Apple Computer 2002

Observing Apple Computer in the 1990s was like watching a melodrama unfold. In five years,
Apple had four CEOs (John Sculley, Mike Spindler, Gil Amelio, and Steve Jobs). As each new chief executive took control, the company went through one reorganization after another. By July 1997,
Apple had surrendered two-thirds of its market share, losses topped $1.6 billion, and shares were trading near all-time lows. (See Exhibit 1.) Competitor Michael Dell recommended that Apple throw in the towel: “I’d shut it down and give the money back to the shareholders.”1 But as Apple entered the new millennium, many loyalists hoped that the melodrama was over. Cofounder Steve Jobs had come to Apple’s rescue when the company was at its lowest point. Jobs unleashed a series of dramatic moves, including a stunning decision to sign a long-term cross-licensing agreement with
Microsoft for $150 million.2 Jobs then ended Spindler’s cloning strategy and went on to kill the
Newton, John Sculley’s pride and joy. But Jobs’s boldest gambit was the iMac, a cleverly designed, low-cost Macintosh that took the market by storm in 1998. Four years later, an updated and more powerful iMac was introduced as a “digital hub” for Apple’s new peripheral devices and software.
Jobs also broke tradition by opening dozens of Apple-exclusive retail stores and by outsourcing iMac production. By 2000, Jobs had reversed course on nearly every aspect of his predecessors’ strategies and had returned the company to profitability. In 2002, however, Apple again faced weak unit sales, flat gross margins, and declining share in several core markets. Steve Jobs had to wonder: was this déjà vu for Apple, or would the new products and strategy bring the company back to