January 6, 1998 After taking over the company on the verge of bankruptcy, Steve Jobs shocked attendees at the Macworld Expo in San Francisco by revealing that Apple is profitable again.
Referring to the company’s strategy since taking over as interim CEO, the recently returned co-founder of Apple says: “Everything came together for us.”
Most of us didn’t know how huge Apple’s return was supposed to be.
Apple’s long way to the top
Today, when Apple has more money in the bank than some small countries, it is quite difficult to remember the time when profitability was a problem. However, that was certainly the case in the late 1990s. With rival Microsoft continuing its rise to the peak of valuation in 1999, Apple has suffered the consequences of disappointing product launches in the previous decade and poor management decisions.
Jobs himself was no stranger to losses. While Pixar’s IPO in 1995 turned him into a billionaire, the hardware division of his computer company NeXT proved disappointing from a financial perspective. Shortly after returning to Apple and taking over as CEO, Jobs reported a big quarter for Apple in losing money in 1997. The company lost $ 161 million in just three months.
Apple’s return to profitability
A few things helped set off the turnaround in late 1997 that Jobs spoke about at MacWorld in January 1998.
The first was Jobs ’aggressive cost-cutting, which reduced products that failed, R&D costs and the number of employees at Apple. The second was the success of new products like the beige Power Macintosh G3. That machine proved to be very good with customers – it sold 130,000 units compared to the forecast of 80,000. (For more on the history of the Power Mac G3 and its later upgrade in 1999, check out yesterday’s version of “Today in Apple History.”)
This was followed by the continued success of Mac OS 8, which at the time delivered the most successful sales performance of any Apple software product in history. In addition, Cupertino has benefited from the adoption of Macs “to order” and increased business through Apple’s website. For both of these successes, Jobs took a page from Dell’s mega-successful gaming book while Apple embraced the internet like never before.
At Macworld, Jobs said Apple expects to report net profits in excess of $ 45 million with revenue of about $ 1.575 billion in the quarter ending Dec. 31. Following the surprising announcement, Apple shares rose nearly 20% to $ 19 per share. Prior to Jobs’ statement, analysts predicted that the company would continue to lose money.
But don’t feel bad…
Still, don’t be offended that you didn’t invest all your savings in Apple in early 1998. Despite the positive news, Wall Street continued to view Apple as a troubled company.
“It doesn’t change the bleak long-term picture as the company continues to shrink,” Kurt King, a technology analyst at NationsBank Montgomery Securities, said at the time. “Without a recovery in market share, there will be no reversal.”
In fact, Apple continued to lose market share, declining from 13.7% in 1991 to just 4.4% in late 1997.
Jobs wanted to point out that Apple is trying to tighten its belt while focusing on great new products. He didn’t mention it then, but the most important of these new products was the colorful iMac G3, which solidified Apple’s financial and critical turnaround later in 1998. Other successful products like the first iBook were also in development.
“We will light the midnight oil … and we will work to achieve a result that will make you proud of us again,” Jobs said of Apple’s future.
Why did anyone doubt him?
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