 History of the Apple Computer.  From the beginning which was in 1976 through the present  Prediction of the near future and new Apple Computer products to be released.

 Steven Paul Jobs, Stephen Gary Wozniak and Ronald Gerald Wayne founded Apple Computer.  In 1976, Ronald Wayne resigned from Apple Computer with only a one time payment of $80.  Hewlett Packard grants Gary Wozniak the permission to create the Apple I.

 This was the year that Apple was incorporated.  Rob Janov designed the Logo which is still used today.  Mark Makula invests $92,000 in the company  Michael Scott becomes the first President of Apple.  The Apple I is released for $1,295.

 Apple and Xerox sign an invest agreement.  Xerox invest one million dollars in Apple stocks.  Apple engineers were allowed to study Xerox’s PARC’s graphical user interface.  The PARC operating system was the 1 st OS for the public market with GUI.  It was commercially unsuccessful.

 Jef Raskin worked on a computer concept involving: › Design › Implementation philosophy › Human usability over execution & speed  Raskin named his concept after his favorite type of apples: McIntosh.  Apple begins working on Lisa, originally a $2000 business computer.

 Apple goes public.  Stocks’ value increases by 1700%.  The new Apple is released.  Apple sold it for $4340 to $7800 depending on the configuration.

 Steve Wozniak is injured in a plane & takes time off from Apple and does not return to the Macintosh project.  Michael Scott resigns as president of Apple.  Mike Markkula succeeds Scott.  The Lisa’s development is officially finished.  Apple Computer, Inc. & Apple Corps (recording company of the Beatles) enter a secret agreement.

 The Lisa is released.  Apple becomes the fastest growing company in history.  John Sculley, former president of Pepsi Co., becomes president & CEO of Apple Computer, Inc.  The Macintosh is released-retailing for $2495.

 Apple lays off 1200 employees.  Stephen Jobs officially resigns as chairman of Apple.  Apple sues Steve Jobs.  Apple drops suit against Jobs & he founded NeXT, Inc.  Apple tries to make Mac more attractive by releasing “Macintosh Office”.

 Apple’s 10 th Anniversary.  The Mac SE & the Mac II are introduced.  Apple sues Microsoft & Hewlett Packard accusing them of violating copyrights of Apple.

 Apple Corps sues Apple Computer accusing it of violating the terms of the agreement in 1981 by producing synthesized music.

 IBM, Motorola & Apple form an alliance. › Motorala makes Processors for Apple  Apple Computer, Inc. pays Apple Corps $26.5 million.  The lawsuit between the two is settled.

 Michael Spindler replaces Sculley as CEO.  Sculley resigns as chairman of Apple.  Apple releases the first PDA (Newton Message Pad). Release of 1 st Power Macintosh desktop computer & system 7.5  Apple starts licensing the MacOS.  Apple announces Pippin, a multimedia system

 Apples’ 20 th Anniversary.  The PowerPC 603e is announced  Apple Computer, Inc. takes over NeXT Computer, Inc. for $430 million.

 Jobs returns to Apple due to the NeXT Computer, Inc.  Apple starts buying back all licenses from Mac-clone manufacturers.  The Power Macintosh G3 & The Apple Store are introduced at “Apple Event”.  The iMac becomes the fastest selling PC in history, being reordered over 150,000 times.

 Jobs becomes permanent CEO.  Chief sales executive Mitch Mandich steps down.

 Opens first Apple retail store in McLean, VA.  Apple acquires fire wire company Zayante.  Former executive John Couch returns.  Larry Elisson resigns from Apple board.  iPod, OS X, iMac G4 all introduced.

 iTunes music store opens.  Tibco sues Apple over trademark.  Apple launches iTunes Canada.  iMac G5

 Raskin dies at 61.  Software development Avie Tavanian leaves.  Video iPod launched & 1 million videos sold from iTunes.

 January of 2007 Apple dropped “Computer from its corporate name.  Apple employs over 20,000 permanent & temporary employees currently.  Worldwide annual sales in its fiscal year 2007 (ending September 29, 2007) are US $24.01 billion.

 The Apple iPhone was released on June 29,  It is a multimedia, internet phone and has a multi-touch screen with virtual keyboard and buttons.  On October 26, 2007 Apple released a new operating system Mac OS X 10.5 Leopard.  It is a Unix based operating system  The recently released iPod Touch has all the capabilities of the iPhone except it can’t be used as a phone.

 Google released beta version of Google gadgets for Mac.  Google Gadgets are mini applications similar to Apple's own Dashboard Widgets  Google's Gadgets for Mac are now integrated and installable into Apple's Dashboard in Mac OS X.  This makes them functionally indistinguishable from Dashboard Widgets.  Google Gadgets comes integrated with Google Desktop, a desktop search application also available from Google.

 Rumors are floating around that a new Mac book will be released in early  The new ultra portable Mac Books are to be aluminum clad, 50% lighter and "strikingly slimmer" to the existing 15" Mac Book. They are also expected to incorporate NAND Flash memory to improve battery life and boot times.

 AT&T Inc. Chief Executive Officer Randall Stephenson confirmed that the 3G version of the iPhone would be made available in  Steve Jobs stated that a 3G iPhone is coming, but that the delay is due to excessive battery life consumption with existing 3G chipsets.  The iPhone presently uses the EDGE network for its data connectivity.

 Historically what are Apple’s Competitive Advantages?  Structure of PC industry  Apple’s Strategy since 1990  Has Jobs finally solved Apple’s longstanding problems? Is i-pod any different?

 Ease of Use  Traditional strength in Desktop publishing, GUI  Buyer Loyalty  Proprietary Systems (Supports higher margins, creates barriers to entry and limits direct imitation)  Brand  Plug and Play (related to ease of use- components and peripherals can be added to a Mackintosh fairly easily as compared to a PC)

 Sophisticated powerful buyers › Buy products in truckloads, › Know what they want › Wont pay a lot for it › Will find some other company to sell at lower price  Vicious Rivalry › Open Standards: PCs are commodities, Manufactures compete on price, pushing down margins › Fragmented: No market leader to provide price stability › Rapid technology Obsolesce › Strong buyers with great sophistication › Summary: very tough industry and not attractive

 Fragmented: No market leader to provide price stability

 Low barriers to entry › Technology: One can assemble a PC with a screw driver › Standardized components are available › Plant/ garage: Can be done in a garage › Distribution: Cheap. Over the Web on a classified AD. › Customers: Price sensitive SOHO. Summary: Barriers to Entry are low-Harder to think of another Industry where it is lower.

 Lots of Potential Substitutes › PDAs, Smart Phones › TV Set-top boxes › Video game Consoles. › Summary: Existence of Substitutes Push PC prices further down. Average price of the substitutes are $300.  Complements have been fueling demands (only the bright spot)

› Customer still pay for PC because of software functionalities that runs on PCS › Software, printers, scanners propel the demand. › Summary Complements are only the bright spot in the industry.

 Suppliers are appropriating most of Industries residual profits › Suppliers of components such as Disk drives have no power over PC manufacturers. › Intel/ Microsoft: Together Intel and Microsoft earned more than 20billion in Net profit from PC industry remained at $6 billion with 3% of sales. › How can two suppliers earn more that the whole customer base?  DOMINANT WIN-TEL ARCHITECTURE  BRAND (Intel Inside. Windows)

 Sophisticated powerful buyers  Vicious Rivalry  Lowe barriers to entry  Lots of Potential Substitutes  Complements have been fueling demands (only the bright spot)  Suppliers are appropriating most of Industries residual profits

 PCs and Macs were substitutes. So decline in price of PCs put pressure on Apple’s Prices and Margins.  Macs and PCs have different software complements. Industry was moving toward PC (Wintel).  Software developers were not interested in writing codes for a small Mac market.  Who is the largest software vendor for Mac other than Apple? › MICROSOFT  Win-Win Strategy for them. Even when Mac Sells, Microsoft becomes wealthier.

 Takes 1$billion to make an OS.  AUP for XP was $45-$60. Sold 17 million in 8 weeks, thus breakeven in 8 weeks.  Apple cannot have that speed in sales, and they are priced higher.  With these economies it was impossible for Apple to survive. They needed to change.

 Strategy › High Volume Low price › JV with IBM to develop a new OS.  Logic › Create big installed base › Increase Differentiation › Create a new standard to compete with Wintel and share development cost of new OS  Assessment › IBM could not deliver the higher end performance chips to compete with Wintel. › Customers wanted Intel, so Apple had to re-write its OS top work with Intel. › First two logic were conflicting › Apple and IBM could not leapfrog Microsoft and Intel.

 Strategy › Focus on traditional customer base › Design and marketing to get a price premium. › Shift to owned retails: Apple Stores. › Shift to Intel CPUs.  Logic › Re-affirm your commitment to loyal customers and get big premiums for your product.  Assessment › As of 2006 Jobs did not raise Apple Market Share › Share is declining › Key to driving traffic for i-Pod and possible spillovers to Mac › Opens Apple for potential windows Users.

 Imitation › Apple’s barrier to imitation has been a steady stream of innovations: Video ipod, ipod nano, mini ipod. › Successfully fulfilled all major price points.  Switching Costs › Locks current users with sales from i-tunes.  Cost Leadership › Has long term contracts with leading suppliers of flash memory, which reported to give 40% discount to Apple off list prices.

 Hold up › Apple sells i-pods at premium and gives away songs at less than a dollar. › Music companies have pressurized apple to raise prices. › But market share of Apple was able to retaliate.  Substitution (2006 Questions) › Will Mp3 remain an independent category? › Will PDAs and Cell phones incorporate mp3 capabilities? › Should Apple enter phone business against NOKIA, Motorola and Samsung?

 Huge difference between product advantage and competitive advantage.  Companies must look broadly at economies and driving forces of their industries. Apple was too insular.  Multiple standard co-exist when there is a huge gap between them. Difference between Mac and Windows diminished and it became hard to justify two standards, when one is clearly cheaper.  Timing and Windows of opportunities.