In 1996, Paul explored the rivalry between Apple and Microsoft. Today, on Apple’s 40th birthday, we share it with you again.
Twenty years ago, Apple was rotting. Its stock price hovered around $1 per share (adjusted for stock split and dividends). On Jan. 18, 1996, the day my story ran on “The NewsHour with Jim Lehrer,” The New York Times reported:
Apple Computer Inc., reporting a loss for its first fiscal quarter, said today that it would lay off about 1,300 employees as part of a restructuring.
But Apple gave computer industry analysts and investors little indication of how it would alter its business to regain profitability. Indeed, the company now expects a second-quarter operating loss.
Watch NewsHour’s 1985 report on Apple as the computer company was struggling. In particular, watch then-president John Sculley as he makes a pretty foolish (we know now) prediction: “I believe there is no such thing as a home computer market.”
The reason for the rot? As our story explained, Microsoft had a head start. That meant personal computer users became accustomed to its interface, its quirks. And once they started down the Microsoft path, they became dependent on Microsoft; in terms of time, know-how, and frustration, it was expensive to quit.
Moreover, Microsoft’s business strategy was to make its PC software available to developers so they could create games and other applications for Microsoft-run computers. Apple’s “operating system” was, by contrast, proprietary, and closed. Given more software options, more customers trod the Microsoft path and became ever more “path dependent.”
But as our story explained, two big changes were in the works.
One: Apple was finally opening up its operating system to outside software developers.
Two: The Internet was taking off, a technology utterly independent of the operating systems at the end of the line.
Plenty of other things happened too, Steve Jobs’ return to Apple a year later among them. And the irony is — if irony’s the right word here — that it is now Apple that trades on the path dependency of its millions and millions of users. I buy the next generation Mac or iPhone because I became so used to the last ones. The out-of-pocket price is higher but hey, it would be more expensive — in terms of time, know-how, and frustration — for me to switch. And, as today’s Apple stock price of $109 a share suggests, I am not alone.
P.S.: When I sent this post to our webmeister, Kristen Doerer, here’s how she responded: Thanks Paul! And so true. That’s why I’m about to buy a MacBook Air instead of a cheaper lightweight PC … they’ve got me.