January 6, 1998: After taking over a company on the verge of bankruptcy, Steve Jobs shocks attendees of San Francisco’s MacWorld Expo by revealing that Apple is profitable again.
Referring to Apple’s strategy since Jobs took over as interim CEO, the recently-returned co-founder says that, “It’s all come together for us.”
Little did most of us know exactly how massive Apple’s comeback trail was set to be…
The long road back to the top
Today, when Apple’s got more money in the bank than some small countries, it’s pretty hard to remember a time when profitability was an issue. It most certainly was in the late 1990s, however, when rival Microsoft was still climbing to its 1999 valuation peak, while Apple was suffering the effects of disappointing product launches and poor management decisions during the preceding decade.
Steve Jobs was no stranger to losses. While Pixar’s 1995 IPO had turned him into a billionaire, the hardware division of his NeXT computer company proved disappointing from a financial perspective. Soon after returning to Apple and taking the iCEO position, 1997 had also seen Jobs announce a massive money-losing quarter for Apple, as Apple lost $161 million in just three months.
There were a few things which helped spark the late 1997 turnaround that Jobs addressed at the January 1998 MacWorld.
Part of it was Jobs aggressive cost-cutting, which shed both failing products, R&D spend, and a number of staff. Another part was the success of new products like the beige Power Macintosh G3 computer, which performed very well with customers — selling 130,000 units against a forecast of 80,000. (For more about the Power Mac G3’s history and its later 1999 upgrade, check out yesterday’s installment of “Today in Apple history.“)
Then there was the continued success of Mac OS 8, which at the time had the most successful sales performance for an Apple software product in history. In addition, there was the adoption of “built-to-order” Macs and increased business through Apple’s website, both of which took a page out of Dell’s mega successful playbook and saw Apple embrace the internet in a way that it never had before.
On the back of Jobs’ MacWorld announcement that Apple expected to report net profits exceeding $45 million on revenues of about $1.575 billion in the quarter ending December 31, Apple stock rose almost 20 percent to $19 a share. Analysts had been predicting that the company would lose money.
But don’t feel too bad…
Don’t beat yourself up about not investing all your savings in Apple in early 1998, though. Despite the positive news, the company was still looked on as a troubled company.
“It doesn’t change the dismal long-term picture because the company is continuing to shrink. Without recovering market share it won’t have a turnaround,” Kurt King, a technology analyst at NationsBank Montgomery Securities said at the time.
Apple was still losing market share from its 13.7 percent in 1991 to just 4.4 percent in late 1997.
Jobs was keen to point out that Apple was trying to tighten its belt, while focusing on great new products. He made no announcement at the time, however, but the most important of these was the colorful iMac G3, which solidified Apple’s financial and critical turnaround later in 1998. Other products like the first iBook were also in development.
“We’ll be burning the midnight oil … and will be working to deliver a result that will make you proud of us again,” Jobs said, concerning Apple’s future.
Why on earth did anyone doubt him?