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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 world.

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 sold.

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 corporate filings.

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 actually paid.

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 rates.

“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 relationship.

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 traveling.

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 authorities.

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 50 percent.”

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 bill.

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 Congressional report.

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 Mountain View.

“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 and Cisco.

“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 Kong,

Siem Eikelenboom in Amsterdam, Dean Greenaway

in the British Virgin Islands,

Scott Sayare in Luxembourg

and Jason Woodard in Singapore.

How Apple Sidesteps Billions in Taxes,
NYT,
28.4.2012,
https://www.nytimes.com/2012/04/29/
business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html

Apple Adds

Sharper Screen

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,
    http://www.nytimes.com/2012/03/08/technology/
    apple-updates-ipad-with-some-refinements.html

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 audiences.

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 product.

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 the market.

“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 that.

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 ages.

“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 for decades?

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,
    http://www.nytimes.com/2012/03/06/technology/
    as-new-ipad-debut-nears-some-see-decline-of-pcs.html

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 percent).

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 numbers.

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 planet.”

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 undervalued companies.

“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 percent.

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 mobile phones.”

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, 24.2.2012,
    http://www.nytimes.com/2012/02/25/business/
    apple-confronts-the-law-of-large-numbers-common-sense.html

Factbox:

Apple's history and milestones

Thu Oct 6, 2011
9:51am EDT
Reuters

(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 color graphics.

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)

    Factbox: Apple's history and milestones, NYT, 6.10.2011,
    http://www.reuters.com/article/2011/10/06/
    us-apple-history-idUSTRE7950NI20111006

Steve Jobs,

Apple’s Visionary,

Dies at 56

October 5, 2011

The New York Times

By JOHN MARKOFF

Steven P. 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 was 56.

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 and frail.

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 billion.

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 adults worldwide.

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 publication.

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.”

Early Interests

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 is I!”

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.

An Apocalyptic Moment

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 control computers.

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 blue jeans.

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.

Return to Apple

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 microprocessors.

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 million units.

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 brought.

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 been matched.

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. Stay Foolish.”

“I have always wished that for myself,” he said.

Steve Lohr contributed reporting.

This article has been revised

to reflect the following correction:

Correction: October 5, 2011

An earlier version of this obituary incorrectly

identified the city

where Mr. Jobs graduated from high school.

It was Cupertino, not Los Altos.

It also 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,
http://www.nytimes.com/2011/10/06/
business/steve-jobs-of-apple-dies-at-56.html

Apple Cited

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 health.

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 90 days.

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 makers.

(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,
https://www.nytimes.com/2011/09/02/
technology/apple-suppliers-causing-environmental-problems-
chinese-group-says.html

Electronics Maker

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 the buildings.

“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 factories.

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 conditions.

“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 Health Organization.

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 center.

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.

Electronics Maker Promises Review After Suicides,
NYT,
26.5.2010,
https://www.nytimes.com/2010/05/27/
technology/27suicide.html

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 next year.

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 mobile applications.

“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 mysteries left.”

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 energy-efficient.

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 screens.

“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 bathroom.

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 time.”

Just a Touch Away, the Elusive Tablet PC,
NYT,
5.10.2009,
http://www.nytimes.com/2009/10/05/technology/05tablet.html

Digital Domain

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 Vista arrived.

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 by 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 presence up.”

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 company.

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 virtually unstoppable.”

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,
NYT,
16.9.2007,
https://www.nytimes.com/2007/09/16/
technology/16digi.html

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