Apple Inc – How College Dropouts Created Multi-billion Dollar Company

By | June 11, 10

Apple Inc – How 21 And 26 Years Old College Dropouts Created A Multi-billion Dollar Company With $1,300

This is the amazing story of how Steve Jobs and Steve Wozniak took the world by storm using their talents, ideas, marketing skill, and $1,300 to reinvent and catalyze the growth of the personal computer, building one of the largest companies in the world with annual sales running in tens of billions of dollars. It is a story that shows the insignificance of needing large chunk of cash to start a business, and how to build a world class business from scratch.

In Aril 1976, Steve Jobs, then 21 years of age, and his partner, Steve Wozniak, 26, founded a company they called Apple Computer having dropped out of college to pursue business. Their business, which started with the creation and marketing of Apple I computer, began with capital investment of $1,300, which the partners contributed from selling some of their most treasured possessions comprising a van and two calculators.

Steve Jobs - Apple co-founder

Steve Wozniak, a talented and self-taught electronics engineer was the product creation engine room, while Steve Jobs provided the marketing skill in the business, and together the duo were set to cause a huge ripple in the personal computer industry.

From Steve job’s garage, Wozniak created the company’s first product, Apple I computer, a computer without keyboard or power supply, which was particularly produced for use by a computer hobbyist club in the San Francisco Bay area. Priced at $666 each, the company sold 200 pieces of the computer the first year.

Encouraged by their success with Apple I, the partners immediately started work on another computer that summer, Apple II, which was to appeal to a greater market beyond computer hobbyists.

With the desire to build a big company, Job met with Mike Markkula for advice on how to achieve it. Mike Markkula had managed marketing for Intel Corporation and Fairchild Semiconductor, and Jobs wanted to draw from his experience. Seeing that the future of Apple Computer was great, Markkula bought over one-third of the company for $250,000, and helped Jobs with the company’s business plan.

In 19977, one year after Apple Computer was formed; Jobs hired Mike Scott to be President, and recruited Regis McKenna, an advertising guru and owner of one of the most successful advertising agency in Silicon Valley, to create advertising strategy for the company.

Having designed Apple logo, McKenna started advertising Apple personal computers in consumer magazines, with Apple II placed in retail stores. By June, 1977, Apple’s sales reached $1 million.

The huge and almost instant success of Apple II was not only due to Apple’s marketing effectiveness. It was also largely due to the innovations and functionality, which Apple II had over other microcomputers of its era:

It was the first microcomputer to use color graphics and a television set as its screen. Also, its expansion slot made it more useful than other computers. Apple II could read and store information on cassette tapes, although slow and unreliable. However, by 1978, Wozniak had invented the Apple Disk II, which was then the fastest and cheapest disk drive available, and which made it possible for Apple to develop software for Apple II.

As a result of Apple’s innovative product creation backed with strong marketing, the company had, by 1978, become one of the fastest-growing companies in the United States, with more than 100 dealers distributing its products. And in December 1980, Apple went public.

By 1981, Apple’s research and development budget reached $21million. This was justified by the release of 40 new software programs and launch of its first hard disk. At the close of 1982, Apple had become the first personal computer company to make $1 billion in annual sales.

In April 1983, Jobs brought in John Sculley to replace Mike Markkula as Apple’s new president. John Sculley was a proven and successful top class marketer, having led Pepsi-Cola as president against tough competitors like Coca-Cola in that industry. Jobs was sure John Sculley experience and expertise would help Apple to break IBM’s domination of the business office market.

Propelled by Steve Jobs’ desire to create personal computers that anyone without technical knowledge can use at lower prices, Apple released the Macintosh personal computer in 1984. Selling for $2,495 a piece, 70,000 Macintosh with a new disk drive that was faster than those used in other machines, were sold in the first 100 days of release.

In September the following year, a new Macintosh with more memory and two disk drives was launched. Sure that anyone who tried the Macintosh would want to buy it, Jobs sponsored a national advertising campaign that asked people to try the Macintosh for free for 24 hours and more than 200,000 did. As the Macintosh and its accessories were selling hot, so also was Apple II, which reached a record of two million sales by 1985.

In the midst of Apple’s success, a bitter infighting between divisions and between Jobs and Sculley caused Jobs to leave the company in 1985 following the board of directors’ support for Sculley, and compulsion on Jobs to resign. Jobs went ahead to found NeXT Incorporated, which later became a strong competitor to Apple in the business computer market.

The 1990s saw Apple falling from grace to grass. The company lost sales and market share almost throughout the decade as a result of poor management decision from different CEOs that led the company during this period. Michael Spindler who replaced Scully in 1993 made the terrible mistake of licensing Apple technology to outside firms, which resulted in the massive production of Apple clones into the market that seriously wore off Apple’s profits.

Spindler also made the mistake of grossly underestimating the demand for Apple’s new product, Power Macintosh, released in 1994. By 1995, unfulfilled order for the product reached $1 billion. Noting this flop, Apple’s stock value nosedived by 15% in two days.

Gil Amelio took over from Spindler after the latter was sacked by the board of directors in 1996. Under Amelio, who seemed to be unable to relate to Apple’s unique corporate culture, Apple’s financial losses deepened, climbing to $816 million in 1996 and $1 billion in 1997. Apple’s stock, which was valued at $70 per share in 1991, crumbled to $14 per share, while its market share, which was 16 percent in the late 1980s had been suppressed to only four percent.

In July 1997, Amelio got the boot. But before then, Apple board of directors, realizing the company could only be saved at that point by its creator, made plans to bring back Steve Jobs to lead it again. Apple bought Jobs’ NeXT for $377 million, and two months after Amelio’s sack Jobs was named Interim CEO.

With the same passion, understanding, and determination that he employed in making Apple the great success story it was in the 1980s, Jobs quickly set out to reposition Apple as a profitable, vibrate, and innovative leader in the personal computer industry.

He stopped the licensing of Apple’s technology to outside firms, streamlined the company’s product line from nineteen products to only four, thereby removing Apple from making such items as printers, portable digital assistant, scanners, and other peripherals. Jobs focused Apple firmly on what it knew how to do best – making of desktop and portable Macintoshes for professional and consumer customers.

Uncomfortable with Apple not having popular computers that sell for less than $2,000, Jobs commissioned Apple’s production team to develop such, and ten months later the iMAC, a sleek and colorful computer, was unveiled in August 1998, which went ahead to be very successful in the market.

By the ending of the decade, Jobs had turned around the company from losses to profits. The company made a profit of $309 million in 1998, which swelled to $601 million in 1999. Its stock value equally exploded by 140 percent, reaching $99 per share in 1999.

The company entered the new decade with interim dropped from Jobs title, and with great confidence, an eye for innovation, and business opportunities outside of personal computers.

With the introduction of the iPod digital music player in October 2001, Apple’s focus shifted to the mobile consumer electronic market, from which it has enjoyed great success and most of its revenue. The iPod is the market leader in portable musical player, selling over 220 million units so far.

From the iPod, Apple has continued to create more innovative hand-held digital electronics that have remained to shape people’s habits worldwide. These include its iPhone, which was launched in 2007, and since held the leading market share of 28 percent. Others are Apple TV and iPad.

As Apple sustains its hold on the mobile consumer electronic market, repeatedly churning out innovative products that meet the desire of its market; and as the company keeps an eye wide open for new business opportunities to exploit arising from the ever changing consumer behavior, it is bound to remain successful in the years to come.

Read Apple’s Business Strategies here.



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