Case STUDY Apple Computer: A New Life Few companies get a second chance. Apple Computer has fought back from the brink of financial failure several times. Apple Computer was the creation of Steve Jobs and Steve Wosniak. When they introduced the Apple II in 1977, the personal computer moved from being primarily a desktop tool for businesspeople to a computer that individuals could afford and use. I was a one-box com- puter and monitor that was easy to assemble and simple to use. They developed their own easy-to-use and reliable operating system rather than relying on the established Microsoft software used on most com- puters. Since Apple was reluctant to license the operating system to other companies, it never achieved the widespread use of Microsoft Windows. Apple received recognition for continuing innovation with a series of unique products including the Lisa computer, the Newton handheld computer, and the PowerMac G4 Cube. They also refined their oper- ating software resulting in OS X, a faster, more flexible, easy-to-update operating system. However, the company struggled with operations and management issues. Steve Jobs was replaced as the head of Apple in 1985 and left the company. A series of CEOs worked on marketing, new product development, partnerships with other companies, and other strategies, but failed to return the company to its original success. Many business and financial experts predicted that the company would not survive. Jobs was rehired by Apple in 1996 and soon was reinstated as CEO. He recommitted the company to a narrowly focused set of innovative products and concentrated on exploiting the growing popularity of the Internet. In fact, he often used the title ICEO to demonstrate his belief in the importance of the Internet focus. The first new company success was iTunes, a software system that made it easy to download, manage, and listen to music on the computer. That was quickly followed by the iPod, which has become the world's most popular portable media player. Apple opened the online iTunes Music Store, selling individual songs as downloadable music files inexpensively. The company's financial condition has rebounded with a rising stock price, excellent cash flow, and a return to profitability. Additional new product plans including partnerships with companies such as Nike and Disney suggest Apple has been able to reinvent and reestablish itself. Think Critically 1. How could Apple Computer be a leader in innovation yet finan- cially unsuccessful? 2. Use a Web search to identify new product ideas Apple is developing on its own and in partnership with other companies. Do you believe they continue to focus on innovative ideas? 65 Analyze Cases Use the case from the beginning of the chapter, Apple Computer: A New Life, to answer the following questions. 26. If you were an investment business looking for new companies that held a great deal of promise for growth and financial return, what would you have thought about the strengths and weaknesses of Apple Computer in the late 1970s? Do you think Apple Computer provides a more or less risky investment opportunity today than it did in the first few years of its existence? Justify your opinion. 27. If you analyzed current balance sheets of Apple Computer and compared them to the balance sheets of the first few years of its operations, what differences would you expect to see other than a much larger business? 28. One of Apple's unique competitive strengths has been that it has con- centrated on being innovative rather than providing products that are similar to its competitors. Why do you believe that strategy resulted in some of the past financial problems for the company? Why have prod- ucts like iPod and iTunes improved the company's financial health? Portfolio Activity COLLECT an example of a balance sheet and an income statement from a public corporation. Recent financial statements are often available on a company's web site. CREATE a visual to demonstrate how the two financial statements provide important information about the company's financial health. CONNECT your visual to other items already in your class portfolio or re- late it to an important concept you have learned in another class. Make the connection by preparing a one-minute presentation on the importance of being able to understand financial statements. Stock Market Activity As companies plan their strategy for success, various factors must be consid- ered. Setting organizational goals, preparing a budget, and analyzing finan- cial statements are activities involved in business financial planning. Appropriate planning along with successful implementation of these plans will likely have a positive affect on a company's stock price. Select a company that you will research and analyze. Conduct library and web research, and obtain a copy of the company's annual report to 1. Identify recent and current goals of the company. 2. Determine the extent to which these goals have been achieved. 3. Assess how financial performance has affected the company's stock price. 4. Describe potential actions that might be appropriate for future company success. 5. Maintain a record of the company's stock value with the date and clos- ing price. Note any major company, economic, or news developments that may affect stock prices. Case STUDY Apple Computer: A New Life Few companies get a second chance. Apple Computer has fought back from the brink of financial failure several times. Apple Computer was the creation of Steve Jobs and Steve Wosniak. When they introduced the Apple II in 1977, the personal computer moved from being primarily a desktop tool for businesspeople to a computer that individuals could afford and use. I was a one-box com- puter and monitor that was easy to assemble and simple to use. They developed their own easy-to-use and reliable operating system rather than relying on the established Microsoft software used on most com- puters. Since Apple was reluctant to license the operating system to other companies, it never achieved the widespread use of Microsoft Windows. Apple received recognition for continuing innovation with a series of unique products including the Lisa computer, the Newton handheld computer, and the PowerMac G4 Cube. They also refined their oper- ating software resulting in OS X, a faster, more flexible, easy-to-update operating system. However, the company struggled with operations and management issues. Steve Jobs was replaced as the head of Apple in 1985 and left the company. A series of CEOs worked on marketing, new product development, partnerships with other companies, and other strategies, but failed to return the company to its original success. Many business and financial experts predicted that the company would not survive. Jobs was rehired by Apple in 1996 and soon was reinstated as CEO. He recommitted the company to a narrowly focused set of innovative products and concentrated on exploiting the growing popularity of the Internet. In fact, he often used the title ICEO to demonstrate his belief in the importance of the Internet focus. The first new company success was iTunes, a software system that made it easy to download, manage, and listen to music on the computer. That was quickly followed by the iPod, which has become the world's most popular portable media player. Apple opened the online iTunes Music Store, selling individual songs as downloadable music files inexpensively. The company's financial condition has rebounded with a rising stock price, excellent cash flow, and a return to profitability. Additional new product plans including partnerships with companies such as Nike and Disney suggest Apple has been able to reinvent and reestablish itself. Think Critically 1. How could Apple Computer be a leader in innovation yet finan- cially unsuccessful? 2. Use a Web search to identify new product ideas Apple is developing on its own and in partnership with other companies. Do you believe they continue to focus on innovative ideas? 65 Analyze Cases Use the case from the beginning of the chapter, Apple Computer: A New Life, to answer the following questions. 26. If you were an investment business looking for new companies that held a great deal of promise for growth and financial return, what would you have thought about the strengths and weaknesses of Apple Computer in the late 1970s? Do you think Apple Computer provides a more or less risky investment opportunity today than it did in the first few years of its existence? Justify your opinion. 27. If you analyzed current balance sheets of Apple Computer and compared them to the balance sheets of the first few years of its operations, what differences would you expect to see other than a much larger business? 28. One of Apple's unique competitive strengths has been that it has con- centrated on being innovative rather than providing products that are similar to its competitors. Why do you believe that strategy resulted in some of the past financial problems for the company? Why have prod- ucts like iPod and iTunes improved the company's financial health? Portfolio Activity COLLECT an example of a balance sheet and an income statement from a public corporation. Recent financial statements are often available on a company's web site. CREATE a visual to demonstrate how the two financial statements provide important information about the company's financial health. CONNECT your visual to other items already in your class portfolio or re- late it to an important concept you have learned in another class. Make the connection by preparing a one-minute presentation on the importance of being able to understand financial statements. Stock Market Activity As companies plan their strategy for success, various factors must be consid- ered. Setting organizational goals, preparing a budget, and analyzing finan- cial statements are activities involved in business financial planning. Appropriate planning along with successful implementation of these plans will likely have a positive affect on a company's stock price. Select a company that you will research and analyze. Conduct library and web research, and obtain a copy of the company's annual report to 1. Identify recent and current goals of the company. 2. Determine the extent to which these goals have been achieved. 3. Assess how financial performance has affected the company's stock price. 4. Describe potential actions that might be appropriate for future company success. 5. Maintain a record of the company's stock value with the date and clos- ing price. Note any major company, economic, or news developments that may affect stock prices