejo, Calif., that monitors the
operating systems among visitors to 40,000 customer Web sites.
To try to win over customers when Vista appeared, Mr. Jobs and his managers did
not enlist resellers for the Mac with the same enthusiasm that they showed in
building Apple’s own network of retail stores. In the war for operating system
share, there’s no substitute for boots on the ground to retake territory, shelf
Hewlett-Packard, the world’s largest PC company, sells its computers in 23,000
retail stores in the United States alone. (An Apple spokesman said that the
company did not release the number of its resellers in the United States, but
the company said it operated 185 Apple stores.)
Matthew H. Kather, senior technology analyst at W. R. Hambrecht & Company, said,
“You could grow your share a lot faster if you could get your Mac retail
APPLE was organized in a way that was bound to lead to neglect of the Mac and
the retail channel. The 10 members of the company’s executive team include a
senior vice president who is responsible for the iPod and nothing else. Another
is in charge of only the stores Apple owns. No one’s sole responsibility is the
Mac. The Mac’s sales are under the purview of the chief operating officer,
Timothy D. Cook, who has other things on his plate, like running the entire
Apple began working with the retail chain Best Buy in spring 2006 on a pilot
project to obtain shelf space for Macs. Given Apple’s long, tempestuous history
with many retail chains, restoring trust has been tough. (Best Buy dropped the
Mac in 1999 when Apple continued to ship models and colors that pleased itself,
and not those ordered by Best Buy).
The six-store pilot with Best Buy was expanded to 50 stores by the end of 2006.
There are now 200 stores, with plans to expand to 300 this fall. Best Buy,
however, has not yet agreed to place the Mac in all 872 stores. If Apple had
begun wooing Best Buy two years ago, and perhaps appointed an ambassador to look
after the relationships with the chain and other resellers, the Mac would have
been much better off.
Apple has not even begun to try to re-enter another domain from which it had
withdrawn its Mac sales teams: large corporations. Given such strategic
decisions, the Mac has limited room to expand.
However, the opportunity for Apple that has been opened by Vista’s introduction
is temporary. Mr. Kay, of Endpoint, described a Microsoft operating system and
its thousands of certified supporting hardware vendors and the two million
device drivers as forming an enormous flywheel.
“It takes a lot of energy to spin it up,” he said, “but once it gets going, it’s
Randall Stross is an author based in Silicon Valley
and a professor of business
at San Jose State University.
A Window of Opportunity
for Macs, Soon to Close,
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