Apple's move on Wednesday (Aug. 19) to become the first public company in history to capture a $2 trillion valuation marks the latest chapter in a long turnaround for a company that almost went under in 1997.
Apple stock rose as high as $468.65 intraday on Wednesday, pushing the company's market capitalization above $2 trillion — almost double where it was just two years ago. Although shares later pulled back below the $467.77 level required to give the company a $2 trillion value, the company has certainly come a long way over the past 23 years.
Back then, Apple was forced to cut about a third of its workforce and was just 90 days away from being forced to declare bankruptcy. “It was on the rocks,” late Co-founder Steve Jobs later told The New York Times. “It was much worse than I thought.”
Here’s how the company went from near-bankruptcy to become the most valuable business in history:
Jobs co-founded Apple in 1976, left in 1985 after scuffling with the company CEO and returned to take the helm in 1997 when Apple acquired his second company NeXT.
Once he reclaimed the helm, Apple slashed 70 percent of its product plans, launching the “Think Different” ad campaign and executing the very bold vision of its new/old leader.
The first big hit of the Jobs 2.0 term was the iMac G3, a sleek, all-in-one desktop computer that won people over with its first bright-blue design. (Its later iterations came in candy-colored hues.) Particularly popular with college students and younger consumers, it made Apple “cool” again as of 1998.
Next up was the iPod, which wasn’t the first MP3 audio player on the market, but was widely hailed as the first good one. It could hold a lot of music and smoothly and seamlessly play it back.
And the iPod kept advancing. Subsequent upgrades could hold more and more songs, play back video content and eventually surf the web.
The addition of Apple iTunes in 2003 cemented the iPod’s place as the standard MP3 player, which drew a host of new users into the Apple ecosystem during the early 2000s. Apple opened the iTunes Music Store with 200,000 songs alongside its third-generation iPod. In the first week, iTunes Store customers bought more than one million songs.
The iPhone Era
But Apple’s biggest and most epoch-making hit to date came with the 2007 introduction of the iPhone, which more or less kicked off the global mobile era. Apple then paired the iPhone with the first version of the Apple App Store in July 2010.
Subsequent releases of the iPad (2010), Apple Pay (2014) and the Apple Watch (2015) stimulated consumer and investment interest in tablets, mobile payments and wearables, respectively. But none of those devices has gotten close to setting off the kind of seismic shift that the iPhone and the App Store did.
But Apple has changed its focus in recent years away from being the world’s foremost inventor of new gadgets and into the construction of a more fully realized Apple ecosystem. That has hinged largely on the meteoric expansion of its services offerings — Apple Pay, Apple Music, AppleCare — into what is today a multibillion-dollar annual business. Services made up only 6.5 percent of Apple’s revenue in 2012’s first quarter, but more than tripled to 22 percent as of 2020’s third quarter, according to Statista.
“We had strong performance in our digital services with all-time revenue records in the App Store, Apple Music, video and cloud services as well as elevated engagement on iMessage, Siri and FaceTime,” current Apple CEO Tim Cook said in the company’s latest earnings call. “Based on these results and our performance over the last four quarters, we are proud to announce that we have achieved our goal of doubling our fiscal 2016 services revenue six months ahead of schedule.”
Apple Watch, meanwhile, has made increasingly large entrances into the healthcare field. It’s viewed as not just an accessory, but an increasingly vital piece of health tech. For example, Apple started the year with a massive study with Janssen Pharmaceuticals to determine if Apple’s Watch Series 4 could be leveraged to diagnose and treat atrial fibrillation.
Where Apple Encountered Some Good Luck
Of course, timing is everything. For all of Apple’s brilliant innovations over the past 25 years, the company has also managed to enjoy some very good timing.
For example, when Apple was hanging on by a thread in 1997, Microsoft was suffering the opposite problem of being too successful. At the time, it was embroiled in a brutal antitrust lawsuit with the U.S. government.
Steve Jobs persuaded Microsoft chief Bill Gates that it was a historically bad time for Microsoft’s main competitor to go bankrupt, and Gates bought $150 million of non-voting shares in Apple. Before Apple could get back to greatness, it needed a major cash infusion — one it wouldn’t have likely gotten had Microsoft not been eager to prove that it really loved its competitors.
Gates also offered Apple free access to Microsoft Office, which at the time was the primary software system that computer users demanded.
Apple was also a major beneficiary of the advance of mobile networking technology between the years 2000 and 1010. The nation’s first 3G network first started construction in January 2002 and covered the majority of the country by the iPhone’s launch in 2007.
Moreover, the 4G network was under construction as of 2010, making most of the innovations that people use their smartphones for today possible. Want to use Facebook or Twitter on a smartphone? That’s a fairly data-hungry activity, and without 4G, it would be an incredibly slow process to post a photo or retweet a witty bon mot.
What the Future Holds
Since 2020 has been a year full of all kinds of surprises, hard predictions on Apple's future (or much of anything else) are something of a sucker’s game.
Where does Apple go from here — and how long will it take to get to $3 trillion? Depends on what the next entry in the hit parade is.
(This article has been updated to reflect Apple's rally above $2 trillion.)