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Apple – a risky business in the 1970s

Everyone remembers that the company originally known as Apple Computer began in a garage. But it took some efforts to get the company out of the garage – efforts that were primarily undertaken by Mike Markkula. Markkula donated a document to the Computer History Museum – a previously confidential document (PDF)” that was used to solicit additional investors into the company.

By the time the document was issued, Apple had achieved revenues of nearly a million dollars, and projected revenues of $13 million in the coming year. These would be achieved by targeting a market known as the “Personal Computer Market,” a market that Apple Computer anticipated would grow rapidly.

However, although the Steves might not have realized this, Markkula was well aware that any investment solicitation had to state the risks to the potential investors. If an investor were misled, the company could face significant legal issues.

Therefore, the document listed the following risks:

Operating History: Apple Computer Inc. is a new company which has not established a long history of operation upon which to base opinions of accuracy of forecasts, financial projections or operations efficiency.

Manufacturing: Apple has experienced extreme difficulty in obtaining its custom injection molded cases. There is no assurance that this problem will be solved through establishing additional sources of supply.

Cash Flow vs Rapid Growth: Apple management expects that rapid growth and potential market fluctuations may present severe cash flow management difficulties.

Management: Apple Computers’ Management team is young and relatively in-experienced in the high volume consumer electronics business.

Now in hindsight one can say that this was just an example of business people (and perhaps lawyers) being overly cautious. After all, Apple was making insanely great products, and would continue to do so. And who in 1978 could have anticipated that electronics companies would be able to take advantage of the labor force and technical skills available in Communist China?

But before you dismiss the risk factors, think of all the computer companies from the 1970s who are not around today. With the exception of Microsoft, pretty much all of those companies are gone, since they succumbed to their own risk factors. If you look through the computer history of the late 1970s, you see names such as MITS, Tandem, Commodore, and Digital Equipment Corporation – long since gone via merger, sale, or dissolution.

Why did Apple and Microsoft succeed when MITS and Commodore didn’t?

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