How the World Got Wired · The Phone in Your Pocket

Apple’s Near Death

To understand why January 9, 2007 was such an important moment, you have to know what Apple was a decade earlier.

In 1997, Apple was almost bankrupt. The company that had been founded in a garage in 1976 by Steve Jobs and Steve Wozniak, that had become famous in the early 1980s for the Macintosh computer, had spent most of the 1990s slowly losing to Microsoft. Microsoft Windows ran on about ninety-five percent of personal computers in the world. Apple’s Macintosh ran on about three percent. Apple was losing hundreds of millions of dollars a year. Most experts thought it would not survive another two years.

There was a strange twist in Apple’s story. Steve Jobs had been forced out of the company he had co-founded, back in 1985, after fights with the board of directors. He had spent the next twelve years running two other companies — a computer firm called NeXT (the same NeXT, you may remember, that made the computer Tim Berners-Lee used to invent the World Wide Web), and an animation studio called Pixar, which would eventually make Toy Story and become a Hollywood giant.

In 1997, with Apple about to go under, Apple bought NeXT — partly to get the technology, partly to bring Steve Jobs back. He became Apple’s CEO for a second time. Almost immediately, Microsoft — Apple’s biggest rival — gave Apple $150 million as part of a deal to keep Apple alive, because Microsoft worried that if Apple died, the government might decide Microsoft was an illegal monopoly and break it up. (This is one of the strangest moments in the history of Silicon Valley: a great rival writing a check to save its enemy because killing the enemy would be too dangerous.)

Over the next nine years, Jobs slowly turned the company around. In 1998, Apple released a brightly-colored desktop computer called the iMac. In 2001, it released a portable music player called the iPod, which became enormously popular and gave Apple its first hit product in over a decade. By the mid-2000s, Apple had become the company that made the music player almost every American teenager wanted to own.

But by 2005, Jobs was worried about something. He could see that mobile phones — which by then were everywhere — were starting to play music. They were getting better at it. Eventually, he reasoned, why would anyone carry an iPod and a phone? Eventually the phone would just be the music player. And Apple did not make phones.

He decided that Apple had to make a phone. Or else, in a few years, Apple’s most important product would be killed by somebody else’s invention.

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