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Thursday, July 08, 2010

Apple Computer Inc.

Apple, the oracular Silicon Valley company that became an icon of personal computing, has risen to its greatest heights in the years since Steven P. Jobs returned to its helm and opened horizons beyond the desktop. With its coveted gadgets and resurgent stock price, Apple has cast something of a spell on both consumers and investors.

As measured by the value of its stock, Apple shot past Microsoft, the computer software giant, in May 2010 to become the world's most valuable technology company. The changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and Mr. Jobs. The rapidly rising value attached to Apple by investors also heralded an important cultural shift: Consumer tastes have overtaken the needs of business as the leading force shaping technology.

The iPod and the iPhone have been major forces in the music and smartphone industries, respectively. In June 2010 Apple release the much anticipated fourth iteration of the iPhone. While Apple is at the top of its game, it faces a new and powerful rival in Google, which is battling Apple in mobile devices with its Android operating system, and mobile advertising.

The company's iPad tablet computer — an idea that has flopped before — has also drawn enormous attention; the device, with a 10—inch multi—touch screen, is intended to fill a gap between laptops and smartphones, Mr. Jobs said.

But as one success follows another, the company finds itself in a bewildering position. As the tech industry's perennial underdog, Apple was frequently scorned and dismissed by larger and more successful competitors like Microsoft or Dell. Now, with growing frequency, the company is seen by competitors and other industry players as a bully.

Companies like Google and Adobe have accused Apple of unfairly using its clout to exclude their technologies from the iPhone and iPad. And some application developers are fretting under Apple's tight control of those devices.

Perhaps the loudest complaints came after Apple barred some third-party programming tools from the iPad, including Adobe's Flash software, which is widely used to create online videos and Web applications.

The decision led to a very public war of words between Adobe and Mr. Jobs. It also prompted the Federal Trade Commission to begin asking questions about the effect of Apple's decision on competition.

Then in June 2010, Apple appeared to make the switch from excluded to excluder in the mobile ad market. New policies for the iPhone 4 bar Google and AdMob from selling ads on the device, resulting in a complaint to the FTC from Google, which was in the unusual position of playing victim.

The FTC inquiry is not the only one concerning potentially anticompetitive behavior by Apple. The Justice Department recently began a preliminary investigation into whether Apple pressured music labels to exclude, its rival in digital music distribution, from certain licensing agreements. And Apple is one of many Silicon Valley companies whose hiring practices are being examined by the department.

The latest inquiry from the commission has raised eyebrows among some antitrust experts, in part because Apple currently controls less than a third of the smartphone market in the United States.

Founded in 1976 by Mr. Jobs and Steve Wozniak, Apple came of age as one of a wave of firms -- including Atari, Radio Shack and Texas Instruments -- that were looking for ways to transform the digital computer into a home appliance. Of that first personal computing generation, it is Apple and the charismatic Mr. Jobs that have consistently found a way to touch the zeitgeist. Apple's microprocessor-based consumer products have found expanding consumer markets around the world, beginning with the Apple II computer, widely adopted in education during the 1970s.

In 1979, Mr. Jobs made a legendary visit to Xerox's Palo Alto Research Center, where he saw a prototype personal computer called the Alto. He took away a range of ideas about computer design and graphical user interface and developed two families of computers, the Lisa and the Macintosh. Aiming to make Apple's products "insanely great," Mr. Jobs was convinced that they could change the world.

Although the Lisa failed commercially, the Macintosh succeeded, reshaping the computer industry over the next decade. Its success, however, came at great cost to Mr. Jobs, who was forced out of the company in 1985 by his handpicked chief executive, John Sculley, a recruit from Pepsi.

Apple initially prospered under Mr. Sculley, and the Macintosh briefly reached a market share of more than 15 percent of the personal computer industry, but the company foundered as Microsoft's Windows operating system became the desktop computing standard.

The company began to unravel when Mr. Sculley placed a large bet on the arrival of the hand-held computing market. When Apple's Newton failed commercially, he was forced out in 1993.

In 1997, Apple's current era dawned as Mr. Jobs returned after more than a decade in exile. At the time, many analysts gave him little chance of resurrecting the company, which had largely been written off by the computer industry. (Michael S. Dell, who built his own PC empire, was even quoted as suggesting that Apple's smartest move would be to "shut it down and give the money back to the shareholders.") Starting with the title of interim chief executive, however, Mr. Jobs systematically rebuilt the company's Macintosh franchise by adding an operating system he had developed at Next Inc.

In 2001, he introduced the iPod music player, setting the company on its current course as a major force in consumer electronics. The iTunes Music Store, created to enable users to fill the device with audio, has made Apple an important force in the music industry as well. Over 10 billion songs from the store have been downloaded since the site went active in April 2003.

In 2007 Apple introduced the iPhone, a convergence of entertainment, computing and communications that has roiled the cellular phone industry. Its Apple TV set-top box has had less impact, but signals a continuing interest in the living room.

For now at least, Apple appears to have a comfortable lead in the simmering smartphone battle. Since 2007 it has sold tens of millions of iPhones and the similar-looking iPod Touches, and the devices have become its most profitable product category.

In April 2010, Apple announced that it had sold more than 300,000 iPads on the device's first day on the market, a figure that included preorders. That met the expectations of financial analysts who were keeping tabs on the release of the company's highly anticipated tablet computer. Apple also said iPad users had downloaded more than one million apps from the company's App Store and more than 250,000 electronic books from its iBookstore.

Wall Street has warmly greeted the news in May of Apple's dominance over Microsoft, calling it the end of an era and the beginning of the next one. Microsoft, with its Windows and Office software franchises, has dominated the relationship most people had with their computers for almost two decades, and that was reflected in its stock market capitalization. But the click-clack of the keyboard has ceded ground to the swipe of a finger across a smartphone's touch screen.

And Apple is in the right place at the right time. Although it still sells computers, twice as much revenue is coming from hand-held devices and music. Over all, the technology industry sold about 172 million smartphones in 2009, compared with 306 million PCs, but smartphone sales grew at a pace five times faster.

Analysts said the iPhone 4 should help Apple sustain its sales momentum, appealing both to new iPhone customers and to owners of the two-year-old iPhone 3G who were looking to upgrade.

Soon after its release, however, iPhone 4 users began complaining that when they held the phone a certain way, the bars indicating signal strength dropped off sharply. On July 2, 2010, Apple announced that its phones had been exaggerating signal strength by displaying too many bars — indicating stronger reception than there ever was. The problem, Apple said, was a bug in the software, which it promised to fix soon.

Apple said the flaw existed with older versions of the iPhone, too. For a company that obsesses over every detail of its products, the failure to detect the longstanding problem earlier was seen as astonishing.

Some customers said they were skeptical of Apple's explanation of the vanishing bars. Nonetheless, many customers agreed that the new iPhone was better at making calls than earlier models, and Apple's admission of a software bug was unlikely to diminish either scorn from critics or sales of the iPhone 4.

Company Information

Apple Inc. (Apple) designs, manufactures, and markets personal computers, mobile communication devices, and portable digital music and video players, and sells a variety of related software, services, peripherals, and networking solutions. The Company sells its products worldwide through its online stores, its retail stores, its direct sales force, and third-party wholesalers, resellers, and value-added resellers. In addition, the Company sells a variety of third-party Macintosh (Mac), iPhone and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and various other accessories and peripherals through its online and retail stores, and digital content and applications through the iTunes Store. The Company sells to consumer, small and mid-sized business (SMB), education, enterprise, government and creative customers. In December 2009, the Company acquired digital music service Lala.

Apple Inc.

1 Infinite Loop Cupertino CA 95014
Phone: +1 (408) 996-1010
Fax: +1 (408) 996-0275

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