Apple Incorporated

Apple, the oracular Silicon Valley company that became an icon of personal computing, has risen to its greatest heights in the years since Steven P. Jobs returned to its helm and opened horizons beyond the desktop.

With its coveted gadgets, Apple has cast something of a spell on both consumers and investors. The iPod and the iPhone have been major forces in the music and smartphone industries, respectively.

As measured by the value of its stock, Apple shot past Microsoft, the computer software giant, in May 2010 to become the world's most valuable technology company. The changing of the guard caps one of the most stunning turnarounds in business history for Apple, which had been given up for dead only a decade earlier, and Mr. Jobs. The rapidly rising value attached to Apple by investors also heralded an important cultural shift: consumer tastes have overtaken the needs of business as the leading force shaping technology.

The iPhone 4 became Apple’s most successful phone introduction yet, and with Apple expected to bring the iPhone to Verizon early in 2011 — most likely in an attempt to slow the momentum of Google’s Android software — the sales growth may well accelerate. 

The company's iPad tablet computer — an idea that has flopped before — also drew enormous attention; the device, with a 10-inch multi-touch screen, is intended to fill a gap between laptops and smartphones.

Strong sales of iPads, iPhones and even Mac computers produced record revenue and profit for Apple in the fourth quarter of 2010, highlighting the company’s dominance in consumer electronics. Apple sold 14.1 million iPhones in the quarter, an increase of 91 percent from a year earlier. Consumers bought 4.2 million iPads, and Mac sales totaled 3.9 million, up 27 percent.

Apple’s profit margins are the envy of the consumer electronics industry, but buried among quarterly results that any company would be more than happy to emulate was a decline in gross profit margins. The problem was that the company’s newest products ware not as profitable as its computers and iPod music players. Strong sales of lower-margin products — the iPad among them — caused the decline, according to Apple executives.

Among investors, there is little doubt that Apple’s strategy is the right one. The company’s stock soared nearly 50 percent in 2010, and in October it closed at an all-time high of $318.

But for all its success in the phone business, Apple suddenly has a real fight on its hands. Americans now are buying more Android phones than iPhones, and analysts say that by late 2011, Android will have erased the iPhone’s once enormous lead in the high end of the smartphone market.

A New Role for Apple

As one success follows another, the company finds itself in a bewildering position. As the tech industry's perennial underdog, Apple was frequently scorned and dismissed by larger and more successful competitors like Microsoft or Dell. Now, with growing frequency, the company is seen by competitors and other industry players as a bully.

Companies like Google and Adobe have accused Apple of unfairly using its clout to exclude their technologies from the iPhone and iPad. And some application developers are fretting under Apple's tight control of those devices.

Perhaps the loudest complaints came after Apple barred some third-party programming tools from the iPad, including Adobe's Flash software, which is widely used to create online videos and Web applications.

The decision led to a very public war of words between Adobe and Mr. Jobs. It also prompted the Federal Trade Commission to begin asking questions about the effect of Apple's decision on competition.

Then in June 2010, Apple appeared to make the switch from excluded to excluder in the mobile ad market. New policies for the iPhone 4 bar Google and AdMob from selling ads on the device, resulting in a complaint to the FTC from Google, which was in the unusual position of playing victim.

The FTC inquiry is not the only one concerning potentially anticompetitive behavior by Apple. The Justice Department recently began a preliminary investigation into whether Apple pressured music labels to exclude Amazon.com, its rival in digital music distribution, from certain licensing agreements. And Apple is one of many Silicon Valley companies whose hiring practices are being examined by the department.

The latest inquiry from the commission has raised eyebrows among some antitrust experts, in part because Apple currently controls less than a third of the smartphone market in the United States.

Apple likes to maintain tight control over what programs can appear on the iPhone — a task that became a little bit harder on July 26, 2010, when the Library of Congress, which has the power to define exceptions to an important copyright law, said that it was legal to bypass a phone's controls on what software it will run to get "lawfully obtained" programs to work.

The issue has been a topic of debate between Apple, which says it has the right to control the software on its devices, and technically adept users who want to customize their phones as they see fit.

Apple also said that altering the phones encouraged the pirating of applications, exposed iPhones to security risks and taxed the company's customer support staff. But iPhone hobbyists say they simply want to have free range to use certain features and programs on their phones that Apple has limited or failed to offer.

The Early Years

Founded in 1976 by Mr. Jobs and Steve Wozniak, Apple came of age as one of a wave of firms — including Atari, Radio Shack and Texas Instruments — that were looking for ways to transform the digital computer into a home appliance. Of that first personal computing generation, it is Apple and the charismatic Mr. Jobs that have consistently found a way to touch the zeitgeist. Apple's microprocessor-based consumer products have found expanding consumer markets around the world, beginning with the Apple II computer, widely adopted in education during the 1970s.

In 1979, Mr. Jobs made a legendary visit to Xerox's Palo Alto Research Center, where he saw a prototype personal computer called the Alto. He took away a range of ideas about computer design and graphical user interface and developed two families of computers, the Lisa and the Macintosh. Aiming to make Apple's products "insanely great," Mr. Jobs was convinced that they could change the world.

Although the Lisa failed commercially, the Macintosh succeeded, reshaping the computer industry over the next decade. Its success, however, came at great cost to Mr. Jobs, who was forced out of the company in 1985 by his handpicked chief executive, John Sculley, a recruit from Pepsi.

Apple initially prospered under Mr. Sculley, and the Macintosh briefly reached a market share of more than 15 percent of the personal computer industry, but the company foundered as Microsoft's Windows operating system became the desktop computing standard.

The company began to unravel when Mr. Sculley placed a large bet on the arrival of the hand-held computing market. When Apple's Newton failed commercially, he was forced out in 1993.

In 1997, Apple's current era dawned as Mr. Jobs returned after more than a decade in exile. At the time, many analysts gave him little chance of resurrecting the company, which had largely been written off by the computer industry. Michael S. Dell, who built his own PC empire, was even quoted as suggesting that Apple's smartest move would be to "shut it down and give the money back to the shareholders." Starting with the title of interim chief executive, however, Mr. Jobs systematically rebuilt the company's Macintosh franchise by adding an operating system he had developed at Next Inc.

The Beginning of a Revolution

In 2001, Mr. Jobs introduced the iPod music player, setting the company on its current course as a major force in consumer electronics. The iTunes Music Store, created to enable users to fill the device with audio, has made Apple an important force in the music industry as well. Over 10 billion songs from the store have been downloaded since the site went active in April 2003.

In 2007 Apple introduced the iPhone, a convergence of entertainment, computing and communications that has roiled the cellular phone industry. Its Apple TV set-top box has had less impact, but signals a continuing interest in the living room.

For now at least, Apple appears to have a comfortable lead in the simmering smartphone battle. Since 2007 it has sold tens of millions of iPhones and the similar-looking iPod Touches, and the devices have become its most profitable product category.

In April 2010, Apple announced that it had sold more than 300,000 iPads on the device's first day on the market, a figure that included preorders. That met the expectations of financial analysts who were keeping tabs on the release of the company's highly anticipated tablet computer. Apple also said iPad users had downloaded more than one million apps from the company's App Store and more than 250,000 electronic books from its iBookstore.

Wall Street warmly greeted the news in May 2010, of Apple's dominance over Microsoft, calling it the end of an era and the beginning of the next one. Microsoft, with its Windows and Office software franchises, has dominated the relationship most people had with their computers for almost two decades, and that was reflected in its stock market capitalization. But the click-clack of the keyboard has ceded ground to the swipe of a finger across a smartphone's touch screen.

And Apple is in the right place at the right time. Although it still sells computers, twice as much revenue is coming from hand-held devices and music. Over all, the technology industry sold about 172 million smartphones in 2009, compared with 306 million PCs, but smartphone sales grew at a pace five times faster.