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You are here: MacNN Forums > News > Mac News > This Week in Apple History: March 26 through April 1

This Week in Apple History: March 26 through April 1
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NewsPoster
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Mar 28, 2016, 09:40 AM
 
Not a great deal happened in this week of Apple history, except for the formation of the company and later its single-biggest financial loss ever. So it's the week of the company's birth and of its near death, that's all. As MacNN slices through the history of Apple's four decades one week at a time, this is perhaps the most striking example of its triumphs and disasters. It's also the week you can see the start of successes and troubles to come.

For instance, it's around this week in 1983 that Steve Jobs is finally convincing John Sculley to join Apple. Also, right back at the start of the company in 1976, it's around now that Apple's third founder Ronald Wayne begins to get justifiably twitchy about what's happening with the company's finances.

April Fools' Day

While the date is right at the end of this sliced week of history, everything really began with April 1, 1976. That was the date that Apple was formally established with the filing of partnership papers.



The document, addressed to whom it may concern, begins: "Whereas Mr Stephen G Wozniak (hereinafter referred to as Wozniak), Mr Steven P Jobs (hereinafter referred to as Jobs), and Mr Ronald G Wayne (hereinafter referred to as Wayne), all residents of the County of Santa Clara, State of California, have mutually agreed to the formation of a company to be specifically organized for the manufacture and marketing of computer devices, components and related material, said company to be organized under the fictitious name of Apple Computer Company.)"

While it was a three-way partnership, it wasn't an equal one. Jobs and Wozniak were both listed as having 45 percent of the company –– peculiarly twice spelt out misspelt as "fourty-five" –– and Wayne was to get 10 percent. He was also listed as having "major responsibility for Mechanical Engineering and Documentation" but it's really the latter that he did. At the time, Wayne was a chief draftsman at Atari and continued as that while working on Apple in the evenings.

The most notable work he did during his short time with the company was to create its famous logo –– just not the one you now automatically associate with Apple. Instead, Wayne is responsible for the rather fine line drawing depicting Isaac Newton. It's a gorgeous piece of illustration, if not very practical for reproducing on the side of computers.



Whenever you examine something in hindsight and especially from 40 years later, it's tempting to see connections that may not be there. For instance, Wayne's Newton logo is surely just a demonstration of one man's artistic talent. Yet you might see that and, if you know other logos of the time, conclude that Wayne was older than most of the startup computer geeks getting into the business. He was: at the formation of Apple, Wayne was 41 while Jobs was 21 and Wozniak was 26.

His age is arguably also why he was asked to join the partnership. While reportedly he and Jobs would have philosophical discussions during their time at Atari, he was also more established than the two Steves. It's not as if he were rich, but if you were looking at three people to invest in, you'd be reassured by one of them having a career and steady income.

Good finances

Later on, you'd bet that an experienced Steve Jobs would know the benefit of having someone like Wayne in the company but even in 1976, even as they started, even as the firm was being formed, Jobs would soon be deep into raising cash. He'll be successful very soon –– as early as next week –– but around the time of Apple's formation, Jobs was making the deals that would require some kind of investment.

Specifically, while it's not dated, it's around this time that Steve Jobs demonstrated the 'Apple Computer' (very shortly to be known as the Apple I) to Paul Jay Terrell. He owned what is believed to be the first chain of computer stores, the Byte Shop, and was attending a Homebrew Computer Club meeting. Reportedly he was impressed by the Apple I and told Jobs to keep in touch.

Then while again it's not dated, think of it as undated plus one: the very day after that meeting, Steve Jobs walked barefoot into the Byte Shop in Mountain View, California and said "I'm keeping in touch". It's directly as a result of this that Terrell offers to buy 50 Apple I computers: an enormous first order for any company. For comparison, in the last quarter of 2015, Apple sold 50 iPhones every 5.3 seconds.

Back in 1976, though, 50 was a daunting number. "I was shocked, just complete shocked," Wozniak told Jobs' biographer Walter Isaacson. "I will never forget that moment." There were catches. Terrell wasn't interested in selling kits or motherboards to be assembled, he wanted only completed and fully cased computers.



Paul Jay Terrell in the Byte Shop, circa 1970s. (Photo by NextShark.) Terrell later told NextShark that: "In the early days, Steve Jobs was more arrogant: he had a pretty good-sized ego, so it was tough to get Steve to listen to you. The big thing that I did for him was convince him when he was trying to sell just a circuit board for 35 bucks that he ought to actually assemble and test it and put it all together, then sell it for $500. That was one of the things that he did listen to."

Also, while he does not appear to have set any deadlines, Terrell did specify that he would only pay cash upon delivery. That meant that the new Apple company had to find money to buy components, which it would next week.

Bad finances

Not to get ahead of ourselves, but Jobs would end up getting both a cash loan and a line of credit. He would juggle them both well and ultimately turn the Byte Shop deal into something that would fund Apple's next moves. It's arguably how the company works to this day, albeit now with a lot more financial wriggle room.

It's also arguably the point where Steve Jobs and Bill Gates have most in common. Gates was far better at coding than Jobs who doesn't appear to have ever bothered writing applications, but really he's always been more interested in business and finances. For all that Jobs was clearly razor-sharp focused on products, he was successful in the financial side even back in his earliest days.

You can't say the same for Apple. Flash forward to March 27, 1996 when, with Jobs now long gone, Apple announces the biggest of its many big, big losses. We're now used to Apple having to report its earnings and we're used to Wall Street seemingly ignoring when the company does well. Maybe financial people just have long memories. For on this date, Apple warned that it expected to suffer a loss of $700m in the then-current quarter. That there would be losses wasn't a surprise –– the day before on March 26, 1996, Apple's debt was downgraded to junk-bond status by Moody's Investors Service of New York –– but the sheer scale was startling.

Apple told Wall Street and the press that there were reasons, though. Specifically, it was due to unsold inventory that was having to have its value written off and also to the company's being reorganized. At the time, around 1,300 employees were being laid off under moves by CEO Gil Amelio. He told the press: "I'm confident at this point that I know what the problems are and that they are fixable. We plan to aggressively address these issues and take the necessary corrective actions. We will be able to articulate our plans by early May."

For comparison, the year before this $700 million loss, Apple made a profit of $73 million (on sales of $2.65 billion.) Also for comparison, in today's money that 1997 $700 million loss would be $1.03 billion.

Climbing back

It's astonishing that Apple survived to the end of 1996, let alone became what it is today. You're already certain that it was the return of Steve Jobs that fixed the company but you're wondering if that was in Amelio's mind when he spoke of a plan to be announced in May. We'll keep you in suspense about that but of course you're right about Jobs.

What would happen was that Apple would buy Jobs's NeXT company and thereby get the man too. Skip forward just a little to this week and March 30, 1998 and Jobs was in control in every way bar the name. However, Apple board member Edgar Wallace told another financial establishment, Dow Jones, that: "He is the CEO. Whether we call him interim or not interim is a non-issue with us. We hope he will stay a long time."

Officially Jobs was by then this iCEO and in theory was helping to search for a replacement for the departed Gil Amelio but you can see his control in a news story that broke the next day, March 31, 1998. Planet Computing's Mark Collins revealed that his company had bid to buy Newton technology from Apple.



"We, along with hundreds of thousands in the Newton user community including developers, see a bright future for Newton-based products," he said in a statement. "Apple's decision to discontinue Newton products has left its Newton customers and developers high and dry. If Apple doesn't want to continue Newton, so be it. Just sell it to us and we'll keep it going."

It's not clear whether Apple ever even responded but then it's also not clear whether Power Computing survives in any form today.

-William Gallagher (@WGallagher)
( Last edited by NewsPoster; Mar 29, 2016 at 01:49 AM. )
     
ibook_steve
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Mar 28, 2016, 02:03 PM
 
"Planet Computing"? And I'm guessing the date is wrong too: March 31, 1998, not 1988.
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