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During the time of this case Apple Computers status was not looking too good. It was the close of fiscal fourth quarter of 1997 and Apples revenues were $ 1. 6 billion, a 30 % decrease from the year before. The companys net loss for the quarter was $ 161 million compared to a net profit of $ 25 million the previous year. To get a better understanding of the companys 1997 financial position with respect to the previous year see Exhibit 1 Apples Financial Ratio Analysis. Steven Jobs was once again in charge but only as acting CEO while Apple as in search of a new CEO. Prince Aliweed owned 5 % of Apple and they were looking for suitors to by Apple and fix it.
The decline in demand, resulting in losses and the combination of intense price competition led the company in its decision to continue restructuring its business in 1997. Apple Computer focused on reducing its core structure, improving its competitiveness, and restoring its sustainable profitability. In February 1997, Apple acquired NeXT. The purchase brought Steve Jobs back into the company. To better understand Apples position we need to analyze where they are currently at. The Positives- 1.
Brand Recognition- It is no secret Apple has a world renowned brand name and catchy hardware design. Apples success was due to marketing and technological innovation in the high growth. 2. User Friendly Architecture- Apple kept the architecture of the Macintosh proprietary, and it could not be cloned like the open system IBM PC. This allowed them to charge a premium for their distinctive user friendly features.
This user friendly feature not only helped them to take a large portion of the general market share it helped them to be the dominant player in schools. 3. Purchase of NeXT Software- The Acquisition of NeXT brought a host of talented quality programmers along with Steve Jobs and other executives. They knew Apple, the industry, and were full of vision which is what Apple desperately needed at this time. 4. Good Core Products- Apple had strong core products, the Macintosh still had a strong foot hold in the market. In the early 1990 s Apple sold more personal computers than any other computer company.
Net Sales grew to over 7 Billion, net income to over $ 530 Million, and earnings per share to $ 4. 33. The basis for these products allowed Apple to survive through difficult times even when it seemed that they were destined for a take over. Among these core products was their graphic software sales which dominated well into the first quarter of 1997. Segments of this market included Desktop Publishing Software at 62. 4 % market share, Presentation software at 51. 6 % market Share and Drawing and Painting Software at 43. 9 % market share. 5.
Leader in Schools- Apple had a major share of the education market which meant that the majority of childrens first computer was with an Apple PC. In the first quarter of 1997, Apple had a 29. 6 % share in the U. S. education market. This is a considerable feat since their closes contender, Dell was at a modest 9. 6 %. 6. Deal with Microsoft- Microsoft paid $ 150 million for a non-voting stake in Apple...
The deal permitted Microsoft to maintain its dominance in business software with Apple customers. Apple gained renewed industry confidence and Microsoft support software. This also gave them an infusion of cash from an undisclosed settlement on patent infringement with Microsoft estimated to be in the hundreds of millions of dollars. With such vital strengths as the aforementioned, it is hard to believe how Apple could be in such dire straight, however if we examine the negatives it is easy to see how they are in the situation they are in.
THE NEGATIVES: 1. High Turnover in Top Management- In July 1997, Dr. Gilbert F. Amelio had resigned as Chairman of the Board and CEO. This led to a number of other board members resigning, such as; the VP of Marketing, the VP of International sales, The Sr. VP of Operations.
On the same day as Amelio, Ellen Hancock, a well known industry executive who worked for Dr. Amelio at National Semi-Conductor, resigned as Executive VP of technology. This type of upheaval in the top tends to panic shareholders and they lose confidence. A critical resignation was the CFO, Fred D.
Anderson Jr. , whom was well respected by the analysts watching the stock. This type of turnover is viewed negatively because at that level personnel has the most to gain and the most to loose based on the companys performance. 2. Lawsuits- In January of 1996, a shareholder class action lawsuit was files naming Apples then directors as defendants. The complained was basically mis-management on the part of the directors and that they breached their fiduciary duty to the stockholders by allegedly rejecting an offer from a computer company to acquire the company in excess of $ 50 per share. Apple was named on Approximately 60 lawsuits, alleging that plaintiffs incurred carpal tunnel syndrome from use of keyboards and mouse input devices sold by the company. 3. Decline in Stock- This is a major problem because the stock becomes a liability.
The momentum of the decline is severe enough where the long-term borrowing was secured by stock. This triggered a loss in confidence by shareholders. Exhibit 2 shows this period highlighted in yellow as a very turbulent time. Note the volume traded during the stocks rapid decent. 4. Competition- At this point, Microsoft clearly dominated the market. Apples operating system was known as the MacOS, and Apple had depended on their sales of people reluctant to switch over from the Macintosh installed user base to Microsoft's platform because of the cost it would incur.
However recent innovations in Microsoft's operating systems such as Windows 95, Windows NT, and Windows 98, made the differences between MacOS and Microsoft's less significant. Several key competitors announced that they were targeting certain Apple key segments, including education and publishing. 5. Compatibility- Because Apples software was only compatible with the MacOS, they limited their market potential. This has been one of the biggest complaints from end users. What Apple though was a key marketing strategy ended up leading to their troubles to take market share from their competitors. THE PLAN OF ACTION- A plan of action for Apple to reclaim their market share and profitability would have to include the following; 1.
Become less obscure- Rather to just catering to the Mac faithful in desk top publishing or other high graphical interface, it should become more mainstream and go head to head with companies like Microsoft. Stay focused on attacking the education market but also focus on the home office market. 2. Need to offer key products in various market segments- Apples line in too broad in their focused market segments. They need too streamline their products in each segment while going after other segments. 3.
Spend more on R& D and introduce product that is Innovative and Exclusive- There is no doubt that the computer industry is one of the fastest growing industries and highly dependant on technology. The company needs to develop a revolutionary new product that is years of its competition, The exclusivity should be in that its technology should be proprietary and patent protected. 4. Direct Selling- This strategy became the bread and butter of Gateway Computers and highly profitable. This eliminate dealers and therefore takes cost out of the retail price.
Apple should adopt this type of strategy and sell directly with the utilization of the World Wide Web. A computer is not something that needs to be displayed in a store. The sale online should allow the customer to pick their features and computing power with a variety combinations. ALTERNATIVES: Other alternatives would include focusing on their core competencies such as the education and the desktop publishing markets and implementing strategies suggested by John Sculley such as partnering with a PC maker in the education segment. By having a dominant foot hold in the education market, Apples first customers would be children who would become accustomed to using Apple products and therefore would be more reluctant to change to a competitor.
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Research essay sample on Company Status Of Apple Computers
