Apple has an "i" for revolutionary technology. Since its release, the company's iPhone has spurred a revolution in cell phones and mobile computing. It also continues to innovate its core Mac desktop and laptop computers, all of which feature its OS X operating system, including the iMac all-in-one desktop for the consumer and education markets, the MacBook Air ultra-portable laptop, and the high-end Mac Pro and MacBook Pro for consumers and professionals. Apple scored a runaway hit with its digital music players (iPod) and online music store (iTunes). Its iPad tablet computer has become another game-changer in the consumer market. Apple gets nearly 40% of sales from customers in the US.
The iPad fills a market niche between notebook computers, e-book readers, and smartphones. With its slightly larger touchscreen display, the tablet has a number of functions, such as playing games, music, movies, and videos; accessing the Web; keeping up with e-mail; and serving as an e-reader for books and periodicals. The company also unveiled iBookstore, used to buy and store e-books.
Apple created another revenue stream through the App Store, which the company tightly controls. In another effort to boost brand awareness and its appeal among consumers, the company operates some 245 Apple retail stores in the US and 112 stores in other countries.
The company recently released its iCloud offering, a set of free cloud services used to automatically and wirelessly store content and push it to multiple iOS (Apple's mobile operating system) devices, as well as Mac and Windows-based computers. iCloud enables simplified convergence among the many Apple devices, encouraging consumer loyalty to the brand. Among one of its benefits is that calendars, contacts, and e-mail are updated across all devices without the need to separately synchronize the data.
Apple's FileMaker subsidiary provides database software. Apple also offers application software that includes iWork (productivity suite), Garage Band (consumer music creation), Final Cut (video film and editing), and Logic Studio (high-end audio recording and production), among others.
After emerging from the global recession with increased sales and profits in fiscal 2010, Apple continued to shine with overall sales that increased by two-thirds in 2011 and net income nearly double that of the prior period. Double-digit growth continues to be the norm for most of Apple's product lines. Sales of the iPhone and related products were up by 87% for the year, down slightly from 90% increases recorded in the prior two years. The main driver behind the company's sales growth in 2011, however, was the iPad; its sales rose more than 300% in 2011 to become Apple's third largest product line. Only the iPod saw sales decline for the year (by 10%), though it still managed to bring in a sales per unit increase as the product mix shifted toward the higher-margin iPod touch.
It was in 2010 that Apple first saw sales of the iPhone overtake personal computers as its largest product line; in 2011 iPhones and related products accounted for 43% of revenues. In 2011, sales of the iPod and other music-related products and services accounted for 13% of sales, a decrease of 7% over the prior year. The iTunes Store, App Store, iBookstore, and an expanding amount of third-party audio and video content available for sale and rent through iTunes contributed growth of 33% in 2011 over the prior year.
Apple provides regular updates to its iPad, iPhone, and iPod products, generating excitement and buzz with additional features, faster speeds, and (sometimes) lower price tags. In 2012 it launched both the iPhone 5 (larger display, improved camera, longer-lasting battery) and the third-generation iPad (Retina display, quad-core graphics processor, 5 megapixel camera). A 2011 release of the iPhone 4 finally addressed the complaint that it was only available for use with AT&T - that year it became available on the Verizon Wireless network, substantially increasing its reach across the US.
Always a secretive company about its product designs, Apple has brought some chip design expertise in-house to reduce its dependence on outside semiconductor suppliers. Its 2010 purchase of Intrinsity, a provider of chip design software, was intended to support this strategy. The company still relies on silicon foundries (contract semiconductor manufacturers) for the physical fabrication of its chips, but the moves mean fewer outsiders will be involved in future designs of the iPad, the iPhone, and other mobile devices. Apple outsources production of hardware products to a few partners, primarily Hon Hai Precision Industry and Quanta Computer.
In August 2012 Apple won a patent infringement suit against Samsung Electronics in an ongoing battle between the two companies. The $1 billion verdict (Apple originally sought $2.75 billion in damages) found that Samsung violated a number of Apple patents related to elements such as the "bounce back" effect and physical design of the iPhone. While the case could eventually have far-flung consequences in the North American smartphone market, particularly for phones that use the Android operating system, the verdict is complicated by the fact that a South Korean court decided the same week that both companies had infringed on each others' patents, handing out bans and fines to both sides. Samsung, which continues to make some components for Apple's iPhone and iPad products, has vowed to appeal the verdict.
Also that year the US Department of Justice filed an antitrust lawsuit against Apple and five publishers. HarperCollins, Hachette, and Simon & Schuster opted to settle rather than bear the cost of a drawn-out legal battle. Apple and two other publishers -- Macmillan and Penguin -- refused to settle and are preparing to take on the government in court. At issue is a change to the pricing model for e-books, implemented about the time that Apple released the iPad. Under the agreement with Apple, publishers set the price under the agency pricing model, gave Apple a 30% commission, and agreed to give Apple the lowest price provided to any other retailer, the so-called "most-favored nation" clause. E-books had generally been sold under the wholesale pricing model, which allows the book seller to set the price.
Apple's high-profile co-founder and former CEO Steve Jobs died on October 5, 2011. Tim Cook, who handled the company's day-to-day operations as COO during Jobs' leave prior to his death, was named CEO. Jobs left Apple with a stable of innovative products and a revolutionary distribution system for applications that continues to stimulate demand for those products.
Once the world's top PC maker, Apple was relegated to relative niche status in a market dominated by Microsoft Windows-based PCs. The company continues to lead the market in terms of design innovation. The graphical interface and form factor of Apple's computers reflect the aesthetic of Jobs, who had long championed the importance of visually attractive, user-friendly design. The features that distinguish Macs allowed the company to maintain a loyal following willing to pay premium prices and overlook any interoperability issues with Windows (a factor that Apple largely addressed with its OS X operating system). – less