Mac

Thanks to Jeremy Reimer I was able to create the following view into the history of computer platforms.

I  added data from the smartphone industry, Apple and updated the PC industry figures with those from Gartner. Note the log scale.

The same information is available as an animation in the following video (Music by Nora Tagle):

httpv://www.youtube.com/watch?v=8h-C6u4yLj4

This data combines several "categories" of products and is not complete in that not all mobile phone platforms are represented. However, the zooming out  offers several possible observations into the state of the "personal computing" world as of today.

1. We cannot consider the iPad as a "niche". The absolute volume of units sold after less than two years is enough to place it within an order of magnitude of all PCs sold. We can also observe that it has a higher trajectory than the iPhone which became a disruptive force in itself. Compare these challengers to NeXT in 1991.
2. The "entrants" into personal computing, the iPad, iPhone and Android, have a combined volume that is higher than the PCs sold in the same period (358 million estimated iOS+Android vs. 336 million PCs excluding Macs in 2011.) The growth rate and the scale itself combine to make the entrants impossible to ignore.
3. There is a distinct grouping of platform options into three phases or eras. The first lasting from 1975 to 1991 was an era of rapid growth but also of multiple standards and experiments. It was typical of an industry in emergence. The personalization of computing brought about a new set of entrants. The second phase lasted between 1991 and 2007 and was characterized by a near monopoly of Microsoft, but, crucially one alternative platform did survive. The third phase can be seen as starting five years ago with the emergence of the iPhone and its derivatives. It has similarities to the first phase.

We can also look at the data through a slightly different view: market share. Share is a bit more subjective because we need to combine products in ways that are considered comparable (or competing).

First, this is a "traditionalist" view of the PC market as defined by Gartner and IDC, and excluding tablets and smartphones.

This view would imply that the PC market is not changing in any substantial way. Although the Mac platform is gaining share, there is no significant erosion in the power of the incumbent.

Second, is a view where the iPad is added to the traditionalist view.

This view is more alarming. Given the first chart, in order for the iPad to be significant, it would need to be "visible" for a market that already ships over 350 million units. And there it is. If counted, the iPad begins to show the first disruption in the status quo since 1991.

The third view is with the addition of iPhone and Android.

This last view corresponds to the data in the first graph (line chart). If iOS and Android are added as potential substitutions for personal computing, the share of PCs suddenly collapses to less than 50%. It also suggests much more collapse to come.

I will concede that this last view is extremist. It does not reflect a competition that exists in real life. However, I put this data together to show a historic pattern. Sometimes extremism is a better point of view than conservatism. Ignoring this view is very harmful as these not-good-enough computers will surely get better. A competitor that has no strategy to deal with this shift is likely to suffer the fate of those companies in the left side of the chart. Treating the first share chart as reality is surely much more dangerous than contemplating the third.

I've used anecdotes in the past to tell the story of the disruptive shift in the fortunes of computing incumbents and entrants. I've also shown how the entry of smart devices has disrupted the telecom world and caused a transfer of wealth away from the old guard.

The data shown here frames these anecdotes. The data is not the whole story but it solidifies what should be an intuition.

[Update]

Additional platforms added to the first chart.

 

"Yes. I think it’s possible if you integrate tablets"

- Meg Whitman, HP CEO in response to the question of whether Apple could overtake HP in computer sales in 2012.

via HP CEO Meg Whitman Admits Apple Could Surpass HP in 2012 | MacTrast.

However, according to Gartner, HP shipped 14.7 million PCs in the last quarter. While we don't have the total global figure for Apple, my estimates are 5.2 million Macs and 14.7 million iPads, for a total of 19.9 million computers in the same period.

There might be an error in both Gartner's and my numbers, but the gap of over five million in Apple's favor is unlikely to disappear.

The history of shipments from these vendors  is shown below.

The market shares are also shown here:

I included the market shares thee years ago, and the rankings with the iPad excluded.[1] Apple went from 3.42% share at the end of 2008 to 5.6% share today excluding the iPad or 17.6% including the iPad. HP went from 19.3% in 2008 to 16% today or 13% if iPad is included.

Apple is ahead of schedule on their taking[2] the top spot in terms of units.

Notes:

1. Although vendors other than Apple also sell tablets, their totals are unpublished and I am not aware of any estimates so. If anyone has seen estimates I would be happy to amend the data.
2. Throughout the history of the industry, Apple never held the top spot.   The Apple II peaked at 15.8% in 1984 and the Mac at 12% in 1992.

Gartner published its estimates for "PC" shipments during the fourth quarter. As I've done in the past, I combined their estimates with known shipments from Apple and separated Apple's performance from the Windows-based market.

I also take into consideration the iPad as a potential competitor for computing purchases. Apple will report fourth quarter results including Mac and iPad shipments in less than two weeks but I am using my own estimates until then.

Here is how the platforms grew over the last few quarters (all figures are global):

The Gartner data implies a 3% decline in the size of the Windows PC market during the last quarter. This is the fourth quarter of disappointing Windows performance. If you observe the pattern for the Mac vis-a-vis  Windows there is a similarity in the overall cycle but a divergence in terms of growth. The "spread" between Windows and Mac OS X is increasing and has reached an all-time high of 28 points.

But the more interesting story is that the decline in Windows seems to be coincident with the growth in the iPad. The green (Mac + iPad) shows the effect of the new category while the red line (iPad only) shows that growth in isolation (year-on-year).

Coincidence?

Ever since the iPad launched the hypothesis that it has an impact on PC has been hanging in the air. Most analysts (including Gartner) argued that there was no effect from iPad and that the problems with Windows were all due to one-time circumstances. We hear the same about the last quarter with floods in Thailand being blamed.

However, in the latest quarter Gartner began suggesting that "consumers' attention was diverted toward other product categories, especially smartphones and media tablets."

One wonders if these "media tablets" are not PCs and yet they negatively affect the purchase of PCs whether they are indeed competing with PCs.

Historically, Apple's sales to business and government buyers of personal computers have been, in a word, minuscule. To put a number on it, Forrester published data where the estimated value of those sales in 2007 were 2.8%. A figure lower than Apple's overall market share of PCs in that time frame.

Things did not improve much in the years following. The following chart shows the split between Windows and Mac OS X for the value of enterprise computers sold in 2007 through 2009.

Apple's share of value went from 2.8% to 3.7%, an increase of 1 point of share, but one which in real terms was not very valuable because the overall market declined due to recession. Revenues for Apple were basically flat at around $2 billion each year as shown in the second chart.

However, the situation changed very rapidly in the last two years.

Apple's share of enterprise revenues doubled from 3.7% to 7.8% in 2010 and nearly doubled again to 14.6% last year. A large part of that acceleration was due to the iPad which generated an estimated 6 billion in sales in 2011, triple what Macs were grossing in 2007.

Forrester goes further and estimates the same data for the next two years.

The estimate seems to be an extrapolation of the last two years which may or may not happen and we should treat it with caution.

However, if the pattern emerges as an extension of the near past, Apple's position in the market at nearly 30% share next year would be a sea change. It may challenge for the top spot among all vendors to the sector.

It's been said many times that "if only Apple put more emphasis" on Enterprise sales, imagine how much more growth they would obtain. However, I believe that this reversal of fortune did not come about from paying more attention but rather from paying less attention to Enterprise.

Enterprise buyers are demanding customers. They have highly specific requirements and ask vendors to conform to multiple layers of dependencies. As a result, enterprise vendors (led by Microsoft) have done all they could to make their software and hardware conformable to these needs. For decades this was the modus operandi and, due to the early adopter nature of businesses in personal computing, the resulting product was passed on to consumers as the "standard". Consumers accepted it as it was better than having no computers at all.

The problem is that customers, especially demanding ones, don't realize that a new basis of performance might be more beneficial. Apple and mobile devices in general presented this "low-end" alternative not in response to requirements from business but in response to requirements from consumers who had been much more eager in the last decade to adopt new technologies with fewer strings attached. All the security, conformability and legacy issues of the early business adopters turned them into late adopters as technology shifted.

So a company focused on an asymmetric market led with new solutions to problems that enterprises did not think they had. Mobility was something few IT managers asked for and was granted begrudgingly to only those "most valuable" who needed it due to cost and security considerations. As Apple willfully ignored these Enterprise needs it, paradoxically, created exactly what they needed.

It pried entry into the most difficult of markets by not even wanting to enter.

In thinking about how this market will evolve, I hear about "consumerization" and cost reduction as benefits and justification of this shift. But fundamentally, what is happening is a classic low end disruption. Enterprises increased their demands beyond what the users in those enterprises could absorb. Instead of ultra-secure, locked-down and immobile computing, users were looking for flexibility, agility and mobility. That's what Apple was listening to.

Apple's best strategy today would be to persist on this trajectory and listen to the under-served consumer rather than the over-served and over-demanding IT manager.

Thanks to all those who contributed to the big Mac index there is a substantial amount of pricing data available in one location.

The analysis that I hoped to perform on the data was to see if Apple was pricing specific products differently in international markets. It was prompted by some apparently anomalous pricing of the iPhone 4S in Brazil.

To summarize, the idea is to calculate the "expected" price of an Apple product by taking the untaxed US price and adding duties and tariffs and taxes to determine what that product "should" cost in another country. Then taking the difference between this "expected" price and the actual price to determine if Apple is using pricing to signal in a particular market.

The analysis basically eliminates the effect of government on price and leaves currency and actual pricing signals from Apple as variables.

The analysis is not simple because there are many obscure tax rules. Some products are taxed differently in the same country. I have not completed the country-level analysis but have been able to see some averages over the countries reported (total of 45 reports.)

The following chart shows the average deviation from "Expected" as a percent:

Here are some potential interpretations of this data:

• The more a product deviates from expectation (e.g. the Apple TV) the more it's likely to be targeted to the US or potentially has advantages of scale in the US
• The less of a deviation (nearer to zero, e.g. iPads) the more the international market is interesting to Apple. They are essentially signaling that those products are targeted at wide distribution.

If we take this train of thought it takes us to these conclusions:

1. The Apple TV is being "subsidized" in the US. The price is so low there probably because it is benefiting from content sales. This is a compelling argument and it might suggest a strategy for Apple TV closer to that of Amazon's Kindle than to any of the telecom or computing products Apple sells. This may have significant implications in the pricing of any future "TV" product from Apple.
2. The iPhone 3GS seems to be a US-targeted product. Anecdotal  evidence shows that the product is not particularly strong selling in international markets. Apple is seemingly not trying to stoke demand with discounting.
3. The iPhone as a brand is not tuned to compete on price globally. Indeed, the iPhone 4S is the most "overpriced" product and seems to be premium priced vs. iPhone 4. The iPod touch is also something of a prima donna when it comes to pricing.
4. In contrast to the iPhone, the iPad is being positioned through pricing for broad global distribution. This is undoubtedly due to their unlocked nature but there might be some other penetration tactics at play here.
5. Macs in general are not priced aggressively internationally. However the Air does seem to be positioned for volume growth (while the mini is not.)

Admittedly, these are quite aggressive conclusions given the limited data. What gives me some confidence in these conclusions is additional circumstantial data. The demand for some products is clearly higher outside the US than others. I believe and this data seems to support the notion that the overall strategy for the iPhone, iPad, Mac and iPod is being tuned for the international markets with some precision.

Guessing the next Apple product has become the parlor game of choice for a whole generation of technology journalists and analysts. The premise of the game is that given a track record of breakthrough products, there is always another one just around the corner. Being the one to predict this next breakthrough product creates credibility and demonstrates the domain knowledge of the predictor. If the prediction fails to materialize there is consolation in dismissing the actual announced product as disappointing, unsophisticated or, worst of all, uninteresting.

Most often, these guesses are as much a reflection of the analyst as they are an analysis of the company. Too many predictions are designed to impress or demonstrate the imagination or knowledge of the predictor. They typically anticipate a giant leap of functionality, power or market re-structuring. They envision revolution not evolution; a cutting of the Gordian knot not a polishing of ugly rocks.

Yet nearly all of Apple's launches have been sustaining improvements in existing products, technologies or platforms. To name just a few:

• The iPad is an evolution of the iPod touch
• The iPod touch is an evolution of the iPhone
• The iPhone uses OS X and Objective C from the Mac
• OS X came from NeXT
• The app store market model came out of the iTunes store
• The iTunes store came from iTunes which came first to the Mac as a media sync tool for the iPod
• etc.

John Gruber explained the process last spring as it relates to many of Apple's launches. Although the iPhone did introduce a new user input method and experience that takes consumption in a new direction, its building blocks were there for all to see for many years. The iPhone is a natural evolution of the computer with a handy little "Phone" app.

Likewise, the iPod came seemingly out of nowhere but by watching the original launch you see it as part of a "media hub" strategy that envisions the Mac as a personal server. The very products which ended up disrupting the Mac/PC began as extensions of their victims.

You can trace the DNA of almost all of Apple's products to previous products. If Apple did not have these foundations, the slow-motion revolutions would not have happened. Rather than a deliberate big bang, Apple's disruptions are the result of a discovery process. A test, iterate and improve loop. This is why they seem obvious after the launch but also why they seem to be such an anti-climax.

Therefore, the challenge of predicting Apple's next product should be tackled not only through an act of imagination but by carefully projecting the current products and understanding where they can evolve.

So it is that I approach the question of Apple's TV disruption. My working assumption about the next Apple TV is that it already exists. It's none other than the existing Apple TV, improved.

Here are the clues or hints I noted:

• It uses iOS and the hardware from the devices that run it. It originally ran a PC architecture and shared a kernel with Macs.
• It has been integrated with iTunes media stores (with the notable exception of the iTunes app store)
• It has begun to introduce channels other than downloads (ESPN, Wall Street Journal) thus establishing its own distribution for traditional content
• It is a global product, depending only on the Internet protocols and independent of the balkanized cable standards
• Through AirPlay it is integrated with Macs and Apple devices.
• Through display mirroring, iOS devices can use the TV as an external monitor and can even change their own behavior when doing so

This last point is intriguing. I have not seen discussion of this feature, but if using an iPad 2 or iPhone 4S with iOS 5 and an Apple TV with the latest software updates it's possible to have an iOS device become a controller for TV-based game experiences. Developers are already using the API. When using a pinball game with screen mirroring, the device becomes a controller while the action takes place on the big screen. Switching display mirroring off bring the action and control back onto the small screen. There are still problems with lag and the processors are over-taxed on high frame rates, but the APIs are already there for developers. (I could also mention the potential of new a Bluetooth standard for better wireless response).

What these signals point to is Apple defining the TV as an iOS portfolio product. This means integration with iTunes, including an app store. This, in turn, means unleashing developer/creative talent through new monetization opportunities. This means new user experiences in discovery. This means FaceTime-like communication through the TV. This means many other things but mostly it means that the TV will be a platform product.

The only challenge is a (currently lacking) smooth interface. Perhaps that's where voice comes into the picture. But whether that is built-in at the next rev of the product or not is not the story. The story is going to be the sustaining improvement in the original Apple TV. A wonderfully asymmetric product begging to be ignored. A product that because of its apparent lack of success, effectively hides all its secrets in plain sight.

(Note this is not the Critical Path, but a guest appearance on the sister show Mac Power Users.)

Episode #65 • December 5, 2011

Katie and David are joined by Asymco publisher Horace Dediu, who talks about how he researches and publishes his analysis of the mobile marketspace and his thoughts on the future of presentation tools.

via 5by5 | Mac Power Users #65: Workflows with Horace Dediu.

I began thinking carefully about Apple in 2005 when the stock was priced at around $55/share. I remember that the events which made me consider Apple in a different light were the launch of the iPod shuffle and the launch of the Mac mini. Both moves signaled to me that the company was serious about competing with non-consumption. At that point I thought that the company was a potential opportunity as an investment.

But I also remember that many people at the time thought that the stock price was too expensive. At $50, the company was much more expensive than the year before. The stock started 2004 at about $11/share. The reason it had climbed so much was that the iPod began to be a real world-wide growth phenomenon. Buying Apple was buying into the iPod and many said the price was unsustainable given such a strong dependency on fickle consumer tastes. It was a much riskier proposition than that of competitors like Dell and HP which made product for reliable buyers like enterprises.

Indeed, by 2006, the shine was off. In the first half of 2006 the stock collapsed from $85 a share to $50, a fall of 40%. It was becoming clear that with mobile phones taking on more music playing features, the iPod was not going to be a big story for long. What's more, Apple had just announced that they were switching to Intel for the Mac product line. Investors saw just how vulnerable the company still was and considered that the Mac brand was in jeopardy as it transitioned to becoming a Windows-friendly machine.

However, in 2007 the company's value recovered with the introduction of the iPhone. Suddenly there was a new product to drive sales. Nobody knew by how much or how but there was a sense that the iPhone was enough to keep Apple from oblivion.

Yet, again, in early 2008 the company lost 40% of its valuation. In a rather inexplicable period following the launch of the MacBook Air, the company's shares went into free fall. Inexplicable because the company continued to deliver solid growth with 2008 calendar quarters showing between 32% and 155% EPS growth.

Then the recession came. It caused another 40% share price collapse. Growth slowed to a range of 11% to 61% during 2009. As the marco "headwinds" blew over, by the end of 2009, with the help of a lukewarm response to the iPad, the company's value recovered to its 2007 level. In the mean-time its earnings more than doubled.

It may not appear to be the case, but throughout this volatile period, the investment thesis remained fairly constant: Apple is a rather small collection of product bets. Owning Apple meant riding the iPod or the iPhone or the iPad as waves of growth. As soon as one growth wave was seen to start to fade, investors would say the same thing: Apple is done.

The chart below shows just what that looks like in terms of product contribution to gross margin.

The investment thesis is the same today. I've had dozens of conversations with fund managers and if anything, it's even more about betting on products. The iPhone and the iPad make up such a large part of profits that the company seems to be nothing but those two things. So if there is any hint that those products might slow down, the stock is sold off.

What intrigues me about this investment thesis is not whether the signals of growth are interpreted correctly or not, but rather that an investor in Apple in 2006 was considered perfectly rational valuing Apple as an iPod company as much as an investor today is perfectly rational valuing Apple as an iPhone company. Why would anyone buy Apple for any other reason? There is no evidence that Apple can be anything more. Any fund manager positing a different point of view would surely be limiting her credibility.

The consensus is that the value of future, unknown products is zero. Not only that but the probability that there will be any products at all is equally zero. Not only that but whatever Apple does to create new products is not perceptibly valuable. The company is simply the sum-of-the-product-parts and nothing more. Cash flows from current products can easily be shown to be more than the current valuation so even these products are deeply discounted. If and when a new product shows up, it will be considered and maybe if it shows promise, the stock will reflect that, briefly.

A corollary to this investment thesis therefore is that the process of product development at Apple is worth nothing. It does not matter if the company has shown an ability to disrupt and to create new categories. The past is not a predictor. The value of the company is a discounted cash flow of current products--discounted for the odds of commoditization, which are seen to be quite high. A new hit product is a windfall, a winning lottery ticket. Something that you cannot count on.

Think about that in a different context. That's like valuing Pixar on the box office revenues of its current movie. If Cars 2 is not beating records, Pixar is suddenly nearly worthless. The fact that Pixar repeatably creates blockbusters would be seen as meaningless. The way they built a reliable pipeline with predictable cost structures for movie-making is not interesting.

However, the fact is that Pixar did not get acquired on the basis of the last hit it made. It was acquired for its system of production. This can be confirmed not only by the price paid but by the fact that the organization was not folded into the Disney machine. It stands alone and is given autonomy. So at least in the movie making industry, predictability is seen as valuable.

So why is Apple not valued as a process company?

I think the answer lies in the lack of understanding or belief in a theory that predictable success in product development is possible. Until and unless an explanation is available that persuades a majority that Apple is as much a hit factory as Pixar then Apple without the products will intrinsically be valued at zero.

The premise of the stock market today is therefore that being innovative in technology is meaningless. Innovations are valuable but there is no such thing as an innovation process. If there was such a thing then we could measure it and put a number of its value. Until then innovation is nothing more than a spin of the roulette wheel.

Last quarter the iPad had unit growth of 166% with revenue growth of 146%. The iPad is selling more than twice the (also rapidly growing) Mac. The two product lines are shown below:

A big reason the Mac is still growing is that it now consists of 74% portables and the MacBook Air and Pro products are still largely unmatched and have a near monopoly in their target price.

The Mac's average selling price has remained remarkably steady for three years.

But more importantly the iPad and the Mac both outgrew the PC market. Taken as OS X vs. Windows, the growth rates were 27.7% vs. 2.5%. If iOS is included along OS X, Apple grew its "computer" shipments at a rate of 99%.

The following chart illustrates the growth rates for Windows, Mac and Apple as a combined OS X/iOS.

The Windows platform still ran on 82% of PCs sold in the quarter with iOS taking second with 10.5%, OS X third with 4.7% and Android at about 3%.

Even though Mac OS X grew faster than the overall PC market for 20+ quarters, its market share is still below 5%--lower than what the iPhone has been able to obtain in the far larger mobile phone market.

That share has grown from 3.2% in the same quarter of 2008 but it's still a very slowly changing landscape.

However, if we include the iPad, Apple begins to not only grow very rapidly, it moves up sharply in terms of ranking among PC vendors.

Last quarter's 16 million OS X and iOS tablets brought it into second place behind the 16.6 million PCs that HP sold. That was enough to give Apple 15% share vs. 15.7% for HP. Over the last three years Apple has gained nearly 12 points of percentage of share.

The other vendors mostly lost share but the most affected were the smaller OEMs. HP lost 2.6 points, Acer 3.9 and Dell 3.4. However "Other" lost 10.5 points. Lenovo is the only major vendor to gain share (+4.48 points).

What's interesting about this pattern is that whereas in the phone business "others" is a rapidly growing group of companies, in PCs the smaller vendors seem to be suffering. They still make up about 30% of the market but that's down from about 40% three years ago.

In contrast, "Other" went from 15% to 24% of the phone market in the same time frame. Part of the explanation is that the entry of the iPad took the wind out of the "low end" netbooks and other cheap PCs. Consumers migrated low-end usage to a product re-built around those jobs.

In the mobile phone market, the disruption is in the opposite direction: communication is moving rapidly up-market from real-time voice to latent messaging and from storage consumption to broadband consumption. The companies being rewarded today in the phone business are those who are leading the charge to new markets.

In other words, on the PC, we are witnessing low-end disruption. On the mobile phone we are witnessing new market disruption. The irony is that the low end PC and the high-end mobile are very nearly the same thing but the industries, channels and incumbent business models are very different.

I've been providing analysis of Apple's operating and financial performance for some time. Recently we've begun to look at comparisons of financial performance for comparable companies. Now it's time to dig deeper and do comparisons of operating performance as well.

To start, Microsoft.

Whereas Apple has product lines (iPhone, iPad, iPod, Mac, iTunes, Peripherals and Software), Microsoft has business divisions (Windows & Windows Live, Server and Tools, Online Services, Business (Office), Entertainment and Devices). The charts show revenues for both Apple and Microsoft according to these defined segments.

 

The second chart should be a familiar one:

Note that the horizontal and vertical axes are the same. The period of coverage is from mid-2007 to the end of June 2011 which corresponds to the life of the iPhone. The vertical axis ranges up to $30 billion/quarter in both charts.

When shown this way, the exceptional growth for Apple becomes easier to understand (and perhaps Apple's valuation premium of 15.7 P/E vs. Microsoft's 9.5). Microsoft has been growing these past four years but not nearly at the rate of Apple. Microsoft grew quarterly revenues from the ~$15b range to ~$17b range.

Additional points of interest:

• The Mac business generates more Revenue than Windows
• iOS powered devices generate more revenue than all of Microsoft's products put together
• Apple's revenues grew 413% since Q2 2007 while Microsoft's grew 26%
• The release of Windows 7 had a marked effect on revenues in the launch quarter but the sales did not seem to grow above the previous version's run rate ($4.2b/quarter vs. $4.7b/q on average).

But most importantly, whereas Apple's growth has come from new businesses (iPhone and iPad), Microsoft has organically grown existing businesses. The condemnation of leadership at Microsoft should hinge on the absence of significant top line growth. Note that neither the Online Services nor the Entertainment and Devices divisions had appreciable net growth.

 

On October 4th, Tim Cook will take the stage at Apple’s fall event. With Steve Jobs’ transition to head the Board of Directors of Apple and after serving as CEO for fourteen years, it is time to take a look at his reign.

Looking at his performance vs. peer companies from a capital market performance, I have composed the following two charts:

Market capitalization of selected peer companies by calendar quarter in USD million sorted by most recent market capitalization (1997-2011)

Market capitalization as share of combined market capitalization by calendar quarter sorted by most recent market capitalization (1997-2011)

You will note that I included more companies than in previous analysis. The new additions are:

• Compaq (acquired by HP in 2002)
• Palm (acquired by HP in 2010)
• Amazon (a popular request by readers)

I divided this era into three distinct periods:

Restructuring of Apple 1997-2000

In the beginning of 1997, Apple’s market capitalization was lower than almost all of its peers. In absolute terms the market capitalization moved only slightly upwards towards 1999 and the dent in 2000 is significantly lower compared to the market capitalization increase of other companies, first and foremost Microsoft's. Especially in the early part of this period restructuring and streamlining efforts took precedence. The introduction of iMac in 1998 and the iBook in 1999 set the tone in terms of design, quality and "thinking different" for many years to come.

iTunes era 2001-2006

With a stable core business and healthy profitability, Apple introduced the first iPod in October 2001 complementing the earlier introduced iTunes music player. Two years later, Apple introduced the iTunes Store offering downloadable music for the Mac and Windows operating systems. The venturing into the music and portable music player business and the halo effect for the Mac business is reflected in the market capitalization increasing significantly during the following years surpassing HP and Nokia.

Mobile iOS devices 2007-2011

Market capitalization further increased with the entry into the smart-phone market in 2007. Note that market capitalization of all selected companies combined at that time was as high as in the dot.com era of 2000. But this time Apple accounted for more than 10% of it. From 2008 to 2009 market capitalization of all companies declined severely due to the financial crisis. Rapid recovery followed during 2009 and early 2010. Apple introduced the iPad in March 2010 further fueling its rise to the top, surpassing Microsoft’s capitalization and topping Exxon Mobil as the world's most valuable listed company.

During the time of Steve Jobs as CEO, Apple's market capitalization increased on average by 42% every year--an unprecedented track record. According to his own admission, Steve Jobs became CEO when Apple was 90 days away from bankruptcy. He resigned 14 years later after leading Apple to becoming the most valuable listed company in the world. From a value creation point of view, it's hard to think of a better performance from anyone, ever.