Friday, July 29, 2011

A Tale of Two Apples.

Apple Computers Inc was created in 1976 by Steve Jobs and Steve Wozniak, in Steve Jobs' garage. He was a college student and living with his parents at the time. It is the quintessential startup. They went on to produce the world's first mass market personal computer with a GUI (Graphical User Interface). Before that, everything was green or white text on a black background; functional, but limiting.

That's the first incarnation of Apple.

This incarnation of Apple peaked in 1984 with its famous 1984 Macintosh commercial aired during Super Bowl XVIII. This is extremely iconic of the Apple culture, which in turn is a reflection of Steve Jobs.

Not long after the Mac release of 1984, Jobs was ousted from the reins and the company pursued a long, downward spiral into corporate mediocrity. Unfortunately, I am thus far unable to find a stock chart that covers this early period of Apple, but you can see from the chart below that the price did plummet in 1985 after Jobs' departure, and only regained a bit of ground to tread water for the next 10 years.

After Apple's lost decade, Jobs was brought back and ultimately began what is now it's 2nd incarnation.

In 1996, Steve Jobs was brought back to Apple as an advisor. In July , 1997 Jobs became the interim CEO and began restructuring the company's product line after the previous CEO was ousted by the board of directors who were unhappy after overseeing a 3 year record-low stock price and "crippling financial losses."

In 1997, Steve Jobs announced that Apple would join Microsoft to release new versions of Microsoft Office for the Macintosh. This was a condition of Apple receiving $150 million investment (in exchange for non-voting Apple stock ) from Microsoft. This is truly a low point as Microsoft was Apple's main competitor and had been eating Apple's lunch since the departure of Jobs. (see chart below)

This alone would be enough for many companies to simply fall by the wayside, or be consumed by the bigger company (of course, Microsoft made this investment instead of simply taking over Apple at the time because the Clinton DOJ was accusing Microsoft of being a monopoly. If Apple collapsed entirely, or Microsoft consumed them, then Microsoft really would be a monopoly in the PC market and not just a more dominant force).

But Steve Jobs is not most CEOs. This bailout from Microsoft allowed Apple to stay afloat long enough for Jobs to redefine the product line and the company with it. It ushered in the current,insanely profitable era in which Apple now finds itself. In essence, Jobs took a second rate PC company and turned it into the leading brand of geek chic consumer electronics. From the iMac to the iPod and iTunes and now the iPhone, Jobs has not only resurrected Apple, he's transformed it into an integral part of millions of people's lives - far beyond computer users.

So what's the point of this little biography? It's simply to remind investors out there that regardless of the incarnation of Apple, there are two different Apple Inc's - the one run by Steve Jobs, and the one that isn't.

Don't be distracted by any corporate talking points - Apple Inc. IS Steve Jobs. When Steve Jobs leaves Apple again, investors should seriously question the company's future viability. Jobs is a creative visionary force and a savvy business man, but his ego is not one which lends itself easily to grooming replacements.


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