Apple (in 2011) after Steve Jobs

MHE-FTR-015
0077645065

FRANK T. ROTHAERMEL
ALICIA HORl3ACZEWSKI

Apple (in 2011) after Steve Jobs

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AUGUST 24, 2011. 6:05 A.M. At 1 Infinite Loop in Cupertino, California, Steve jobs parked his
Mercedes with no license plate at an odd angle in a handicap slot. Jobs was looking very thin, dressed
in his typical uniform of a long-sleeved black rurtleneck, blue jeans, and sneakers. He was a pancreatic
cancer survivor. When he was first diagnosed in 2004, the doctors told him he had three to six months
to live. 1 However, he hlrned out to have a rare form of pancreatic cancer that was treatable. "I had
the surgery, and I'm fine now," he stated during his much-publicized commencement address for the
Stanford graduating class of 2005. 2 Unfortunately, Jobs's cancer recurred, and he underwent a liver
transplant in 2009, taking a six-month medical leave from his managerial responsibilities. His health
problems had continued to plague him, forcing him to take a second medical leave starting in January
2011. Although Jobs had remained intimately involved with strategic decision making, and repeatedly
assured shareholders that his health problems would not be a detriment to the company, the stock price
had slipped as investors worried over the prospect of an Apple without Jobs at its helm. Apple had
become such a close reflection of Jobs himself that the two hardly seemed distinguishable.
It seemed like just yesterday that Jobs had started Apple Computer, Inc. in his parents' garage in
1976. Thirty years later, he had succeeded in creating a fusion of computing, industrial design, and
brand power that lead Apple to develop some of the most innovative products in the world, including
the iPod, iPhone, and most recently, the iPad. In the process, Apple had become a household name. It
dominated a recent ranking of social brands, with the iPhone appearing at the top of the list, iTunes at
number six, and the company itself ranked eighth.3 Jobs was proud that he was credited with bringing
life and inspiration to the company not once, but twice.
Jobs was in a hurry to start his day. He had a meeting scheduled at 10 a.m. with his board of directors to discuss the future of the company. He had to make an announcement that he had long dreaded:
The time had come for him to step aside from the active management of the company and focus on
his own health. Jobs hoped to remain as Chairman of the Board, to ensure that the culhlre of innovation that he helped instill would endure as the key to Apple's competitive success, no matter what
uncertainties lay ahead. Meanwhile, Apple would need a new chief commander who would treat the
company as Jobs did-not just as a passion, but as family, art, and above all, a place where people did
not just work but changed the world. 4 Yet it would be difficult to find someone who could embody
the image and culture of the company like Jobs did. To many, Apple was Steve Jobs, and Steve Jobs
was Apple. Steve Jobs was more than a leader. He was a cult figure--a prophet of innovation. One
employee even featured on his license plate the letters WWSJD-"What Would Steve Jobs Do?"5

Professor Frank T. Rothaermel and Research Associate Alicia Horbaczewski (GT MBA '10) prepared this case from public sources. This case is
developed for the purpose of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or
inefficient management. by Rothaermel and Horbaczewski, 2013.

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Apple after Steve Jobs

When Jobs was 17, he read a quote that made a lasting impression on him: "If you live each day as
if it was your last, someday you'll most certainly be right." 6 His recent bout with cancer proved to him
that life was shorter than he ever expected. Having come so close to death and lived, Jobs could say
with more certainty, "Death is very likely the single best invention of life. It is life's change agent. It
clears out the old to make way for the new." 7 Change, and in particular the process of creative destruction, was the only constant Jobs had faith in.. especially now.

The Creation of Apple, Inc.

In 1976, Steve Jobs and Steve Wozniak conceived the idea of a personal computer company and
founded Apple Computer, fie. (The word "Computer" was dropped in 2007 to reflect expansion from
the personal computer market to consumer electronics in general.) 8 Only 21 years of age, Jobs had to
sell his Volkswagen to get money to start the company. Jobs and Wozniak, then 26, began to assemble
personal computers in Jobs's garage with a small group of friends. Soon after, they received additional
financing to spur the growth of the company. In 1978, the Apple II, the first personal computer, was
launched and sold for $666.66.9 In December of that same year, Apple launched a successful IPO, making it a publicly traded company.

By 1980, Apple had released three improved versions of the personal computer, and its two founders Jobs and Wozniak had become multimillionaires. Then IBM entered the personal computer market
in 1981 and quickly became a serious competitor. IBM's open architecture was easily imitable by other
manufacturers and soon became the industry standard, giving rise to many more computer companies
in the United States (e.g., Compaq and Dell) as well as in Taiwan, Korea, and other Asian countries.
Even more threatening was the consortium between IBM, which specialized in the development of
computer hardware, the newly formed Microsoft with its DOS operating system, and Intel with its
expertise in memory and processors. By 1982, IBM had increased its profitability and market share
substantially, and Apple's position was under attack.

"OBSESSED WITH DESIGN"

Nonetheless, in just over 10 years Apple had grown into a $2 billion company with over 4,000 employees.10 In 1984, Apple introduced its finest creation yet: the Macintosh. Jobs's curiosity and intuition
had led him to become "notoriously obsessed with design and style." This passion began when Jobs
dropped out of Reed College at the youthful age of 17. "The millute I dropped out, I could stop taking
the required classes that didn't interest me, and begin dropping in on the ones that looked interesting,"
Jobs remembered. 11 He decided to take a calligraphy class to learn about serif and sans serif typefaces
and what makes great typography: "It was beautiful, historical, artistically subtle in a way that science
can't capture, and I found it fascinating. None of this had even a hope of any practical application in
my life. But 10 years later, when we were designing the first Macintosh computer, it all came back to
me. And we designed it all into the Mac. It was the first computer with beautiful typography." 12 Jobs
firmly believed that if he had not dropped out of college and into that calligraphy class, the Mac would
never have had multiple typefaces and proportionally spaced fonts. And, "since Windows just copied
the Mac, it's likely that no personal computer would have them," if he had not made that decision. 13
Although the Macintosh was the first personal computer applauded for unique industrial design
and ease of use, it had a slower processor than IBM PCs and their clones, and very few compatible software programs due to Apple's closed proprietary operating system. As a result, the Mac was gradually
pushed to the periphery as a niche player with customers mainly in education and graphic design.

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Apple (in 2011) after Steve Jobs

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Apple after Steve Jobs

Apple's integrated value chain enabled the company to produce computers of very high quality, but
placed the Macintosh at a price disadvantage as the growing consumer technology industry became
increasingly commoditized.

NEW MARKETING GURU

In 1983, jobs decided to bring on john Sculley to run the company with him. Atthe time, Sculley was
a marketing guru from Pepsi whom Jobs "thought was very talented." 14 Sculley was responsible for
the "Pepsi Challenge" and "Pepsi Generation" ad campaigns that helped Pepsi overtake Coca-Cola in
market share for the first time in the history of the "Cola Wars." He had also turned arotmd PepsiCo's
failing food division by bringing in new management, improving product quality, and instituting new
accounting and financial controls. 15

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Apple's innovative advertising tale started on January 22, 1984. During the third quarter of the
Super Bowl that year, "one of the most famous television commercials of all time'' was broadcast. 16
The ad was based on the dystopian society depicted by George Orwell in his novel 1984. Hundreds
of identical drones were shown listening to their larger-than-life dictator, whose black-and-white face
was projected onto a screen in the middle of the room. Suddenly a beautiful woman, escaping capture
from armed guards, threw a hammer at the screen which exploded in a technicolor display of dazzling
light The ad stated, "On January 24th, Apple Computer will introduce Macintosh. And you'll see why
1984 won't be like 1984." 17 In this fashion, customers were introduced to Apple as the revolutionary,
subversive, and r~bellious company of the 1980s, ready to take on the tyrant of IBM.
For a while after John Srulley joined Apple, things went very well. But Jobs later recalled that "our
visions of the furore began to diverge and eventually we had a falling out." 18 Apple's core identity
changed with Sculley in charge. The business strategy shifted from differentiation based on a premium
product with a high price tag to producing a low-cost product with mass-market appeal. Sculley's
new ambition for Apple was to compete directly with IBM in the household-computer market. Apple
worked on bringing down the cost of manufacturing and formed alliances with Intel, Novell, and even
its old nemesis, IBM. At the same time, Apple moved toward desktop publishing, multimedia, and
peripherals. Howeve4 a series of major product flops, missed deadlines, and unrealistic earnings forecasts destroyed Apple's reputation. As a consequence, Apple's profitability continued on a downward
slope. With dismal sales and declining net income, a power struggle erupted between Jobs and Sculley,
who eventually succeeded in convincing Apple's board of ilirectors to throw Jobs out of Apple in 1985.

HARD TIMES
To add insult to injury, Microsoft released its graphical user interface (GUI)-based operating system,
Windows 3.0, in 1990, effectively cementing the Wmtel standard with 90 percent market share in the PC industry. This was the powerful combination of a Wmdows operating system running on the x86 architecture chips
made by Intel. Today, the x86 architecture is ubiquitous among computers, and a large amount of software
supports the platform, including operating systems such as MS-DOS, Windows, Linux, BSD, Solaris, and
Mac OS X. The innovator Apple had become a non-factor in the PC industry, retreating to ever-smaller
niches of the market.
In June 1993, leadership changed hands again from Sculley to Michael Spindler. Spindler continued
the company's focus on cost-cutting, but also made international growth a main objective. By 1995,
Apple was spreading itself too thin across product lines and geographic markets. It had lost any strategic focus, and could not stop operating in the red.

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Apple after Steve Jobs

Steve Jobs Returns

During this time, Jobs was starting over. "What had been the focus of my entire adult life was gone,
and it was devastating." 19 Jobs had been fired very publicly from a company he had helped to create,
and even considered leaving Silicon Valley for good. 20 Jobs later reminisced, "I didn't see it then, but it
turned out that getting fired from Apple was the best thing that could have ever happened to me. The
heaviness of being successful was replaced by the lightness of being a beginner again.... It freed me to
enter one of the most creative periods of my life. " 21 Had he in fact left Silicon Valley, he would not have
played the key role in two more of the most successful teclmology companies to date.
On February 3, 1986, Jobs invested in Pixar Animation Studios. Since then, Pixar has earned ten
Academy Awards, four Golden Globes and three Grammys, among many other awards. Pixar created
the world's first completely computer-animated feature film, Toy Story, and is now the most successful animation studio in the world, with fihns like A Bug's Life, Toy Story 2 and 3, Monsters Inc., Cars,
Ratatouille, Finding Nemo, The Incredibles, and WALL-E.
In 2006, Disney bought Pixar for $7.4 billion in a deal that also landed Jobs a seat on Disney's board
of directors. "The addition of Pixar significantly enhances Disney animation, which is a critical creative
engine for driving growth across our businesses," Disney CEO Robert Iger stated.22 Jobs, the majority shareholder of Pixar at the time with 50.l percent, became Disney's largest individual shareholder
with 7 percent. 23 His holdings greatly exceeded those of the previous top shareholder of Disney, exCEO Michael Eisner who owned 1.7 percent, and even Disney's Director Emeritus Roy E. Disney, who
owned less than 1 percent of the corporation's shares.24

Just one year prior to starting Pixar, Jobs was involved with another computer company called NeXT,
Inc., later known as NeXTSoftware, Inc. NeXT developed one of the first enterprise web application
frameworks for the higher-education and business markets. In a bizarre twist of fate, Apple purchased
NeXT on December 20, 1996, for $429 million.25
Earlier in 1996, Gilbert Amelio had replaced Spindler as CEO of Apple, which was reporting a
mere $69 million in first-quarter revenues. Amelia's intention was to revive Apple's former strategy
by focusing again on the premium-product market segment. Amelio made many changes at Apple,
including terminating the IBM alliance and announcing massive layoffs of 30 percent of the company's total work force of 13,400. 26 With the acquisition of NeXT, Amelio also brought Jobs back as a
part-time adviser to Apple. Despite all these measures, Apple's market share continued to tumble to
just 3 percent worldwide. 27
Apple experienced its worst year ever in 1997, and subsequently ousted Amelio due to crippling
financial losses and a low stock price. Jobs was brought back as interim CEO in September of that
same year. Thereafter, Steve Jobs succeeded in orchestrating one of the greatest corporate comebacks
in modern-day history (see Exhibits 1 and 2 for financial performance data).

Restructuring Apple
When Steve Jobs returned to Apple in 1997, he was ready and eager to shake things up. In a meeting with Apple's top executives, after hearing all their explanations as to why Apple was performing
poorly, Jobs infamously roared: "The products SUCK! There's no SEX in them anyrnore!" 28 Jobs swiftly

1,

Apple (in 2011} after Steve Jobs

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Apple after Steve Jobs

refocused the company that he had helped start and discontinued several products such as the Newton
FDA, the LaserWriter printer line, and the Apple QuickTake camera-all now collector items for Apple
enthusiasts.
During this time of restructuring, Jobs outsourced manufacturing to Taiwan and scaled down the
distribution system by ending relationships with smaller outlets. With Jobs's savvy insight for what
consumers wanted, he launched a new, revolutionary website to sell Apple products directly to customers online. For the first time ever, he also opened Apple retail stores, tied to his build-to-order
manufacturing strategy. Although these moves seemed risky at the time, all of these operational
improvements helped to boost previously declining sales. For the first time since 1993, Apple once
again became profitable in 1998.

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Jobs also realized the necessity to make Apple's operating system more accessible for software providers. He switched everything to the open-source, UNIX-based operating system, Mac OS X. 1his
proved to be a more stable operating environment and permitted the company to issue annual upgrades
in response to customer feedback. In 2005, Apple completed this transition by switching from PowerPC
to Intel processors, which meant that Apples could run not only the Mac OS X but also any operating
systems that used the x86 architecture. 1bis marked the beginning of a truly open era for Apple computers: They were now the most flexible as well as the most attractive. As a result, Apple's stock price
rose from $6 in 2003 to over $80 in 2006, surpassing even Dell's market cap. 29 Dell's CEO, Michael Dell,
was left retracting the words he had very publicly spat nine years prior, "If I ran Apple, I would shut it
down and give the money back to shareholders."30
Jobs even formed an alliance with Apple's archrival Microsoft to release new versions of Microsoft
Office for the Macintosh. In return, Microsoft made a $150 :million investment in non-voting Apple
stock. 31 Jobs, in a cell phone call with Gates, said, "Bill, thank you. The world is a better place. " 32
Beyond changing the operating system, the most visible change Jobs instituted was leveraging
industrial design to produce more aesthetically pleasing computers. Jobs almost instantly revitalized
Apple's image by pushing the limits of technology and design. He appointed Jonathan Ive, a British
designer, as head of Apple's in-house Industrial Design group (IDg). There have been several distinct
design themes in Jobs and Ive's collaboration over the years: translucency, colors, minimalism, and
dark aluminum. Ive has been credited with being the chief designer of the iMac, the aluminum and
titanium PowerBook G4, the MacBook, unibody MacBook Pro, iPod, and iPhone.33 Ive's work at Apple
has won him a slew of awards and widespread recognition.
Jobs also started to brand Apple as a functionally appealing, hip alternative to other dull, clonelike computers in the market. Known for his candor, Steve Jobs once accused Michael Dell of making
"un-innovative beige boxes."34 Continuing in the same vein as the infamous 1984 television ad, Apple
launched its "Think Different" campaign in 1997. The aim of the campaign was to reflect the culture of
Apple, comprised of great people who think differently. The television advertisements featured major
artists, scientists, and politicians who were seen as independent thinkers, including Albert Einstein,
Martin Luther King, Jr., John Lennon, Thomas Edison, Amelia Earhart, Alfred Hitchcock, Pablo Picasso,
and Jerry Seinfeld. Similarly, Apple's print advertisements had less to do with specific products, and
everything do to with company image. They simply featured a portrait of one of the historic figures
and a small Apple logo with the words "1hink Different" in the bottom comer.

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Apple after Steve Jobs

Apple's Culture
As early as 1983, Steve Jobs coined the following motto at an offsite retreat: "It's better to be a pirate
than join the navy." 35 Jobs's Macintosh team had only 80 employees at the time, but already he sensed
that they were developing the group-think mentality that he detested. In response to "Captain" Jobs's
cry, programmers Steve Capps and Susan Kare painted a rainbow-colored Apple eye patch onto a
pirate flag and hung it above the Macintosh building.36 This iconic image became illustrative of Apple's
unique corporate culture and also symbolic of Apple's first inspired slogan in the late 1970s, "Byte into
an Apple."
According to its website, working at Apple was "less of a job, more of a calling."37 Apple looked for
employees who were on a mission to "change the world" and create "some of the best-loved technology on the planet."38 Apple promoted itself to prospective candidates as "a whole different thing" with
"corporate jobs without the corporate part."39 Apple looked for people who were "smart, creative, up
for any challenge, and incredibly excited about what they do. In other words, Apple people. You know,
the kind of people you'd want to hang around with anyway."40 Steve Jobs had been more than instrumental in developing Apple's envied corporate culture from its establishment. Employees typically
worked 60 to 70 hours a week, and no one complained.
Apple has been thought of as putting Silicon Valley on the map with its hard-working but relaxed,
casual atmosphere. 41 This characterization would be an impossible contradiction in most other corporations in the United States, but not at Apple. When Jobs returned to Apple in 1997, he became famous
for his standard black turtleneck and jeans uniform, walking around the campus with, or sometimes
without, his sneakers. Jobs even went barefoot to a 1999 meeting to settle a patent dispute with executives from Microsoft.42 Jobs was the ultimate example of an "I'm-a-genius-and-I-don't-care" attitude.
Apple employees embraced their hero and became convinced that with confidence and creativity, they,
too, could become rich and leave a legacy-sans suit or shoes.
Apple's rebel spirit not only attracted a long-lasting appreciation from loyal employees, but also
created an almost cult-like following among customers who appreciated Apple's propensity to think
differently. Millions of people wanted to be seen as unique individuals, and hence, millions of people
bought Apple products. The "Cult of Apple" was a group of rumored fanatical followers devoted to
all things Apple, but "while there are many customers who eat, think, and breathe Apple, members of
the Cult of Apple take their devotion one step further and believe inApple."43 The result was that Apple
had a conspicuous horde-like following walking down the streets of every major city in the world with
the signature white-ear buds of Apple products attached to their heads. Apple products became so
trendy that other companies had to design their consumer electronics like Apple's to have a hope of
selling. The loyalty of the Apple customers has served the company well, and now it is not just the diehard fanatics who believe. Even people in the mainstream are becoming Apple converts.

Innovation at Apple
The one competency that has kept Apple on the cutting edge, all the way from startup to survival
to success-and finally to profitability and industry envy-has been innovation. "Innovation distinguishes between a leader and a follower," Jobs repeatedly said.44 Jobs believed that innovation is a
process that can be cultivated and managed within an organization. It begins with idea generation, and

Apple (in 2011) after Steve Jobs

Apple after Steve Jobs

then moves to idea adoption and development, and finally to idea implementation. All the while, the
innovation process is being enabled by effective leadership and a supportive organizational culture.
Apple's top management was critical in nurhrring an innovative organization because employees
needed to know that they would not be reprimanded for making risky choices when attempting a
creative project. A high tolerance for failure and calculated risk-taking is necessary for employees to
feel comfortable bringing up new ideas in any organization.45 Apple's workforce appeared to have
embraced this attitude fully, as they proudly "[said] NO to 1,000 things."46
Compared to its competitors, Apple spent a minuscule 3.6 percent of revenues on research and
development (R&D) for a grand total of $844 million in 2007. In contrast, Microsoft spent about 12.8
percent of annual revenues on R&D, equating to a whopping budget of $7.4 billion. Google similarly spent over 12.7 percent of annual revenues on R&D, for a total expendihrre of $2.1 billion. (See
Exhibit 3 for a list of R&D spending at selected technology companies.) Comparing the amount of
money spent at Apple with that of other technology giants shows how effectively Apple's innovation
process works, making possible a significant return on R&D investment. In fact, Jobs was known to
say: "Innovation has nothing to do with how many R&D dollars you have. When Apple came up with
the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people
you have, how you're led, and how much you 'get it."'47

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Apple's employees seemed to "get it," indeed. Apple was rated by BusinessWeek and Boston
Consulting Group as the #1 Most Innovative Company in the world for several years in a row (see
Exhibit 4).48 This was quite a feat considering that Apple led both newer companies such as Google and
Amazon, as well as more established firms like 3M and Procter & Gamble, in the rankings.

The iPod/iPhone/iPad Revolution

The big bang happened at Apple in October 2001 with the lannch of the iPod, a portable digital
music player based on the MP3 music format. The sleek design and smart graphical user interface
bewitched consumers. The product was an instant hit, selling over 100 million units within six years. 49
The profitability of the iPod was phenomenal, with margins estimated as high as 47.4 percent before
freight, marketing, and other costs.50
In April 2003, Apple provided iTunes as a complement for the iPod. iTunes was the first online store
from which customers could buy songs individually at 99 cents each, rather than purchasing entire
albums for upward of $15 to $20 or downloading songs illegally. Within three days of lannch, iTnnes
users had downloaded one million songs. By June 2008, iTunes had exceeded 5 billion downloads.51
On February 25, 2010, which was coincidentally Steve jobs's 55th birthday, Apple achieved the great
milestone of 10 billion iTunes downloaded. Apple had seemingly effortlessly established itself as the
newest icon of the digital age, revolutionizing the music industry and holding fast to its leadership
position in the technology race.
In keeping with its iconoclastic reputation, Apple promoted its iPod as a stylish alternative to arche-

typal music technology products with the new "iPod People" campaign. Ads featured several silhouetted people with white headphones in their ears dancing against a colorful background. Apple
advertising had always been creative by design, but its "iPod People" promotion brought in an unmistakable "coolness-factor" as the essence of the product. That desired attribute was directly transferred
to the customer upon purchase.

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THE IPHONE
In June 2007, Apple launched the iPhone, the third leg to Apple's innovation tripod, and soon
Apple's share price passed the $100 mark.52 The iPhone was a multifunction smartphone which provided the customer with a unique touch-based interface and a revolutionary operating system delivering a computer-based experience. According to Jobs, the iPhone was "the Internet in your pocket."53
Apple partnered with AT&T to bring this device to the market and make it affordable for consumers.
AT&T was happy to subsidize the phones, as long as it could ride the Apple wave of "coolness" and
irmovation.

One year later, Apple launched the iPhone 3G, which was advertised as twice as fast at half the
price. The iPhone 3G supported all Microsoft document formats and had full support for a Microsoft
Exchange server. Apple sold a record 6 million 3G iPhones in the first year, giving birth to a whole new
generation of smartphones. In the summer of 2010, Apple released the iPhone 4 with built-in cameras
and higher resolutions. In that same year, Apple had attained 17.4 percent of the smartphone market,
with 82 percent sales growth since 2008. It had taken only two years for Apple to jump to second place
behind Nokia, with 32.7 percent market share. Research in Motion, the maker of the BlackBerry, was
third, with 15.3 percent.54 Apple planned to introduce the 4G iPhone5 in the fall of 2011, this time
allowing Verizon and Sprint, in addition to AT&T, to offer wireless services for the iPhone.55
In fact, Apple commanded such a following with its iPhone that even 10 percent of Microsoft
employees used it, reopening the long-standing rivalry between the two companies. In September
2009, at a company-wide meeting in a sports stadium in Seattle, a Microsoft employee was using his
iPhone to take photos of Microsoft CEO Steve Ballmer. Suddenly, "Mr. Ballmer snatched the iPhone out
of the employee's hands, placed it on the ground, and pretended to stomp on it in front of thousands
of Microsoft workers."56 Afterward, Jobs sent an e-mail inquiring into this conspicuous iPhone use to a
Microsoft spokesperson, who declined to comrnent.57 Microsoft later announced its intention to release
its own version of the smartphone-Windows Phone 7-in time for the 2010 winter-holiday season. 58

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THE IPAD
On January 25, 2010, Jobs took his biggest gamble yet with the announcement of the iPad, a multimedia, tablet-style computer designed to take the place of a pencil and pad of paper. 59 (See Exhibit 5 for
a historical timeline of Apple's product introductions and net income.) During Jobs's keynote address
introducing the iPad two days later, he praised his new invention as the "best browsing experience
you've ever had. It's phenomenal! The Internet in your hands." Investors apparently shared Jobs's
excitement, as Apple's stock price rose 15 percent after the iPad was unveiled.60
However, the idea of a keyboard-free, touch-screen portable computer tablet had been around for
more than two decades. Apple had even launched its own Newton MessagePad in 1993, which became
known less for its pioneering features and more for being ridiculed in "Doonesbury" for the software's
problem in recognizing handwriting. 61 Upon returning to Apple in 1997, Jobs withdrew the Newton,
which had become a commercial failure and a public relations embarrassment.62 Competitors learned
from Apple's Newton debacle and started to introduce improved products at a lower price, including
Palm's Pilot, Handspring's Visor, and RIM's BlackBerry. Meanwhile, Jobs continuously scrapped all of
Apple's new tablet prototypes for over a decade, because they reportedly "weren't good for anything
except browsing the Web from the bathroom." 63

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Apple (in 2011) after Steve Jobs

Apple after Steve Jobs

Apple had come a long way since the Newton, evidenced by the fact that its iPad was the most
highly anticipated gadget of 2010. 64 Jobs in his keynote address stated that ''the iPad is our most
advanced technology in a magical and revolutionary device at an unbelievable price."65 The iPad was
half an inch thick, weighed 1.5 pounds, and had a 9.7-inch "gorgeous, super-high quality display" and
was "multi-touch, super-responsive, and super-precise."66 It had Wi-Fi wireless connectivity and was
capable of browsing the web, e-mail, photos, video, music, games, and e-books. It operated much like
the smaller iPhone and could nm all 140,000 applications (apps) designed for the iPhone. Additionally,
the iPad incorporated features like a calendar, photo manager, spreadsheets, and presentations to take
on a more multimedia look. 67
Given initial rumors that the iPad would cost anywhere from $700 to $1,000, customers were pleasantly surprised when it debuted at prices ranging from $499 up to $829. Many Apple fans remembered
when Jobs famously spouted his disdain for the growing development of the notebook market: "We
don't know how to make a $500 computer that's not a piece of junk. " 68 However, customers had to
pay an extra $30 a month to AT&T for the same always-on Internet access that the Kindle provided,69
with an option to renew their subscription on a monthly basis. This arrangement represented a significant departure from the wireless industry's traditional carrier-centered model, allowing Apple to
extract more value while carriers bore more of the cost. On the other hand, AT&T did not subsidize
the device, as it did with the iPhone, so this deal could potentially prove profitable for both parties.

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Despite pent-up demand, it was estimated that the iPad would caruribalize the market for other
Apple products, including the iPhone, iPod, and Mac notebooks, by around 10 percent. 70 To overcome this potential threat, Jobs would have to convince customers that they needed another gadget,
in addition to their laptops and smartphones. Jobs believed there was room for a third category
between the laptop and smartphone, but acknowledged that "it must do things far better than both
existing devices." Jobs argued for the necessity of his iPad: "If it is not better at these tasks, then there
is no reason for it being there." 71
Yet critics pointed out that unlike the iPhone, the iPad lacked a built-in camera for taking photos.
It also lacked the ability to play Flash-based content on websites, which accounted for 75 percent of
video on the web, and it could run only one app on the screen at a time. While Jobs hailed the iPad as
"a dream to type on," 72 for many it was not as easy as a typical keyboard with tactile keys to feel. 1bis
caused many customers to express disappointment with the iPad as doing less than the iPhone, but on
a bigger screen. 73 In March 2011, Steve Jobs in typical showman fashion, unveiled the iPad2, a thinner
and sleeker but higher performing version of the original iPad. Moreover, the iPad2 now contained
two cameras to facilitate online video chat. 74
With the introduction of the iPad, Steve Jobs defined Apple as a mobile-devices company, competing
against Sony, Samsung, and Nokia. 75At the same time, Apple faced direct competition from other computer manufacturers, who were quick to jump on the iPad bandwagon, hoping to undercut Apple's
price to gain market share. For example, Hewlett-Packard announced its own keyboardless computer
called the "Slate," and Dell, Acer, and Sony were all refining their own versions of the tablet. In addition, the iPad was likely to face competition from the new mini-laptops or "netbooks" being offered
by Apple's competitors for around $100. 76 These devices could perform all of the necessary functions
needed for most personal, academic, and even professional needs. Nevertheless, Jobs did not appear to
be too concerned: "The problem is netbooks aren't better at anything-they are just cheaper."77

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Apple after Steve Jobs

Revolutionizing the Publishing Industry?

Because the iPad was capable of reading books, newspapers, and magazines, Jobs predicted that the
iPad would reshape the publishing business much the way his iPod revolutionized the music industry.78 The CEO of McGraw-Hill, Harold McGraw, expressed his agreement in an interview on CNBC
saying, "We have 95 percent of all our materials on thee-book format. ... So now with the tablet you're
going to open up the higher-education market, the professional market. The tablet is going to be just
really terrific!" 79 Technophiles envisioned that the iPad would "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."80
Many believed that the iPad represented the next technological innovation to replace Amazon's
Kindle and Sony's Reader. Jobs described how Apple would take over Amazon's e-book market saying:
"We're going to stand on its shoulders and go a bit further." 81 He started by armouncing a new online
store for electronic books called iBookstore along with new partnerships with major book publishers
including the Hatchette Book Group, Macmillan, Penguin Group, HarperCollins, Simon & Schuster,
and McGraw-Hill to provide e-book content for the iPad. The only publisher that did not sign on with
the iPad was Random House. One reason why it held out is that publishers and authors would make
lower revenues and royalties per book sold.
With few exceptions, the publishing industry was enthusiastic to tap into a market of 125 million
Apple customers. "It is never wise to stand between a consumer and a preference for how they get
their content," said John Makinson, CEO of Penguin. 82 Moreover, publishers detested Amazon's
pricing model, which charged Kindle customers a standard $9.99 for each e-book" causing publishers to lose about $5 for each e-book sold. In contrast, the iBookstore set the maximum e-book price
at the cost of printing the book, so publishers were able to charge anywhere from $12.99 to $14.99
for most titles. 83 Apple retained 30 percent of the sale price and returned the remaining 70 percent
to the publishers. What publishers liked about the iPad deal was that they (and not Apple) got to
determine the prices of e-content for end consumers. In addition, this deal gave publishers leverage
to negotiate higher prices for their content with Amazon. It was even possible that publishers would
withhold titles from Amazon if they did not agree to raise their prices. As a result, the competition
between Apple and Amazon "is as intense a situation as the industry has ever had .... It's a huge
chess match. " 84

Apple's Deep Executive Bench

After introducing the iPad, Jobs turned the presentation over to Scott Forstall, a computer science
graduate from Stanford who crune to Apple with NeXT computers. In a surprising step toward open
innovation" Forstall armounced that he was opening up his iPad code, making a new app-development
kit available right away so that developers could begin building apps for the iPad. Perhaps symbolically, Jobs left the stage and Forstall sat in the same cushy chair Jobs had just occupied. Many in the
audience speculated: Was this a signal that Forstall would replace Jobs as the next CEO of Apple?
While not addressing the succession question directly, Apple was quietly taldng steps to ensure that
its future was not as directly linked with Jobs playing such an active role in the company as he had in

10

()

Apple (in 2011) after Steve Jobs

Apple after Steve JobS

the past. 85 Apple investors were painfully aware of how any news regarding Jobs's health could affect
Apple's stock price. 86
After Jobs was initially diagnosed and treated for pancreatic cancer in 2004, rumors had continued to circulate about his health because of his gaunt appearance. Despite the fact that spokespeople
for Apple repeated consistently that "Steve's health is robust,"87 the media were not fully convinced.
While The New York Times published a story citing Jobs's health issues as no more life-threatening
than "a common bug," Bloomberg mistakenly published on August 28, 2008, a 2,500 word obituary of
Jobs containing blank spaces for his age and cause of death. 88 Although Bloomberg promptly retracted
the article, its accidental release only fueled the questions and rumors regarding Jobs's health.89 Jobs,
meanwhile, seemed to take all this speculation in stride. He even joked by quoting Mark Twain at a
conference, "Reports of my death are greatly exaggerated. " 90
In April 2009, Jobs underwent a liver transplant at the Methodist University Hospital Transplant
Institute in Memphis, Tennessee, and his prognosis was again "excellent."91 A surgeon wrote: "Chances
are Jobs will be fine, and will remain as cantankerous, arrogant, dictatorial, and wildly visionary as
ever for many years to come. " 92

()

Nevertheless, when Jobs had annormced his medical leave on January 14, 2009, Apple's stock took
a $13 billion hit that same day, even though the public had known about his health problems for a
long time. (See Exhibit 6 for Apple's stock price history.) While Jobs was away, Timothy Cook, head of
worldwide sales and operations, ran the company. Cook was later awarded a bonus of $22 million, $5
million in cash and the rest in stock, for serving as interim CEO during Jobs's medical absence. 93
Jobs returned on June 29, 2009, as the reigrling CEO of Apple. 94 Apple refrained from making any
official statements regarding Jobs's health, but Jobs held his first public appearance after almost a year
in September 2009 to show investors that he was once again back, in charge, and healthier than ever.
Jobs was dressed in his usual black turtleneck, jeans, and sneakers. The 54-year-old appeared enfuusiastic, but still seemed very thin and spoke with a scratchy voice. Apple shares rose by 20 percent after
Jobs's return, showing how deeply intertwined the company's health was with that of Jobs himself.95
Some Apple board members, however, did not think Jobs fulfilled his fiduciary responsibility to
disclose the seriousness of his health problems in a timely and forthright manner. Jerome York, a
long-time board member until his death in March 2010, as well as former CFO of Chrysler and IBM,
stated in a 2009 Wall Street Journal interview that "he had strong feelings about the way Mr. Jobs
handled disclosures about his leave for health reasons ... he [Mr. York] almost resigned when told
of the seriousness of Mr. Jobs's illness. Mr. Jobs should have publicly disclosed his health problem
earlier." 96 York also said that he was disgusted by Jobs's concealment and added, "Frankly, I wish
I had resigned then. " 97
Jobs was a bit more proactive in announcing his second leave of absence in January 2011. The company released an e-mail sent to all employees, stating: "At my request, the board of directors has granted
me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in
major strategic decisions for the company."98 Once again, it was Tim Cook who stepped into Jobs's
shoes: "I have asked Tim Cook to be responsible for all of Apple's day-to-day operations. I have great
confidence that Tim and the rest of the executive management team will do a terrific job executing the
exciting plans we have in place for 2011."99 Was this an implicit announcement that Tim Cook-with
two terms as interim CEO-was Jobs's heir apparent?

11

Strategy & Policy

()
Apple after Steve Jobs

Even without a major health crisis, Jobs and the board had a fiduciary responsibility to the shareholders to put a succession plan in place. 10 Fortunately, Apple had a deep executive bench:

Timothy Cook, Chief Operating Officer. With an MBA from Duke University and a BS in Industrial
Engineering from Auburn University, T:im was a low-profile, but high-:impact executive at Apple.
Tim's personality contrasted starkly with Jobs's; he displayed no ego and was much happier out of
the limelight. Tim Cook served as CEO of the company when Jobs was on medical leave for pancreatic cancer.
Scott Forstall, Senior Vice President, iPhone Software. With an MS in Computer Science and a BS
in Symbolic Systems, both from Stanford University, Forstall came to Apple with NeXT computers.
He was responsible for Mac OS X before being named vice president for iPhone software. He had
spoken publicly at Apple's worldwide conferences.
Jonathan Ive, Senior Vice President, Industrial Design. With a BS and an honorary doctorate from
Newcastle Polytechnic in England, Ive was recognized as the man who designed the iPod and
many more of Apple's most iconic products that had shaken up both the music and the electronics
industry.
Phil Schiller, Senior Vice President Worldwide Product Marketing. With a BS in Biology from
Boston College, Schiller was a well-known public figure and showed up regularly on stage with
Steve Jobs during keynotes to present new products. He was instrumental in marketing the iMac,
iBook, iPod, and Mac OS X.
(For more details on the education and experience of these Apple executives, see http:/ /www.apple.
com/pr/bios/.)
Ron Johnson, who had been Senior Vice President, Retail, left Apple in June 2011 to become president (and ultimately CEO) of J.C. Penney. Under his direction, Apple's retail stores had achieved a
record level of growth, exceeding $1 billion in annual sales within two years of their debut.

Challenges Ahead
Steve Jobs was feeling somewhat more cranky than usual as he walked into Apple headquarters.
He could see the rebellious "think different" attitude on which he founded Apple's innovative culture
weakening under the watch of his very own chosen MBA executives. He feared he had surrounded
himself with business managers who thought similarly to the big tyrants IBM and Microsoft. Jobs
wanted to remind himself and his leadership team to "Stay hungry. Stay foolish." 101
Jobs had been described as both the best and the worst boss to work for. Many Apple employees had
to readjust to Jobs's homecoming. They had grown accustomed to having a higher level of freedom
over product development while Jobs was on leave, only to have him take it away upon his retum. 102
While many were fiercely loyal and even in awe of Jobs's creative genius, they were also afraid of
him. Jobs once criticized the work of an employee in an e-mail, saying, "Much of your information is
incorrect," but he would not provide specifics. 103 He made them feel terrible and even made some cry.
Fortune magazine wrote that Jobs was "considered one of Silicon Valley's leading egomaniacs." 104 Nor
did he reserve his pronouncements only for Apple insiders. In an e-mail exchange with a blogger, Jobs

12

( )

Apple (in 2011) after Steve Jobs

----------~--~-

--------------~--------

Apple after Steve Jobs

asked, "What have you done that's so great? Do you create anything, or just criticize others [sic] work
and belittle their motivations?" 105
It was 10:12 a.m. when Jobs entered the conference room. Facing an anxious-looking board of directors,
Jobs began to read a prepared statement: 106
To the Apple Board of Directors and the Apple Corrununity:
I have always said if there ever came a day when I could no longer meet my duties and expectations as
Apple's CEO, I would be the first to let you know. Unforhmately, that day has come.
I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.
As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim
Cook as CEO of Apple.
I believe Apple's brightest and most innovative days are ahead of it. And I look forward to watching and
contributing to its success in a new role.
I have made some of the best friends of my life at Apple, and I thank you all for the many years of being
able to work alongside you.
Steve

On October 5, 2011, Steve Jobs lost his battle with cancer.

()

13

Strategy & Policy

Apple after Steve Jobs

EXHIBIT lA Apple's Consolidated Income Statement Data, 2004-2010

(in millions, except share and
per-share amounts)

2010
$65;225
14,013

Ne.tsale.s
Net income

2009
$42;905

2008

J3i,{79

2007
2005
2006
$24;0o6 $.19;~15. J13,931
3,496
1,328
1,989

2004
$~.~79

266

'. 'E?r~l-OQ'_~ _Per cpfr!fJ);qY~,:SB,~t~::

Basic

$15.41
15.15

oi14Md:/

$9.22

<!):oa.

Shares, '000' in computing EPS

-,: short-,tEirfi1_ifi_~~Stfri,~nJ~,Total assets

$4.04

$6.94
i;;!>.78

...

L'.aasic,
cash, cas,n':eq;qi_Vaie'Qt&~--and

,;<,

909,461 : 89~:Pi6 881,592

Diluted 924,712 907,005 902,139
$51,011 '<-,,,
$3:f!i92
. $24,490
;', -?
$75,183

$47,501

$27,392
$47,791

$15,861 $18,542
j;~j:6{0 ,$~1,030

$39,572

$2.36

?i:!t

$1.64
1.55'

$0.36
0,:;!4

~(jf;59,5; ,844,058

808,4i~ q~3.1ao

889,292

856,878

774,776

877,526
: $li~llW ;$10;1-10

;,,:,',';'.'.:!;;:' ,J;]:'i'
$25,347

$17,205

$11,516

$8,039

$10,815
$14'~3''
',,,,~'

$7,221

$4,088

$2,976

: $~l!i~4

1ong-ter111 'debt: (including

:su,rrent ?i~tr[t\~,~~
Total liabilities

,;':Shareholdef~{:!~:q),tY:;;

EXHIBIT 1B

Apple's Regional Sales, 2006-2010 (in millions)

Segment-wise Sales Breakup

~etsales :bY. oper,lind.s~g'ment
<fArti'ericas ~at sa1~~-:,,
Europe net sales
" Japan net:s~ie~< '
Retail net sales

Other segme~tf~ei~~Jes (a)

Total net sales
Unit sales -~Y:_Op'.e'T*uWg;:S~_gment:
Americas Mac unit sales

2010
%
increase

: $?1.498, 29%
18,692 58%
'3,981 ''75%
9,798 47%
8,25~ 160%
$65,225 52%

Europe Mac :u:ni~;s~l~:s'j ,

Japan Mac unit sales
Retail Mac unit--sa_les,,,-\'-'
Other segments Mac unit sales (a)
Total Mac unifsales ,

4,976 21%
3,859. ,36%'
481 22%
2,846 \'35%
1,500 62/o
1.3.662. 31%

(a) Other segments include Asia Pacific and FileMaker.

Source: Apple Annual Reports 2006--2010.

14

$7.~2~;:,:, j;5;d6$

2009

2008

2007

increase
increase
increase
$18;9s)'j5% $16:447 38%.'~Ui~d7 21l61o
9,233 69o/o
5,469 34/o
11,810 28%
2,27~JS2% . 1,728 59% :rrn:;ml4 '(1.Q)%
4,362 34/o
6,656 (9)%
7,292 67%
2,791 59% \.!~1',75~, 30o/o
3.. 11~'14%
$42,905 14% $37,491 53% $24,578 27o/o

4,120 4%
2,8,4013%
395 2%
2,-1'15-', 4o/o
926 17%
10,396 . 7%

3,980
2,519
389
2,034
793
.. 9,715

3,019 24o/o
32%
39%. 1815/
,,,,, S5%:
29%
302 (1)%
47% . V,386 ey6%
50%
528 58%
38% ',,7051
'', ,3(3%

2006

$ 9.Ms
4,096
1M1
,! ,,
3,246

' .. 1.. 34(

$19,315
2,432
1;345
304
886
335
5,303 .

c)

Apple (in 2011) after Steve Jobs

Apple after Steve Jobs

EXHIBIT 1C Net Sales by Product, 200&-2010

Net sales by product:

;q!ski~psl~i
Portables (b)
-,::JQt~i:i~-~c::~ei,:sales
iPod
Other~u~lc re.lated producltand s~rvices (c)
IPhone and services (d)
iPad and r~[~,~~ Jlt6~ 0 cts
Peripherals and hardware (f)
, SoftwarQ_-_~h_lf~~~1~i,c~''$,ci1es

Total net sales

2010
$',6,2or:
11,278
17;479
8,274
4,948.
25,179
4,958
1,814
,:2,573
$65,225

2009

2008

$ 4,324

$ 5,622

9,535
l\3859
'"",'
8,091
>~
;,-,,,, b6
13,033

8,732
14,354
9,153

1,475

1,694
2,208
$37,491

2;41~ :.

$42,905

. :i,3ilo
6,742

2007
$ 4,023
6,313 '
'10,336
8,305
2,496
630
1,303

.1.ooii,
$24,006

2006

$ 3,31.g,
4,056
7;3Zo
7,676
1,885

1,100
1;279
$19,315

(a) Includes iMac, Mac mini, Mac Pro, Power Mac, and Xserve product lines.
(b) Includes MacBook, iBook, MacBook Air, MacBook Pro, and PowerBook product lines.
(c) Includes iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.
{d) Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories.

()

{e) Includes revenue recognized from iPad sales, services and Apple-branded and third-party iPad accessories.
(f) Includes sales of displays, wireless connectivity and networking solutions, and other hardware accessories.

(g) Includes sales of Apple-branded operating system and application software, third-party software, Mac and Internet services.

Unit sales by product:

.oesl<top~ ;,J;1:
Portables (b)
J'.J:r1it~l'. Mh8 UnitS'ales
""' '" ,,.,, " '
Net sales per Mac unit sold (h)

:::~~Od;:~~!':~-ai_es
Net sales per iPod unit sold (h)

i~-O~ne ~~ilssold
iPad units sold

~,627

9,035
13,662
$1,279
50;3{2
$164
39,989.! i.
7,458

''3:i82
:,"
7,214
10396
,,,,,,,.,,,
$1,333
~1,132
$149

:,\,712 '.:
6,003
9/715 >'
$1,478
54J8gf
$167

~Q.'!31

11,~~7

. 2,714
4,337
7,051
$1,466
51,630
$161
1,389

2,434
2,869
5:.303
$1,391
39,409
$195

(a) Includes iMac, Mac mini, Mac Pro, Power Mac, and Xserve product lines.
(b) Includes MacBook, iBook, MacBook Air, MacBook Pro, and PowerBook product lines.
(c) Includes iTunes Store sales, iPod services, and Apple-branded and third-party iPod accessories.
(d) Includes revenue recognized from iPhone sales, carrier agreements, services, and Apple-branded and third-party iPhone accessories.
(e) Includes revenue recognized from iPad sales, services and Apple-branded and third-party iPad accessories.
{f) Includes sales of displays, wireless connectivity and networking solutions, and other hardware accessories.

(g) Includes sales of Apple-branded operating system and application software, third-party software, Mac and Internet services.
(h) Derived by dividing total product-related net sales by total product-related unit sales.
Source: Apple Annual Reports 2006--2010.

15

Strategy & Policy

Apple after Steve Jobs

EXHIBIT 2

Apple's Consolidated Balance Sheets, 2006-2010

(in millions)

25-Sep-10 26-Sep-09 27-Sep-08 29-Sep-07 30-Sep-06

ASSETS:
Current assets:
, ;'tj~S~'.~ri'd-cash equivarCnt~-',
Short-term marketable securities

:::;-!;",~9-CO'.dritS receivabfe;,_f~_~S"_ai_10Waiic'es
Inventories

-o;~t,er,red tax as_se~~:',

Vendor nontrade receivables
>::>:t::pthefcurrent,aS~etS';,'

'.r-'"'

Total current assets

- :-:L_ob:Q,-;~~rm m~t~etab1~:'~~-au-r_it1es,
Property, plant, and equipment, net

, , 'iililli::,G-Ooq~m
Acquired intangible assets, net

~1~#:P-~ssets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilitles:
-Ad661iiltShJayablfi>'.':-''
,,,,, ,, "''"''
'''
Accrued expenses

",Q~,f~r:r~'d''.r~venue
Total current liabilities
Non-current llabiillies:
Deferred revenue-non-current
'>Oth~r;;iiOn~current tiabiHife~
Total liabilities

$11,261 : i$s:21l3
14,359
18,201
5,5l~+ ' : 3'.361
1,051
455
1,135
4,414
1,696
i,447' ):'i1,444
41,678
31,555
25,3Q1./ i.0;528
4,768
2,954

Source: Apple Annual Reports 2006--2010.

16

509

1.:11a1.
'.!'

. $6,392,
6,034
3,718
. '1,637
1,252
346
270
607

;'&,8~2 :' ' 3,805

32,311
21,956

2,455

247
342
2263
'.
;.
2,011
~,"'
$75,183
$47,501

$12,0)5
5,723
2,98.4
20,722
1,139

~
27,392

1,832

285
299
1.ii:\5; ;i . 1.2.22
$39,572
$25,347

~s.eyo1

$5,q20
3,719
. 4,853
14,092

3,852

.;z:o.s:i:.
11,506

2,:)70'
14,509
1,281
38i.
139
1,2a'0
$17,205

.. $.4.~10

J3,3~d

4,329

3,053

9,299

6,443

3,029

853
. 3:502'

~
18,542

---' 15,861

: 1,516
10,815

. 778
--. 7,221

''.-'\''.}

10,668
37, 169

_])
47,791

-;Tatar liabilities and share,hdlders

equity

),422''''

$9,3~2

74\J

Co111mitme1,1tS-'8_~,d, CO~tidge~,:ies
Shareholders' equity:
:GovirfiOh:st,Ockr no pa('yalue,
Retained earnings
<AcpHmuJate'd, other coffipr~h6nS,ivir'
(loss)/income
Total shareholders' equity

$11,.8)'.5
10,236

$75, 183

7,177
13,845

8;210
23,353

i~

5,368
9,101

4,355
5,607

..

31,640

8
21,030

H,532

22
9,984

$47;501

$39,572

$~~.347

$17,205

Apple (in 2011) after Steve Jobs

Apple after Steve Jobs

EXHIBIT 3 R&D Spending at Selected Tech Companies, 2010 (in thousands)

Rank

( )

2
3
4
5
6
7
,8
9
.10
11
12
13
14
15

Company

R&D, MOST RECENT

Four09!rters

,~,efe,qfod; o/n,of ,Revenue

Microsoft

$8,714,000

Intel

$5,653,000

13.9
6.08
16.09
l3L17
12.13

$5;s2o:l\oo
$5,2fs;ooo
Oracle

GdqgJe
Hewlett-Packard

SAP., ..
Apple

A~~~rce~M'lirai1!v1ces

EMC
Seagate
Sy1"'~n\ijG
Intuit

'' ., ..

$3,254,000
$2,843,000
$2,819,027
.. ; $2,283,0QO

$1,782,000
, $1,721,000' ,

d2.Q2
2.46

H1~1
2.70

.3J:.85

$1,627,509

11.60

$1,2111,.1.6~

, l87a
,, \

$ 877,000
$ 851,oo'O
$ 566,232

7.70
, 14.32'
13.69

Source: Adapted from Robert Hertzberg, "Top 50 Technology R&D Spenders," CIC Zone,
www.ciozone.com/index.php/Editorial-Research/Top-50-Teclutology-R&D-Spenders.html.

,:
17

Strategy & Policy

Apple after Steve Jobs

EXHIBIT 4

Top 20 Companies on Bloomberg Businessweek 2010 Irmovation Index

Revenue Growth
2006-2009 (in

Margin Growth
2006-2009 (in

%)

%)

35
10

30
31

USA

1o

USA

12
(2Q) ;.

,29
2
(4)
11
NA

Rank

Company

Headquarters

1
2
3
4
5

Apple ;
Google

QSA
USA

Microsoft.
IBM
;:; Toyp~a::Mo.tor

Amazon.Com

7
8
9
10
11
12

~,~:Eie:cit'onics

13
14
15
16

17
18
19.
20

JAPAN

BYD

.'.'i'0ri~rai: Electd9i':
Sony
;.sam~l:ili:b E1eCirOTiic_~:::.:::
Intel

BMW
Qgca-Cola

Nintendo

USA
USA

51

CHINA
USA

99

JAPAN

(19)

USA
;USA
CANADA
. GERMANY:
USA
';:o

,.,, 1.NDIA
GERMANY

:. USA
JAPAN

2
(11)
29
1.5\.
42

(1}
(5)

.s. KOREA

. Ftlrd:Motor

Research In Motion
:, \lpilsWagen
Hewlett-Packard
'riil~~roup

Stock Returns
2006-2009 (in
D/o)

3
17
9
PRIVATE:!
,,,,
(8)
(8)

\,:::o;.

1'/
0
(12)
75
0
8
PRIVATE.
0
9
22

Source: Adapted from Bloomberg Businessweek's 50 Most Innovative Companies, http:/ /bwnt.businessweek.com/
interactive_reports/innovative_50_2009/?chan=magazine+charmeUn/o3A+inside+innovation.

18

707
(1)
(25)
NA
5(9)
12
:;NA
(6)

14
9
piJf\IATE
NA
1
3

..

( )
,

Apple (in 2011) after Steve Jobs

Apple after Steve Jobs

EXHIBIT 5 Apple's Net Income ($million) and Key Events over Time, 1981-2010

B,000 .....................................................................................................................................................................................................
7,000 .................

,,. .,,..,,... ,.,,..,,.,,.,.,,,,.,,,,,..,,,,,,.,,,,,.,,.,,,,."''''"''''''''',.''''HHHHOH.,'"''''"''''.,,.,,,,.,.,.,,,,,.,..,~

(.)

Source: Publicly available data.

EXHIBIT 6 Apple's Stock Price and NASDAQ, September 1984-November 2010

Sep 1997 Jan 1999 Jan 2000 Jan 2001 Jan 2002 Jan 2003 Jan 2004 Jan 2005 Jan 2006 Jan 2007 Jan 2008 Jan 2009 Jan 2010 Aug 2011

7,000 %
6,500 % """"""""""""""'
6,000 %
5,500 % .......................... ...
5,000 o/o ...........................
4,500 o/o

................................

4,000 %............ ................,....,..........

3,500 %...
.....................,....

.....................,.....

3,000 %......,,.....................................,..................................................

2,500 % ..
2,000 % ......
1,500% .. .
1,000% ......

Sept 16, 1997

Steve Jobs becomes CEO

500%
0%-"~......,.;:;,,.~,.,,..............~..........::::::..~~~~~~~~~~~~~~~~
-500 % ..................................................................................~....... ..
!!Ill Apple Inc.
NASDAQ Composite Index

Source: Yahoo Inc.

19

Strategy & Policy

------------------------------------

Apple after Steve Jobs

Endnotes
1. Jobs, S. (2005), '"You've got to find what you love,' Jobs says," Stanford Report, Jnne 14.

2. Ibid.
3. "The Virtue 100: Top social brands of 2009," Virtue.com, accessed October 10, 2010; and http:/ /Virtue.com/
blog /2010 / 01 / 04/ the-Virtue-100-top-social-brands-of-2009.
4. Jobs at Apple, www.apple.com/jobs/us/.
5. "Spotted: illtimate Apple fanboy visits the mothership," TechCrunch, September 25, 2009.
6. Jobs, S. (2005), '"You've got to find what you love,' Jobs says."
7. Ibid.
8. "New mobile phone signals Apple's ambition," The New York Times, January 9, 2007.
9. Jobs, S., Crunchbase, www.crwlchbase.com/person/steve-jobs.
10. Jobs, S. (2005), '"You've got to find what you love,' Jobs says."
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.
15. Sculley, J., and J. A. Byrne (1987), Odyssey: Pepsi to Apple (New York: Harper & Row).
16. "DoubleTwist remakes Apple's classic 1984 ad with a new dictator: Steve Jobs," TechCrunch, September 29,
2009.
17. Text from Apple's TV ad during Super Bowl, January 22, 1984.
18. Jobs, S. (2005), "'You've got to find what you love,' Jobs says."

19. Ibid.
20. Ibid.

21. Ibid.
22. "Disney buys Pixar," CNN Money, January 25, 2006.
23. "Disney agrees to acquire Pixar in a $7 billion deal," The New York Times, January 25, 2006.
24. Ibid.
25. "Apple Computer, Inc. agrees to acquire NeXT Software Inc.," Apple Inc., December 20, 1996.
26. "Apple to trim jobs and its product line," The New York Times, March 15, 1997.
27. Yoffie, D. B., and R. Kim, (2010), "Apple Inc. in 2010 (9-710-467)," Harvard Business School, April 13.
28. "Steve Jobs' Magic Kingdom," Business Week, February 2006.
29. "Dell: Apple should close shop," CNET News, October 6, 1997.
30. Ibid.

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Apple (in 2011) after Steve Jobs

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Apple after Steve Jobs

31. "Microsoft and Apple affirm commitment to build next generation software for Macintosh," Apple Inc.,
August 6, 1997.
32. Time, cover, September 12, 2006.
33. "Jonathan Ive and Apple win again." BusinessWeek, June 7, 2007.
34. "Look forward in anger," The Economist, March 18, 2010.
35. Hertzfeld,A., "Pirate flag," Folklore, August 1983, www.folklore.org/StoryView.py?story=Pirate_Flag.txt
36. Ibid.

37. "Jobs at Apple," www.apple.com/jobs/us/.

38. Ibid.
39. Ibid.
40. Ibid.
41. "Growth by effort: The best company," The Wise Nutrition, December 2008.
42. "Apple and Microsoft: Jobs barefoot under a tree," Computergram International, January 26, 1999.
43. "Cult of Apple," Uncyclopedia, http:/ /uncyclopedia.wikia.com/wiki/Cult_of_Apple.

()

44. Jobs, S., Crnnchbase, www.crunchbase.com/person/ steve-jobs.

45. Hill, C. W. L., and F. T. Rothaermel (2003), "The performance of incumbent firms in the face of radical
technological innovation," Academy of Management Review 28 (2): 257-274.
46. "The seed of Apple's innovation," Business Week, October 12, 2004.
47. "The second coming of Apple through a magical fusion of man-Steve Jobs-and company, Apple is becoming
itself again: The little anti.company that could," Fortune, November 9, 1998.
48. "Is irmovation too costly in hard times?" Business Week, April 9, 2009.

49. "Apple enjoys ongoing iPod demand," BBC News, January 18, 2006.
50. "iPod tear-down suggests high Apple margins," Apple Insider, September 15, 2006.
51. "iTunes store tops five billion songs," Apple Inc., June 19, 2008.
52. "AAPL surges past $100, target at $140," MacNN, April 26, 2007.
53. "Apple's Jobs: Mobile Internet is terrible; iPhone delivers the real Internet," Information Week, May 31, 2007.
54. "iPhone sales double in 2009 as Apple claims third place in smartphone sales," MacRumors.com, February 23,
2010.
55. "Verizon wireless confident it's got muscle for iPhone," The Wall Street Journal, January 10, 2011.
56. "Forbidden fruit: Microsoft workers hide their iPhones," The Wall Street Journal, March 12, 2010.
57. Ibid.
58. Rotlunan, W., "Here come the Windows Phones," msnbc.com, www.msnbc.msn.com/
id/39609748/?GTloo=43001, accessed October 11, 2010.
59. "Apple takes big gamble on new iPad," The Wall Street Journal, January 25, 2010.

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Apple after Steve Jobs

60. "Interest builds in Apple ahead of iPad's launch," The Wall Street Journal, March 20, 2010.
61. "Just a touch away, the elusive tablet PC," The New York Times, October 4, 2009.
62. Ibid.
63. "Apple to take tablet beyond bathroom Web browsing," Apple Insider, October 5, 2009.
64. "Just a touch away, the elusive tablet PC."

65. Jobs, S., Keynote address to introduce iPad, January 27, 2010, www.apple.com.
66. Ibid.
67. "The Microsofting of Apple," The New York Times, February 10, 2010.
68. "Jobs, back at Apple, focuses on new tablet," The Wall Street Journal, August 25, 2009.
69. "Apple takes big gamble on new iPad."
70. "iPhone sales double in 2009 as Apple claims third place in smartphone sales."
71. Jobs, S., Keynote address to introduce iPad.
72. Ibid.
73. "Apple's showman takes the stage," The Wall Street Journal, March 3, 2011.
74. "Apple takes big gamble on new iPad."

()

75. Jobs, S., Keynote address to introduce iPad.

76. "Apple says no to netbooks," The New York Times, April 24, 2009.
77. Jobs, S., Keynote address to introduce iPad.
78. "Apple sees money in old media," The Wall Street Journal, January 21, 2010.

79. "McGraw-Hill CEO confinns Apple tablet, iPhone OS based, going to be 'terrific,"' MacRumors.com, January 26,
2010.

80. "Just a touch away, the elusive tablet PC."

81. "Apple takes big gamble on new iPad."
82. "Books on iPad offer publishers a pricing edge," The New York Times, January 29, 2010.
83. Ibid.
84. "Apple tablet portends rewrite for publishers," The Wall Street Journal, January 27, 2010.
85. "Steve Jobs recovering after liver transplant," CNN.com, June 23, 2009.
86. Ibid.
87. "Apple's Cook gets $22 million bonus," The Wall Street Journal, March 13, 2010.
88. "Steve Jobs lives!" Information Week, August 11, 2006.
89. "Steve Jobs obituary published by Bloomberg," The Daily Telegraph, August 28, 2008.

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Apple after Steve Jobs

90. Ibid.
91. "Apple posts 'Let's Roel<' event video," Macworld, September 10, 2008.
92. "Steve Jobs recovering after liver transplant."
93. "Greatly exaggerated," Daring Fireball, September 11, 2008.
94. "On Apple's board, fewer independent voices," The Wall Street Journal, March 24, 2010.
95. Ibid.
96. "Jobs takes stage at Apple event," The Wall Street Journal, September 10, 2009.
97. Ibid.
98. http,/ /www.apple.com/pr /library /2011 /01 /17Apple-Media-Advisory.html.
99. Ibid.
100. "Succession planning is a fiduciary responsibility," The Rainmaker Group, December 18, 2008.
101. Jobs, S. (2005), '"You've got to find what you love,' Jobs says."
102. "Jobs, back at Apple, focuses on new tablet."

c)

103. Ibid.
104. "Steve Jobs' bad bet," Fortune, March 5, 2007.
105. "Steve Jobs indulges in email argwnent with Gawker writer," Guardian.co.uk, Technology Blog, May 15,
2010.
106. "Steve Jobs's resignation letter," Forbes, August 24, 2011, http:/ /onforb.es/neJ4SO.

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