Jobs made it Apple’s mission to bring an easy-to-use computer to market. In April 1978, the company launched the Apple II, a relatively simple machine that people could use straight out of the box. The Apple II sparked a computing revolution that drove the PC industry to $1 billion in annual sales in less than three years.3 Apple quickly became the industry leader, selling more than 100,000
Apple IIs by the end of 1980. In December 1980, Apple launched a successful IPO.
Apple’s competitive position changed fundamentally in 1981, when IBM entered the PC market. The IBM PC, which used Microsoft’s DOS operating system (OS) and a microprocessor (also called a CPU) from Intel, seemed bland and gray alongside the graphics- and sound-enhanced Apple II. But the IBM PC was a relatively “open” system that other producers could clone. By contrast, Apple relied on proprietary designs that only Apple could produce. As IBM-compatibles proliferated, Apple’s revenue continued to grow, but its market share dropped sharply, falling to 6.2% in 1982.4
In 1984, Apple introduced the Macintosh, marking a breakthrough in ease of use, industrial design, and technical elegance. Yet the Mac’s slow processor speed and a lack of compatible software limited its sales. Between 1983 and 1984, Apple’s net income fell 17%, leaving the company in crisis. In April 1985, Apple’s board removed Jobs from an operational role. Several months later, Jobs left Apple to found a new company named NeXT. Those moves left John Sculley, the CEO whom Apple had recruited from Pepsi-Cola in 1983, alone at the helm. Sculley had led Pepsi’s successful charge against Coca-Cola. Now he hoped to help Apple compete against dominant players in its industry.
The Sculley Years, 1985–1993
Sculley sought to make Apple a leader in desktop publishing as well as education. He also moved aggressively to bring Apple into the corporate world. Apple’s combination of superior software, such as Aldus (later Adobe) PageMaker, and peripherals, such as laser printers, gave the Macintosh unmatched capabilities in desktop publishing. Sales exploded, turning Apple into a global brand. By
1990, Apple’s worldwide market share stabilized at about 8%. In the education market, which contributed roughly half of Apple’s U.S. sales, the company held a share of more than 50%. Apple had $1 billion in cash and was the most profitable PC company in the world.
Apple controlled the only significant alternative, both in hardware and in software, to the then- prevailing IBM-compatible standard. The company practiced horizontal and vertical integration to a greater extent than any other PC company, with the exception of IBM. Apple typically designed its products from scratch, using unique chips, disk drives, and monitors, as well as unusual shapes for its computers’ chassis. The company also developed its own proprietary OS, which it bundled with the Mac; its own application software; and many peripherals, including printers.
Analysts generally considered Apple’s products to be more versatile than comparable IBM- compatible machines. IBM-compatibles narrowed the gap in ease of use in 1990, when Microsoft released Windows 3.0. But in many core software technologies, such as multimedia, Apple retained a big lead. In addition, since Apple controlled all aspects of its computer, it could offer customers a complete desktop solution, including hardware, software, and peripherals that allowed customers to “plug and play.” By contrast, users often struggled to add hardware or software to IBM-compatible PCs. As a result, one analyst noted, “The majority of IBM and compatible users ‘put up’ with their machines, but Apple’s customers ‘love’ their Macs.”5