CASE STUDY APPLE INC

Steve Jobs
1955- 2011
Mission Statement
Apple Inc. is committed to protecting the environment, health and safety of
our employees, customers and the global communities where we operate.
We recognize that by integrating sound environmental, health and safety
management practices into all aspects of our business, we can offer
technologically innovative products and services while conserving and
enhancing resources for future generations.

__________________________________________________________

February 2011
Doctor cleared his throat and said Mr. Jobs you do not have much time to live. At
best I think may be six months. We have tried our best but the resurgence of cancer
is too strong it is taken over your entire body. I understand the sensitivity of the
issue if you want we will keep it secret from the media.CEO of Apple Inc. Steve Jobs
got up from his chair and slowly moved out of the cancer treatment facility thinking
about his family and the company Apple Inc. where he has been the major force and
in just 13 years transformed Apple from bankruptcy to number 1 company of the
world.
Apple Inc. in 2011
On Wednesday March 2, 2011 Apple Inc. launched iPad 2 amid great attention from
the media and customers. CEO Steve Jobs who had taken medical leave from his
work took the central stage by officially launching iPad 2 despite his extremely weak
health condition he gave stunning presentation on this product and shocked the
digital world. He was given standing ovation by the audience, during his
presentation he stated, it is just not technology his company innovations are
combination of business, humanities, art and engineering. I work on new product
development with passion and love, we do not give attention to marketing research,
I have never hired any consultants, and I just work on making the products better
and try to provide more value to the customers. Even the The Economist
displayed the release of iPad on its magazine cover page and declared Steve Jobs
as the entrepreneur of the century.
According to the top 100 global brands report released in May 2011 by the most
respected brand researchers MillwardBrown, Apple Inc. was declared number 1
global brand of the entire world.

On the occasion of launching iPad 2 in China April 2011, price of iPad 2 was fixed
20% higher than USA, long queues of customers were witnessed outside Apple sales
centers and several people landed in jails because of fighting which erupted
because of jumping lines. One man is reported to sell his kidney to finance the
purchase of iPad 2

Apples History
Steve Jobs and Steve Wozniak, a pair of 20 something college dropouts founded
Apple Computer on April fools Day, 1976. Working out of the Jobs familys garage in
Los Altos, California, they built a computer circuit board that they named the Apple
1. Within several months they had made 200 units and taken on a new partner
A.C. Mike Markkula, Jr., who was instrumental in attracting venture capital as the
experienced businessman on the team.
Jobs mission was to bring an easy to use computer to market, which led to the
release of Apple 2 in April 1978. It sparked a computing revolution that drove the PC
industry to $ 1 billion in annual sales in less than 3 years. Apple quickly became the
industry leader, selling more than 100,000 Apple -2 by the end of 1980. In
December 1980, Apple launched a successful issuance of common stocks for public.
Apples competitive position changed fundamentally in 1981 when IBM entered the
PC market. The IBM PC, which used Microsofts operating system and CPU from Intel
was a relatively open system that other producers could copy. Apple on the hand
practiced horizontal and vertical integration. It relied on own proprietary designs
and refused to license its hardware to third parties.
IBM PCs not only gained more market share, but they also emerged as the new
standard for the industry. Apple responded by introducing Macintosh in 1984. The
Mac marked a breakthrough in ease of use, industrial design and technical
elegance. However the Macs slow processor speed and lack of compatible software
limited sales. Apples net income fell by 62% between 1981 and 1984 sending the
company into crises. Steve Jobs recruited the Chief Executive of Pepsi Cola John
Scully to turn around the company by using his marketing and management skills.
John Scully was appointed Chief Executive and Steve Jobs became the head of
research and product development.
After spending some time in the company John Scully concluded that there is
nothing wrong with the company it is Steve Jobs who is ruining and destroying the
company by his rash and centralized style of management. John Scully convinced
the Board members and Steve Jobs was fired. Jobs was asked to sell his shares and
leave the company immediately.

In 1985 Steve Jobs left the company with tears in his eyes, he was forced out of the
company which he created and the man he hired John Scully to change the culture
of the Apple conspired for his exit.
In June 1993 Scully was replaced by the President of the Board as the companys
margin was continuously falling. In 1996 a board member Amelio was made the
Chief executive who was fan and admirer of Steve Jobs. He was also aware that
Steve Jobs new company Pixar (3D animation company) was making huge profit
with Toy Story and he had long term plans with Disney world.
Apple lost $ 1.6 billion under Amelio and the worldwide market share tumbled to
around 3%. Amelio told the Board that the only hope of reviving the company is to
get the man who created it.
In September 1997 Steve Jobs became the companys interim CEO

Steve Jobs and the Apple Turnaround

Steve Jobs moved quickly to reshape Apple. He hired Taiwanese contract assemblers
to manufacture Mac products and revamped Apples distribution system from
smaller outlets to national chains. Apple 15 product lines were slashed to just four
categories- desk tops and portables for consumers and professionals. Apple
launched a website to set up direct sales for the first time. Internally, Jobs focused
on reinvigorate innovation. Apple slashed its inventory and increased its spending
on R & D.
Jobs first real coup came with iMac in August 1998. This was a window based
machine with eggshell design. Following Jobs return, Apple posted a $ 309 million in
1998 fiscal year, reversing the previous years $ 1 billion loss.
Jobs wanted to change the image of the company and Apple to be a cultural force.
Apple promoted itself as a high end alternative to other computer brands. Apple ads
were placed in popular and fashion magazines.
PC Manufacturers
The four top PC vendors Hewlett-Packard (HP), Dell, Acer and Lenovo accounted for
55% of worldwide shipments. Industry leader HP had staged an impressive
comeback following a rough period with the acquisition of Compaq computers in
2002.
HP was also the world largest technology company diversifying into services,
servers and storage. Around two thirds of HPs PCs were sold outside the US. HP
also had a strong retail presence through 110,000 worldwide outlets. Dell on the
other hand stumbled, its distinct combination of direct sales and build to order

manufacturing was a hit in the corporate market. Yet Dell was late to catch the
consumer boom. Founder Michael Dell returned as CEO in January 2007 and
emphasized computer friendly products, reentered retail distribution and pushed for
international expansion. Still Dell struggled with cost controls and poor margins. In
2009 Dell was the only top PC manufacturer to lose its worldwide market share.
Acer and Lenovo, active in emerging markets both benefitted from acquisitions of
high profile US PC brands. In 2007 Taiwan based Acer bought Gateway a leading US
PC brand and became the third largest PC vendor in the world. Acer also acquired
Packard Bell a PC maker with strong presence in Europe. China based Lenovo came
into front ranks of PC vendors in 2005 when it acquired IBM money loosing PC
business for $ 1.75 billion. Lenovos greatest strength was its dominant position in
China where it commanded 33% of the market.
Suppliers to the PC industry fell into two categories. Those that made products such
as (memory chips, disk drives, and key boards) come from many sources and those
that made products notably micro-processor and operating systems that had just
few sources. Products in the second category are supplied by two firms Intel and
Microsoft.
(For More details see Exhibit 1& 2)
From Apple Computers to Apple Inc.
Apples shift towards digital hub strategy was initiated by the debut of the iPod in
2001, followed by the iPhone in 2007, then the iPad in 2010. These product lines set
Apple on a path toward becoming a full fledge digital convergence company. The
change in the name from Apple Computer to Apple Inc. In 2007 marked the
official repositioning of the company.
The iPod Sensation
While the prospects of for the PC Macintosh improved, it was the iPod that set Apple
on the explosive growth path. The iPod was initially one of the many portable digital
music players based on the MP3 standard. Thanks to the sleek design, simple user
interface and large storage it soon became the icon of the digital age. The first iPod
stored up to 1000 songs the other MP3 players could only store one hour of music.
The iPod Nano for example had gross margins of 40%. The biggest cost component
for the Nano was flash memory. Apple agreed to pay $ 500 million up front in 2005
to Intel, Samsung and Toshiba to ensure uninterrupted supplies of flash memory.
Released in 2007 the Touch was the first iPod that built in Wi-Fi, 3.5 inch screen and
a multi touch graphical interface. Some 50 million iPod Touch devices have been
sold in 2010. Apple has been charging of $ 75 to $100 higher than the competition.
Competitors like Creative, SanDisk, Samsung all were struggling in front of iPod

even Microsofts Zune line of music player could not create any impact in the
market.
Competitors found themselves facing a major disadvantage with the emergence of
iTunes store.
ITunes: Two features which dramatically differentiated Apple iPods were its iTunes
desktop software which synchronized iPods with computers and its iTunes Music
store. The iTunes was the first legal site that allowed music down loads on pay as
per song basis. By February 2010, iTunes has sold 10 billion songs and featured the
world largest catalog. Over 8000 movies titles could be rented or downloaded by
iPod Touch owners.
The launch of iTunes store had a tremendous impact on the sales of iPod. Before the
launch of iTunes store Apple sold on average 113,000 iPods per quarter. After iTunes
launch, iPod sales shot up to 733,000 units per quarter and exploded thereafter. An
Apple exclusive digital protection software ensured copy rights by limiting down
load of one song to five computers by one user.

The iPhone
Hailed as Time Magazines Invention of the Year the iPhone represented Apple bid
to reinvent the phone. Two and half years of development efforts had been devoted
to the phone, guarded under intense secrecy even within the companys own
employees. The estimated development cost was around $ 150 million.
Entry into mobile phones was considered risky by market analyst. The industry was
dominated by Nokia, Motorola and Samsung with 60% market share. In addition the
products were characterized by short life cycles, including radio technology where
Apple had little experience. In the US market a handset manufacturer is usually
dependent on the operator to provide a subsidy which could lower the price of new
handset by as much as $ 150 or more. Nokia was dominating the market with
attractive hard ware designs and user friendly interfaces, multimedia functions.
Then smart phones rose to prominence with internet browsing, emails and media
players.
The iPhone, however changed the rules in the industry. A revolutionary 3.5 inch
touch screen interface placed commands at the touch of users fingertips without a
physical keyboard. The first model was priced at $ 499 for an 8GB model. At that
time other mobiles from competitors were costing $ 300.
The first generation iPhone sold about six million units over five quarters. With the
3G model, iPhone revenues exploded to $ 25 billion by the end of 2010. Within three
years, the iPhone went from zero to 38% of Apples total revenue. In terms of global

smart phones sales, the iPhone was the biggest growth story capturing more than
26% of the market
Competitors: Apple has two main competitors in smart phone category. RIMs
black berry smart phones delivered one of the best e-mail experiences and was a
popular chance among corporate consumers. The leader in smart phones was
Nokia. The company strength lied in Europe and emerging markets such as India,
China and Pakistan. Googles free Android OS is an open platform that allowed
mobile users to use it for free Android had gained 4% market share. This OS can be
a potential threat to iPhone.
Limitations of the iPhone: Complaints included customers wanted a physical key
board, especially people handling high volume of e-mails. The battery life was weak.
The iPhone did not support flash technology which meant that the device video
could not be played on some platforms.
The iPad
The launch of the iPad in 2010 was yet another bold move by Jobs to redefine an
industry positioned between smart phone and laptop, the iPad was priced at $ 499
to & 829. The computer tablet featured a 9.7 inch screen for reading books,
watching movies and some business productivity applications. Between 2008 and
2010 Jobs bought two microprocessor designs for about $ 400 million. The iPad
became the first product of Apple to run on its microprocessor. Battery life of iPad is
10 hours.
More than 450,000 iPads were sold during its first week on the market. Computer
tablets prior to iPads launch accounted for less than 1% of the market. According to
Job the iPad would kill the note book.
The hype over iPad had produced an immediate competitive response. At least
dozen companies have started producing these computer tablets, HP, Samsung , LG
, Panasonic, Toshiba have already launched tablets in the market. Chinese
companies have also launched computer tablets at half the cost.
Indian IT minister announced that we will be launching a computer tablet copy of
iPad in 2012 at $ 35 so all students can afford it.
One Failure: Apple TV was announced in 2007, it was an attempt by Apple to bring
digital video content directly into the living rooms. Customers were supposed to
download contents from iTunes store and view on Apple TV. Sales were extremely
slow and probably the only failure product approved by Steve Jobs.
Apple Inc. and the Challenges
Apples evolution from a PC manufacturer company to a mobile communication
company has been a spectacular success. Most of the credit goes to one man

Steve Jobs. Market understands this fact and without Jobs at the top, company
may struggle to maintain its number 1 position in the world.
Fully aware of this fact Steve Jobs came to his home and called Timothy D. Cook, his
heir apparent, and Chief Operating officer of Apple Inc. Jobs told him to conduct the
share holders meeting in 2011 as he will not be attending the annual meeting with
the shareholders this time because of his deteriorating health condition and asked
him to put his name for election in the Board so the market should not get wrong
signals. He also stated that just a rumor of his heart attack pulled down the share
value by 10% last week and any negative report about his health may bring the
share value down dramatically.
Steve Jobs continued and started discussing the challenges faced by Apple Inc. He
stated that iPod sales are stagnant in 2010 & 2011 on the other hand Microsoft has
introduced Window 7, which led to resurgence in PC sales. Job stated I am not
satisfied with our PC market share which is only 5%
Timothy D. Cook sitting in his office next morning thought about the risks and
challenges which he faces in case of Steve Jobs permanent disappearance from the
company. Influence of Steve Job in product development and innovation was huge.
Steve Job style of management has been centralized he would communicate with
100 people and would personally approve and supervise all the innovations.
No one use to complain because most of the time Job was right, he was always the
smartest man in the room. Cook realized it would be difficult to bridge the gap
which Steve Jobs absence will create.
Cook was worried due to the highly volatile and competitive nature of the industries
in which the Apple Inc. competes, he must continually introduce new products,
services and technologies, enhance existing products and services, and effectively
stimulate customer demand for new and upgraded products just like Steve Jobs.
Cook was also worried that Steve Jobs had the ability to hire talented people and
retain them on long term basis. Experienced personnel in the technology industry
are in high demand and competition for their talents is intense, especially in the
Silicon Valley, where most of the Companys key personnel are located. Because of
Jobs absence it would be difficult to retain key personnel.
Although most components essential to the Apples business are generally available
from multiple sources, certain key components including but not limited to
microprocessors, enclosures, certain liquid crystal displays (LCDs), certain optical
drives, and application-specific integrated circuits (ASICs) are currently obtained
by the Company from single or limited sources, which subjects the Company to
significant supply and pricing risks. Cook thought that he would like to reduce the
risk in this area

Suddenly his phone started ringing there was somebody from the stock market who
wanted to know about the health condition of Steve Jobs, Cook replied No
Comments.
The man responded without Steve Jobs Apple Inc. can become bad apple
"Cook is a star, just a different kind of star from Steve," said New York-based
business analyst, who recommends buying Apple shares and doesn't own any
himself. "He's arguably one of the best supply chain managers in the world, if you
look at working capital management, cash-flow management, and cash conversion
cycles -- all those great metrics." He has done tremendous work in Apple and the
gap left by Steve Jobs can be filled by Cook. He handled the company in a
professional manner during the absence of Steve jobs for six months in 2007 for
liver transplant operation.
Apple Board has been criticized many times by the press for lacking in corporate
governance as Steve Jobs was always reluctant in asking independent non executive
directors to sit in the Board. Steve Job was also very critical that he took CEO of
Google as independent external director on the Board but he is trying to copy the
success of iPhone and leading Google towards smart phone industry after becoming
aware of what Apple Inc. was doing.

Board of Directors of Apple Inc. announced on October 7, 2011 that Timothy D.

Cook will replace the legendry chief executive of Apple Inc.
Steve Jobs died on October 5, 2011

(End of Case Study)

Appendix: Selected Financial Data

Selected Financial Data of Apple Inc

The information set forth below for the five years ended September 24, 2011, is not
necessarily indicative of future financial results

Appendix 1
US Dollars in Millions
2011

2010

2009

2008

2007
Net sales . . . . . . . . . $108,249
$ 24,578

$ 65,225

$ 42,905

$ 37,491

Net income . . . . . . . $ 25,922

$ 3,495

$ 14,013

$ 8,235

$ 6,119

Earnings per common share:

Basic . . . . . . . . . .
$ 4.04

$ 28.05

Total assets . . . . . . $116,371

$ 24,878

$ 15.41

$ 9.22

$ 75,183

$ 47,501

$ 27,392

$ 15,861

$ 6.94

$ 36,171

7
Total liabilities . . . . . $ 39,756
$ 10,347

$ 13,874

Total shareholders
Equity . . . . . . . . . . . . . $ 76,615
22,297
$ 14,531

$ 47,791

$ 31,640

(a) The Company did not have any long-term debt during the five years ended
September 24, 2011. Long-term obligations exclude non-current deferred
revenue
(b) The company s financial strength is considered to best in the entire industry
of America