Today in Apple history: Apple is back in the black

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The turnaround begins...
Photo: Ste Smith/Cult of Mac/401Calculator

January 6: Today in Apple history: Apple is back in the black January 6, 1998: After taking over a company on the verge of bankruptcy, Steve Jobs shocks attendees at San Francisco’s Macworld Expo by revealing that Apple is profitable again.

Referring to Apple’s strategy since he took over as interim CEO, the recently returned Apple co-founder says, “It’s all come together for us.”

Little did most of us know exactly how massive Apple’s comeback trail was set to be.

Apple’s 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. Rival Microsoft was still climbing to its 1999 valuation peak, while Apple was suffering the effects of the preceding decade’s disappointing product launches and poor management decisions.

Jobs was no stranger to losses. While Pixar’s 1995 IPO 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, Jobs reported a massive money-losing quarter for Apple in 1997. The company lost $161 million in just three months.

Apple’s return to profitability

A few things helped spark the late-1997 turnaround that Jobs addressed at the January 1998 MacWorld.

First was Jobs’ aggressive cost-cutting, which slashed failing products, R&D spending and a number of Apple staffers. Second 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 delivered the most successful sales performance of any Apple software product in history. In addition, Cupertino benefited from the adoption of “built-to-order” Macs and increasing business through Apple’s website. For both of those successes, Jobs took a page out of Dell’s mega-successful playbook as Apple embraced the internet like never 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 continued to lose market share, shrinking from 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 mention of it at the time, but the most important of these new products 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 of Apple’s future.

Why on earth did anyone doubt him?