Apple began 2009 under heavy clouds, with what looked like a massive thunderstorm potentially on the way-its iconic CEO, Steve Jobs, announced that he would be stepping down temporarily in order to deal with an undisclosed medical condition. Outsiders immediately began to question how the company would fare without Jobs at the helm.
As it turned out, Apple’s corporate structure and product pipeline allowed it to post strong profits and dominate media attention throughout 2009, despite the global recession’s drag on the economy. But nobody knew what exactly would happen when Jobs released a note about his health to the public at the beginning of January.
“I’ve decided to share something very personal with the Apple community,” Jobs wrote in a letter addressed to the “Apple Community” on Jan. 5. “As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors.”
The weight loss, Jobs then claimed, was due to “a hormone imbalance that has been ‘robbing’ me of the proteins my body needs to be healthy.” A few days later, on Jan. 14, he followed it up with another e-mail saying those health issues “were more complex than I originally thought” and he would be taking six months off from Apple.
Then Jobs fell off the public radar, with outside analysts speculating about how well the company would perform in his absence. Apple kept on a steady course throughout March, when it rolled out an updated AirPort Extreme, iMac and Mac Mini, along with a new Mac Pro utilizing an Intel “Nehalem” Xeon processor. On March 18, Apple premiered the iPhone OS 3.0, which offered 100 new features along with an upgraded SDK (software development kit) with more than 1,000 new APIs.
On April 23, Apple announced that the billionth App had been downloaded from the App Store, printing large ads in The New York Times and other media outlets to herald the event. At that point, less than a year after the online storefront’s July 2008 launch, the App Store held about 25,000 mobile applications. According to Apple, the most-downloaded free Apps included Facebook for iPhone and Google Earth, while the paid category was topped by Crash Bandicoot Nitro Kart 3D and Koi Pond.
April also saw a bit of controversy for Apple, after protests erupted online over a 99-cent Baby Shaker application that let users “shake” a virtual baby quiet. In an e-mail sent to eWEEK and other media, an Apple spokesperson termed the application “deeply offensive” and announced that it would be removed from the store.
A more serious controversy erupted in July, when Foxconn, the Chinese manufacturer of the iPhone and iPod, paid compensation to the family of an employee who allegedly committed suicide after an iPhone prototype went missing. The incident caused something of a public relations crisis for Apple, which reiterated that it had audited Foxconn’s labor practices in 2006 and pushed for changes.
Nonetheless, Apple continued to post strong financial results, announcing at the end of April that it had shipped 2.2 million Macs, 11.01 million iPods and 3.7 million iPhones during the preceding quarter, which had seen net profit rise year-over-year from $1.05 billion to $1.21 billion.
Those numbers would be enticing to any company, particularly in a recession-bound economy, and a number of Apple’s competitors began developing smartphones they hoped would siphon off iPhone customers. The most notable of these was Palm, which decided to return from the dustbin of tech history with the Palm Pre.
Heading up the Pre development effort was Jon Rubinstein, who joined Palm after leaving Apple in 2006. Considered integral to the development of many Apple products, including the iMac and the iPod, his involvement led a few analysts to suggest the Pre as a potential “iPhone killer.”
The Pre came with a 3.1-inch multitouch screen, a sliding QWERTY keyboard in addition to a virtual one, Wi-Fi, USB, Bluetooth 2.1, GPS and a built-in 3-megapixel camera. It also ran the Palm WebOS, paired with an online store with mobile applications.
“Palm is the new comeback kid,” Philippe Winthrop, an analyst with Strategy Analytics, said in an interview in February. “There are a lot of roots from the pedigree on Jon Rubinstein and the rest of the people who came from Apple, but everything I’ve seen shows they have their own take on it.”
The Palm Pre posted solid numbers following its June release, selling 370,000 units by the end of that month-but the iPhone 3GS managed to move more than 1 million units during its first three days of release, ensuring that Apple would remain dominant in the consumer smartphone market. Palm continued to irritate Apple throughout the year by continually updating the Pre’s software to sync with iTunes, something that Apple repeatedly tried to thwart with each new iTunes update.
Other companies also tried to make inroads in the consumer smartphone space. In August, Research In Motion released the BlackBerry Curve 8520, designed to straddle the business and consumer worlds. The Curve 8520’s form factor included buttons along the outer rim of the device designed expressly for multimedia, such as “Play/Pause/Mute,” “Next” and “Previous” keys.
However, BlackBerry continued to hold the advantage among business users, despite Apple’s attempts to market itself toward both the enterprise and small and midsize businesses. A survey in April by Complete, for example, found that the iPhone was overwhelmingly used as a consumer device as opposed to a business tool.
Defying the economy, Apple continued to post strong quarterly numbers. In a July 21 earnings call, Apple Chief Financial Officer Peter Oppenheimer described the preceding quarter as the “highest non-holiday” one in the company’s history, with profits of $1.23 billion. Sales of the iPhone were up 626 percent year-over-year.
Steve Jobs and Snow Leopard
Speculation about Steve Jobs and his health continued throughout the spring and early summer, but nobody seemed to have any definitive answers. That was before June 20, when The Wall Street Journal reported that Jobs had undergone a liver transplant in Tennessee at some point during the spring. The actual hospital managed to remain a secret for another few days, until the Methodist University Hospital Transplant Institute released a statement on June 23 acknowledging that Jobs had his liver transplant there.
According to the hospital, Jobs was the patient with “the highest MELD score (Model for End-Stage Liver Disease) of his blood type and, therefore, the sickest patient on the waiting list at the time a donor organ became available.” The MELD score tries to predict a patient’s chances of surviving chronic liver disease, and is the metric used by both the United Network for Organ Sharing and Eurotransplant to determine which patients should receive livers.
That statement seemed tailored to blunt questions, raised by The New York Times and other media outlets, over how Jobs had managed to receive his liver so rapidly despite a general lack of available organs nationwide.
On Sept. 9, a gaunt-looking Jobs made his first public appearance since October 2008, taking the stage during an Apple event in San Francisco to announce new features for the iPod and the iTunes App Store.
“I now have the liver of a kid in his 20s, who died in a car crash and was generous enough to donate [his] organs,” Jobs told the audience at the Yerba Buena Center for the Arts near the Moscone Center. “I wouldn’t be here if not for that generosity. I hope all of us can be that generous, and also become organ donors.”
Late summer also saw Apple preparing to launch “Snow Leopard,” its newest operating system upgrade. Also known as OS X 10.6, Apple retailed the operating system for $29, with a five-license family pack available for $49. Those who purchased new Macs from June 8 through Dec. 26 also had the ability to upgrade to Snow Leopard for $9.95.
Snow Leopard included several under-the-hood improvements over the previous version of the operating system, most notably in how it made use of 64-bit CPUs with 64-bit support for Mail, Finder, iChat and Safari. In a bid to further appeal to enterprise customers, Snow Leopard included support for Microsoft Exchange Server.
During this period, Apple also continued to busily patch Mac OS X 10.5.7 with upgrades to security, patches for applications such as iCal and Mail, and improved functionality with Gmail and Yahoo.
Although Snow Leopard was more of an upgrade than a brand-new operating system, pundits nonetheless saw fit to make its release into an “Apple versus Microsoft” story, given the proximity of Snow Leopard’s late August release to the Oct. 22 launch of Microsoft’s Windows 7 operating system. Analysts saw Snow Leopard’s release date and low price as an attempt to steal some of Microsoft’s thunder, although some suggested that Apple would need to take additional steps if it wanted to increase enterprise adoption of Macs.
Two weeks after Snow Leopard’s Aug. 28 release, The NPD Group’s tracking service estimated that Snow Leopard was outselling the original Leopard by a 2-to-1 margin, and outselling Tiger by 4-to-1. Piper Jaffray analyst Gene Munster forecast that Snow Leopard would sell around 5 million copies of the operating system through the end of September.
Talk of an Apple Tablet
By this point, though, it also seemed as if Apple was attracting as much buzz for its vaporware as its products. Rumors that the company was working on a tablet PC for release sometime in 2010, something that Apple refused to either confirm or deny, caught fire after a report in The Wall Street Journal that Steve Jobs was devoting almost all of his attention to the hypothetical device.
Despite Jobs e-mailing the Journal to say “most of your information is incorrect,” a combination of media reports, blogger suggestions and analyst speculation continued to fuel the rumor fire throughout the late summer and early fall. An Aug. 7 research report by Gene Munster suggested that the tablet would be based off either the iPhone OS or else a modified version of the Mac OS X, sell for somewhere in the $500 to $700 range, and sell 2 million units in its first year of release.
By the end of the year, other analysts had likewise leapt on the Apple tablet bandwagon. Oppenheimer & Co. financial analyst Yair Reiner suggested in a Dec. 8 research note that the device would include a 10.1-inch LTPS-based LCD touch screen and sell for somewhere in the neighborhood of $1,000 dollars. Apple’s patent applications throughout 2009, including one filed in June that described a device with a screen that could be manipulated with a combination of fingers and palms, did nothing to quell the scuttlebutt-but until Apple decides to officially comment, any tablet PC must remain in the realm of vaporware.
In the meantime, the App Store grew to more than 100,000 applications, with Apple claiming more than 2 billion application downloads. With that explosive growth, though, came increased calls from outside to impose a regulatory framework on the online storefront. In December, Apple seemed to be moving in that direction, weeding out some developers accused of posting useless applications and fake positive reviews, and offering an RSS feed devoted to news and announcements for iPhone developers.
On Oct. 19, Apple reported fiscal fourth-quarter results that surpassed Wall Street expectations, with revenue of $9.87 billion and a net quarterly profit of $1.67 billion, although sales of traditional iPods declined about 8 percent year-over-year due to “cannibalization” thanks to iPod Touch and iPhone sales. Mac and iPhone sales remained strong, though, and Apple later announced plans to expand its retail footprint by 40 to 50 stores worldwide in 2010.
Steve Jobs wasn’t present on that earnings call, and nor did he announce the new store openings-but as Apple’s year comes to a close, there’s little doubt that he’s firmly in charge.