Apple Computer Inc., is a rapidly growing company in a young and rapidly growing industry--personal computing.
In 1980, the industry was barely six years old, yet retail sales approached $700 million. By 1985, industry sales are expected to grow to $5 billion.
Apple's growth rate outstrips that of the industry as a whole, zooming from about $3 million in 1977 to more than $160 million in 1980.
Behind these impressive dollar figures lies the true significance of personal computing. It is bringing computer power to countless thousands of new applications because of the low cost, small size, and ease of use of personal computers. There were nearly 400,000 personal computers in daily operation in 1980. That figure will swell to approximately 1.6 million personal computers in 1984.
From this growth has emerged a new and exciting concept, the one-on-one relationship between an individual and computer, and Apple is an acknowledged leader in this development. Apple computers are monitoring oil-drilling operations, doing payroll and, inventory for stereo stores, helping students at all levels improve their skills in mathematics, spelling, science, and other subjects, and administering and scoring personality tests for psychologists. They are used by lawyers in the courtroom, by insurance executives making sales calls, and by transportation companies to contact truckers on the road. And soon an Apple computer will be aboard a NASA shuttle to monitor an in-space plant-growing experiment.
As a pioneer in the industry, Apple has more experience in both system design and market understanding than any other personal computer manufacturer. This experience includes defining the personal computer market, educating people to the potential of these machines, and developing systems and software in direct response to customer needs.
Apple was also among the first to recognize the importance of convenient product availability and fast, complete service and today has one of the most extensive sales and service networks in the world.
The following pages will provide a more complete view of the company, its products and services, and its management. (p. 3)
Apple Computer Inc., designs, manufactures and markets personal computers and systems for use in education, business, scientific and home applications. Employment in 1980 rose to about 800 people who occupied 560,000 square feet of floor space in the U.S. and Europe. Apple's manufacturing plants are located in and around corporate headquarters in Cupertino, Calif., in Carrollton, Tex., and in Cork, Ireland. In addition, there are six regional support centers in the U.S. and Europe and Apple products are sold worldwide through a network of more than 1,200 retail dealers.
Incorporated in 1977, Apple is one of the leading manufacturers of personal computers, measured both in number of units sold and in total sales dollars. Its sales in 1980 exceeded $160 million.
Most of Apple's professional employees have technical degrees, and more than half of this technical staff is involved in software development. Each year, Apple invests about 10 percent of its total sales in research and development activities.
Its main products are the Apple II personal computer, nearly 200,000 of which have been sold since its introduction in 1977, and the recently introduced Apple III computer system. Apple II is a simple-to-use, entry-level system priced beginning at $1,200. The more sophisticated Apple III is aimed at the professional user and costs between $4,300 and $7,800, depending on system design. (p. 4)
In addition, Apple designs and manufactures its own disk drives and develops many of the applications software programs for its computers. Because of the large installed base of more than 100,000 units in the field, many independent companies make equipment and write programs for Apple computers. This assures users of a wide selection of hardware and software with which to expand their systems.
Apple Computer and two other domestic manufacturers are the major suppliers of personal computers. It is estimated by Dataquest Inc., that these three companies had 85 percent of the $394 million personal computer market in 1979. Strong competition is expected to develop from several prominent minicomputer and large computer suppliers.
The international market is a large and growing one for Apple. Approximately 25 percent of Apple's sales are to customers outside the United States. The company began manufacturing personal computers in Cork, Ireland in 1980 to serve the European market. At the same time, it opened a European regional distribution and support center in Zeist, the Netherlands.
In 1979, the company established a nonprofit foundation to support the development of microcomputer projects in education and training. with Apple as its major donor, the foundation underwrote about $400,000 worth of computer-assisted instructional development in 1980. (p. 5)
Apple computers represent the widest combination of price and performance in the mid to-upper range of the personal computer industry. Its systems range in cost from about-$1,200 to $7,800 and in complexity from an easy-to-learn machine for dedicated applications to one that can fulfill the word processing and bookkeeping needs of a small company.
There are two basic models in Apple's family of computers. Both models are completely self-contained and include high-resolution color and black and white graphics capability, the Basic, FORTRAN, Pascal and Pilot languages, interfaces for supporting peripheral devices, and a wide variety of applications programs.
Introduced in May 1980, Apple III is the most powerful personal computer on the market. It is a fully integrated computer system with a built-in 143K byte disk drive, up to 128K bytes of main memory, a human-engineered, 74-key keyboard with a 13-key numeric keypad, built-in disk controller for handling up to four floppy disk drives, new Sophisticated Operating System (SOS) software and an improved central processing unit.
Major advances over the earlier Apple II include an 80-column upper- and lower-case display, more main memory and a higher capability operating system, a built-in disk drive, (p. 6) improved multicolor capability and 16 shades of gray for vivid graphics presentations in black and white. These improvements, engineered by Apple in response to the needs of the marketplace, make Apple III the first microcomputer designed specifically for professional and small business users.
For example, Apple III has introduced two new applications packages that deliver computer power previously found on machines costing up to three times as much as Apple III.
The two applications packages:
Information Analyst software is a powerful tool used in planning, forecasting, modeling, pricing and costing, scheduling and budgeting; and
Word Processor software turns the Apple III into a general-purpose office machine for letter writing, text editing, list maintenance and other word-related business tasks.
By simply changing program disks, the user can tailor the Apple III to perform a wide variety of data manipulation and word processing assignments. Apple III also has an emulation mode in which it can run Apple II software--thus protecting the software investment of Apple II owners.
Apple II was the first completely self-contained and fully programmable personal computer. Its place in the product line is as a low-cost, easy-to-use personal computer for small businesses, schools and professionals. (p. 7)
Recent advances in semiconductor technology have led to the emergence of the personal computer industry. These tiny silicon chips-- such as the 6502 in Apple's line of computers-- are powerful microprocessors that are reliable, can be manufactured in quantity, and are reasonable in cost.
However, it has been the development of easy-to-use software that has made these new computers useful and popular. These software programs, available on convenient disks, provide the instructions that tell the computer system what to do and how to do it. In effect, they tailor the system to perform the tasks required by the user.
Apple has invested heavily in software development and today offers one of the widest selections of applications and computer language programs of any personal computer manufacturer. In addition, its new Sophisticated operating System (SOS), an integral part of Apple III computers, is the most flexible microcomputer operating system on the market. It makes system operation virtually transparent to the user and supports the three Apple III high-level languages.
The availability of useful software is one important reason for the popularity of Apple computers in sophisticated applications. These include programs written by Apple programmers and software written by Apple users which is then usually refined and debugged by Apple personnel before being marketed. (p. 9)
These software packages fall into two general categories: Applications software turn the computer into a dedicated machine for doing specific tasks such as accounting, text editing and mailing list maintenance; Language Library software are program development tools that enable more sophisticated users to get maximum benefit from Apple computers through the use of advanced languages.
Some examples of applications software:
In addition to these and other applications programs, Apple offers the industry's most complete line of programming (p. 10) languages. These include Apple's Basic, Pascal, FORTRAN and Pilot. All four are extensively used in education; large libraries of programs using these languages currently exist. These software programs are in addition to Information Analyst and Word Processor software developed for the more powerful Apple III personal computer. All of the programs in the Apple library can be used on an Apple III system.
The software packages are priced from $25 to $625. (p. 11)
From the beginning, Apple personal computers were designed to grow along with the needs of the user. This has resulted in a basic computer system that communicates easily with other computers and peripheral products, and a series of Apple-designed accessories and peripherals.
Chief among the latter is the Apple II floppy disk subsystem, which results in expanded memory capacity, faster data retrieval speed and random access to stored data; and the Silentype Thermal graphics printer for quality hardcopy printing.
A series of interface cards enable Apple computers to communicate with other computers, printers, disk drives, CRT terminals and other computer hardware. This availability of a wide range of equipment and software results in greater flexibility for system growth for Apple computers than for other microcomputers. (p. 12)
The typical owner of a personal computer is a non-technical person who usually uses the computer on a daily basis. It is important that sales, service, repairs and information be available locally and quickly. From the beginning, Apple management recognized the importance of fast response to their customers' needs.
With this in mind, Apple has established a network of more than 700 authorized Apple service centers worldwide, by far the largest support effort among independent personal computer companies.
in addition, owners of Apple computers can call a "hotline" telephone number and be in touch immediately with applications experts. A further protection for the owner of Apple computers is a one-year extended warranty insurance policy which covers all Apple-supplied hardware and system software at a small annual cost.
Distribution is another key element in Apple's program to encourage the vast potential market of personal computer users. This includes offering Apple computers through new outlets serving nontechnical users, such as office supply stores. Also, Apple computers dominate shelf space alongside major competitors at most computer stores. Altogether, Apple products can be purchased at more than 1,200 outlets in this country and overseas. (p. 13)
In June 1980, Apple added five new regional support and distribution centers to better serve local markets, including its first European center at Zeist, the Netherlands. Other new distribution and support centers were announced for Boston, Mass., Charlotte, N.C., Costa Mesa, Calif., and Carrollton, Texas. The company continues to operate its Sunnyvale, Calif. , center. (p. 14)
The history of Apple Computer begins in 1976 when two young, self-made engineers collaborated on a small computing board for personal use. Steven P. Jobs, then 21, and Stephen G. Wozniak, then 26, took six months to design the prototype, 40 hours to build it, and soon had an order for 50 of their personal computers.
With that first order in hand they raised about $1,200 from the sales of a used Volkswagen van and a programmable calculator, and set up shop in Jobs' garage. By 1976 they were doing well enough to form Apple Computer Company, with Jobs as business manager and Wozniak as engineer. They named their computer--and the company--Apple because an apple represents the simplicity they were trying to achieve in the design and use of their computers.
Their first computer--sold in kit form to electronics hobbyists--was so successful that demand soon outstripped both the capacity of jobs' garage and their capital. Believing they had a product with commercial value, Jobs and Wozniak set out to find professional managers who could help them make the company fiscally sound.
Their first recruit was A. C. "Mike" Markkula, whom they met through a mutual friend. Markkula had successfully managed marketing in two semiconductor companies that had experienced dynamic growth--Intel Corporation and Fairchild Semiconductor. (p. 15) He joined Apple Computer as chairman of the board and vice president of marketing.
After researching the personal computer market and assessing Apple Computer's chances of leading the field, the three men decided what it would take in terms of capital, management expertise, technical innovation, software development, and marketing.
Initial financing for Apple came from Markkula and a group of venture capitalists that included Venrock Associates, Arthur Rock and Associates, and Capital Management Corporation. The company also obtained a line of credit from the Bank of America (which has recently been extended). Retained earnings have provided most of the financing required by the company's growth to date.
Jobs, Wozniak, and Markkula worked out a strategy to compete successfully with the corporate giants that were beginning to enter the personal computer market. They decided to emphasize technological superiority and customer support while growing as fast as possible. (p. 16)
The three men felt the best insurance against the risks of rapid growth was a management team with proven ability to manage the dynamics of high-technology growth companies. This team includes: