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Fortune: "How Big Can Apple Get?"

Fortune: "How Big Can Apple Get?"

by , 4:30 PM EST, February 7th, 2005

Despite the runaway success of the iPod and Apple's continually polished Macs, software is at the core of the company today, CEO Steve Jobs told Fortune in his first extended interview since undergoing surgery for pancreatic cancer last summer. "It's not like Apple has somehow morphed into a mass-market consumer electronics company," Jobs said, speaking about the success of the iPod. "Our DNA hasn't changed. It's that mass-market consumer electronics is turning into Apple."

The 4,200 word story, available online in its entirety to Fortune subscribers or on newstands in the February 21, 2005 issue, spans everything from Jobs' return to Apple in 1997 to the thinking that went into developing iTunes and and overview of Tiger.

Below we present a sampling of the more interesting points from the story:

  • Microsoft's $150 million investment in Apple in 1997 that also came with a 5-year comittment to develop versions of Office and Internet Explorer for the Mac (as well as porting Office to Mac OS X) is now worth "well over $1 billion," based on the recent price shares of Apple have traded at.

  • Jobs was "buying time" with the Microsoft deal and the original iMac to maintain interest in Apple and its perceived viability while software engineers furiously worked to bring Mac OS X to market, which Jobs saw as Apple's biggest bet on the future.

  • Apple assumed the Microsoft deal would inspire other developers to renew their comittments to the Mac, but when Apple solicited Adobe in 1998 to develop consumer-targetted software for working with home video or digital photos, Adobe "said flat-out no," Jobs recalled. That surprise decision, given Adobe's history with the Mac, is what prompted Apple to more agressively pursue the applications space and develop its own software. "We said, 'Okay, if nobody wants to help us, we're just going to have to do this ourselves,'" Jobs said.

  • Apple began its efforts by purchasing a languishing product from Macromedia that turned into Final Cut Pro and iMovie. Since that first project, Apple's Applications Software Division has come to number 1,000 engineers.

  • While Apple wowed the industry with its digital video software, the company almost missed the boat for digital music. "I felt like a dope," Jobs said. "I thought we had missed it. We had to work hard to catch up." Apple began by installing CD-RW drives in all of its computers, buying time once more while the company scrambled to put together iTunes, which was developed and released in just four months.

  • Apple expects to generate $1 billion in revenue this year from selling applications and updates, plus other software-related revenue generated by the iTunes Music Store and the 600,000 member-strong .Mac service. While boosted by Tiger's release, that figure is still almost double 2004's number.

  • "With the iPod and iTunes Music Store, Apple has changed the rules of the game for three industries—PCs, consumer electronics, and music. And as new as its influence is, Apple appears to have nothing to fear from major rivals," Brent Schlender of Fortune wrote. "Its software skills have consumer electronics companies at a major disadvantage that could take years to overcome." Added Nathan Myhrvold, former chief of Microsoft Research: "Once audio and visual experiences become a combined hardware-software-network thing, the consumer electronics guys are fish out of water."

Fortune concludes the story by revisiting Jobs' cancer. According to the chief of surgical oncology at the Stanford University Medical Center, where Jobs was treated, the "cure rate" or "instances in which the cancer is successfully removed, never to return" for the type of procedure Jobs had is between 80% and 90%. "Jobs had part of his pancreas removed in late July, returned to work six weeks later, and has been cancer-free ever since. He says he's feeling better than ever."

Five excerpts from the interview with Jobs can be read here.

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