Steve Jobs on iMac: Apple’s consumer breakthrough

It's been 10 months since a new management team took over at Apple. People have been working really hard. You can see a lot of cars in the parking lots and nights and the weekends. And because of their hard work, I'm really pleased to report to you today that Apple is back on track. And because of this, the foundation this gives us, we're going to announce some great new products today. And we're even going to roll out the whole product strategy today. I just want to spend a few minutes and take you through some examples of how Apple is back on track. The most important thing, of course, is people.

Apple's got now a very wise board of directors. Apple's got a very strong senior management team. I would hold the senior management team at Apple up against any other in the industry. But most important, Apple's got some very talented employees, just incredibly talented people. And when you have great people, the most important thing is to not lose them. When I came back to Apple last summer, Apple was losing a lot of them. The attrition rate annualized was 33%, which meant that if Apple kept losing people at that rate, in a year, a third of them would be gone. And I'm very pleased to say that 10 months later, the attrition rate is 15%.

And that that is under the Silicon Valley average today. And that's a very good sign. And part of that is because people now see how Apple can win again. Another part of that is because we've made Apple a much more entrepreneurial place. All of the key employees have lots of stock options. Another key thing that we've done is distribution. We've made a lot of changes in the way Apple distributes its products, a lot of tune-ups across the distribution system. And, of course, one of the bigger ones was at the national level, partnering with CompUSA. They're the biggest, and they decided to reinvest in Apple, and it's worked out great. As you know, they put an Apple store within a store, and each of their approximately 170 stores throughout the U.S.

When we started this program, Apple represented 3% of the CPU revenues sold by CompUSA. Six months later, Apple represents 15% of the revenues of CPUs sold at CompUSA. Another area that we can gauge to see Apple's health is the Internet, Apple.com. How many people are interested in Apple? Now, we've got over 20 million active customers. They might be interested in coming to our website. We have tons of prospective customers who might be interested, a lot of suppliers, a lot of software developers, a lot of competitors. And so this taken together can give us a general thermometer of what is the interest level of people about Apple.

And we've invested a lot into the website and a lot into the award-winning Apple store, which is the gold standard of e-commerce now on the web. And a year ago, we had a million hits per day. Now, the average visitor clicks about five to ten times, so that's 100,000 to 200,000 visitors per day. Today, nine, ten months later, we have 10 million hits a day on the website. That's one to two million visitors a day coming to the Apple website. And they're coming because they're interested in Apple. Growth. The quarter that ended December, IDC reported that Apple had a 3.4% market share. The quarter that ended in March, we actually grew our market share 15% to 4%.

Now, we're not thrilled with 4% market share, but if we can grow our market share 15% every quarter, we will see it going in the right direction, which it is now. And I think we expect it to rise quite a bit more based on some of the things you're going to see here today, but it is now going in the right direction again. And finance. We have some pretty ambitious plans. We want to develop a lot of great products. We want to market them. It takes money. And our customers need to know that Apple's going to be here ten years from now. Well, we were able to turn the company around to profitability. The first quarter, the management team was in place. And the quarter ending December, Apple turned a profit of $47 million. The last quarter, we turned a profit of $55 million.

So the company has made over $100 million in the last six months in a very turbulent time in the industry when other companies are breaking even or even losing money. And I think that's a great accomplishment for the company. In addition to that, the company is growing cash. We increased the cash to $1.6 billion by adding $100 million in the quarter that ended December. And for the last quarter that ended at the end of March, $200 million more was put in the bank. This is really important. And lastly, last July, if you took the number of shares outstanding and you multiplied it by the stock price, the company was worth $1.8 billion. We've added $2 billion to the worth of the company since then. And I think it's just getting going.

So these are some indications about how Apple is back on. So we went back to business school 101. And we said, what do our customers want in our products? What kind of products do they want? And they wanted two fundamental kinds of products. They wanted consumer products and they wanted pro products. Our design and publishing customers primarily wanted the pro products. Our education customers primarily wanted the consumer products. But they also wanted two different kinds of each one, desktop and portable. And we looked at this and we said, now, this looks pretty simple, but we couldn't find a way to come up with anything else that captured what they wanted as succinctly and as clearly as this.

We said, finally, this is it. We've got to make four great products. And we can meet the needs of what our customers are telling us they want. And we've spent the last ten months working like crazy to try to do just that. So the first one was the desktop pro product, the core of our publishing market. And, of course, we introduced that product in November based on the G3 chip. It's a Power Macintosh G3. And we've had exceptional success with this product. We've sold over 500,000 of these in the first six months of the product's life, making it the most successful new Mac in Apple's history. The team did a superb job on this product.

It's based, of course, on the Power PC G3 chip, which is a screamer. Now, its competitor, of course, is the Pentium II. And what is remarkable, what's hard to fathom but true here, is that for a given clock rate, a Power PC chip is twice as fast as a Pentium II chip. In other words, a 266 MHz G3 is twice as fast as a 266 Pentium II. Or a 266 G3 is equal to about a 500 MHz Pentium II. Of course, you can't even make one of those. But if you could, that's what it would be equal to. A 300 MHz G3 chip is equal to a 600 MHz Pentium II. Now, how do we know this? We know this not only by using the systems, but we got the best independent benchmark there is, which is Byte Magazine's ByteMarks.

And these are sort of one of the gold standards in the industry of performance. And they publish the results. And here's the results. The blue bars are the 266 and 300 MHz Pentium IIs, and the bars on fire are the G3s. And they just toast them. And as a matter of fact, Intel, we've been running some ads, as you know, Intel went back to Byte Magazine and said, this can't be true. And Byte Magazine examined all of their tests, and they stood by their results and republished them. Now, Intel has since come out with a 400 MHz Pentium II. How does that stack up? Not much better. Not much better. And so when we run these ads, they're very effective in our testing.

And they're effective because they're true. We are extremely happy today to introduce a totally new PowerBook G3. This thing has been redesigned from the processor to the keycaps, and it is going to set the new gold standard for portables out there. It is hot. It's also very beautiful. This is a side profile here. And this is what it looks like from the back. The back of this thing even is gorgeous. And one other thing. It eats Pentium notebooks for lunch, too. And it's got options on displays.

It's got a 12-inch display that's 800 x 600, same as the high-end Apple portables do now. But it goes further. For the first time in Apple portables, it goes beyond 12-inch displays to a 13-inch 1024 x 768 display and that same resolution in a 14-inch display. 12, 13, and 14. In addition, this thing is incredibly modular. It's built with these two bays. And so you can put one battery or two batteries in. It gives you three and a half hours of battery life, so you can have up to seven hours of battery life with two batteries. You can also put in a floppy disk drive, a CD-ROM, a DVD-ROM drive, or a third-party zip drive in there, and the bays are all hot-swappable.

The batteries are designed with a special feature. Just push a little button. It tells you exactly the state of the battery, whether it's in or out of the computer, and it's got the best keyboard of any portable we know of out there. Now, this thing is powered by a G3 chip, so it is a screamer, and it comes in 233, 250, and 292 megahertz. So we're putting our fastest chips into these things, which we can do, because ours don't draw very much power, and you don't have to fry an egg on them. And so we went out and said, okay, how does this stack up against the other Pentium notebooks out there? We found the fastest Pentium notebook you can get. Matter of fact, they're really hard to get, because they can hardly make them, and we had one flown in special.

This is the latest, greatest one, a 266 megahertz P2, and these are the bite marks, right? 3.9. Let me show you the three speed ranges of the new G3 Powerbooks. So I'd like to invite Phil Schiller, our Vice President of Worldwide Product Marketing on the stage, to help me with some demos. Phil? Hi, Steve. Good to see you. Tell us about your computer here, Phil. Well, I'm glad here to come out and try to take you on head-to-head, because you asked me to go out and get the biggest and the best, and I did. This is the brand-new Compaq Amarta. It's got the latest, greatest, and most powerful keyboard in the world. This is the brand-new Compaq Amarta 7800. There are thousands of Windows customers waiting in line right now to try to get their hands on this computer.

Luckily, we flew someone down to L.A. and got one before anyone else could, leaving plenty of Windows customers in the lurch, because they couldn't get this very machine. It's got a Pentium II, the new mobile Pentium II 266. That's the fastest speed it runs at. It's just been announced, just come out. It has a 512 backside cache. It has advanced graphics for AGP from Intel, with very fast 64-bit graphics. So this has the fastest processor, the fastest notebook graphics, and Compaq's really excited to bring this to the whole Windows market. You can't get much better than this. I'm scared. So, we're just going to have to find out. Now, up on this screen on your left, we have the Compaq Amarta. It's a $5,400 machine, as fast as you can possibly get.

Pentium II 266. In the middle, we have our new PowerBook G3 running at 233 MHz. And on the far right, we have the G3 running at 292 MHz. Of course, both of these machines are less money than the Compaq. So let's go ahead. What we're going to do now is we're going to run two demos. The first is going to be a demo of Photoshop, what a lot of our customers like to do and have been dying to do on a fast portable. So we've got Photoshop here, and we've got exactly the same file on all of these computers. The file has got 40 Photoshop actions in it that happen automatically, and it's about 27 megabytes. Exactly the same file. So we're going to get this queued up on all three machines, and we're going to have a bake-off here. And, Steve, this is a great demo because even a lot of the Intel people show off Photoshop to take advantage of the fast MMX processing in the Pentium II.

So, same demos Intel does, we can do cross-platform. All right. Ready to go? Sure. Three, two, one, go. Here we go. We're racing through those 40 actions right now. Compositing, cropping, throwing on blurs, doing the types of actions Photoshop customers do every day. Boy, the 292 is really in the lead here. Let's see. Done. Done. 292 is done. 233 is getting close. Done. And, God, Phil, your Pentium there is still entertaining us. Fastest Pentium notebook in the world, ladies and gentlemen. And it's almost done.

It's done. Yay. Okay. Our second demo is we've got a Macromedia Director here. And Macromedia Director is used by a ton of our customers for multimedia presentations on the road as well. And we've got, again, a 30-megabyte director file. Not that big. And it is exactly the same file on all the machines. So we're simply going to play it on these machines. And they're great demos because they exercise the graphics, the processor, the cache, the entire system to really get the most of the multimedia performance. Okay. So here we go. Macromedia Director, 30-megabyte file, exactly the same file on all three machines. Ready, set, go. Okay.

Come on. Come on. Done. Done. Thank you. Well, today I'm incredibly pleased to introduce iMac, our consumer product.

And iMac comes from the marriage of the excitement of the Internet with the simplicity of Macintosh. Even though this is a full-blooded Macintosh, we are targeting this for the number one use that consumers tell us they want a computer for, which is to get on the Internet simply and fast. And that's what this product is targeted for. I also mean some other things to us. We're a personal computer company, and although this product is born to network, it also is a beautiful standalone product. We're targeting it also for education. They want to buy these. And it's perfect for most of the things they do in instruction. It's perfect for finding tremendous source of information over the Internet.

And we hope, as you see the product, it will inspire us all to make even better products in the future. So we think iMac is going to be a really big deal. Now, what should it be? Well, we went out and we looked at all of the consumer products out there. This is a picture of one of the better ones. And we noticed some things about them pretty much universally. The first is they're really slow. They're very slow. They're all using last year's processor. Very, very slow. Second is they've all got pretty crummy displays on them. They're generally 13-inch, a few 14-inch, and the quality of them is very poor. Apple designs all its own displays, so we're used to something much better. But these are pretty bad. Likely no networking on them.

Some have it. Most don't. Old generation I.O. devices. And what that means is they're lower performance, and they're harder to use, and most of them aren't so plug-and-play. And these things are ugly. So let me tell you about iMac. We decided to make this thing fast. So we decided to put in a G3 processor running at 233 megahertz. We debated this quite a bit because there were cheaper, slower things we could have used, and we said, No, this has got to be the computer that we want on our desk, too. A G3 running at 233, and we didn't forget the cache. It's got a half-a-megabyte L2 backside cache, and this thing screams, as you'll see in a minute.

On displays, we said, What is the largest display that you'd ever want in a consumer computer? And the answer to us was a 15-inch display running at 1024 by 768. Let's go ahead and build in the best in every product, and let's have our display engineers engineer it, and it's gorgeous. It is an Apple-quality display that we are very proud of. Let's go ahead and put a lot of memory in this thing. 32 megabytes standard. It's expandable to 128. Four-gigabyte disk drive, 24x CD-ROM, and let's build in a lot of communications. This thing's got a 100-megabit Ethernet as standard. Now, why?

Because a lot of our education customers want to put these high-speed networks in, because we're seeing it in homes. Approximately 10% of the homes in Silicon Valley now have Class 5 wiring in them. We're starting to see lots of home networks emerging. A fast modem and also 4-megabit infrared built in. You want to beam your digital photographs in from your digital camera built into every product. We are going to the new generation of I.O. 12-megabit universal serial bus, two ports. We're leaving the old Apple I.O. behind. Stereo surround sound built into every product and a great, great keyboard and mouse. Now, this is what they look like today.

And I would like to take the privilege of showing you what they're going to look like from today on. This is IMAC. Can you go back there and do that again?

Go back and come back. Thank you. So if I can get this screen switched over. We've got a wireless camera here, and I'd like to show you what this thing looks like. Come on in. You've got to see this thing in person, but I'll do the best I can with video. This is IMAC. The whole thing is translucent. You can see into it. It's so cool. We've got stereo speakers on the front. We've got infrared right up here. We've got the CD-ROM drive right in the middle. We've got dual stereo headphone jacks. We've got the coolest mouse on the planet right here.

Come on around. All of the connectors are inside one beautiful little door here, the Ethernet, the USB stuff. Around the back, we've got a really great handle here. The back of this thing looks better than the front of the other guys, by the way. And then around the side. So let's take one more swing around it so you can see. This is what it looks like. And again, you've got to see one of these things in person. Great. Yeah, I've got some slides of what this looks like, too.

I mean, this is incredible compared to anything else out there. It looks like it's from another planet. And a good planet. A planet with better designers. Look at this keyboard. It's so nice. Two universal serial bus connectors on either side so you can plug the mouse into whichever one you want, whether you're right- or left-handed, and you have the other one for peripherals. Look at this mouse. It's the most wonderful mouse you've ever used. Tell us about your computer, Phil. As Steve mentioned, we went out and got the hot new Compaq Rosario 4540, and it does have an AMD K6 233 megahertz MMX optimized processor with a 256K pipeline cache on it.

In fact, Compaq advertises it as a third faster than most all other 233 megahertz products. And, of course, we have a 233 megahertz product, too, and we'll see if it is a third faster. This is the best thing you can buy in this class of products, and customers are just eating them up. Well, great. Well, I have an iMac, and so why don't we put them through their paces? So let's take that same director demo again, director 60, and let's get these machines ready to go, and we'll see which one's faster. And over on the left, again, we've got the Compaq with the K6 233 in it, the most popular and fastest consumer computer out there. And on the right, we have iMac. Well, I'm ready for you. All right. Three, two, one, go.

Come on. It's playing. It's playing. Do you want to put it out of its misery or let it go?

And I got the fastest consumer product you can buy at any price. It's the brand-new Pentium II 400 megahertz MMX processor in a Compaq Presario 4880. And over $2,500, that's without networking. There's no networking that comes with it, and that's without the monitor before you add that. So when you add those things, it's over $3,000. And this thing has a 100 megahertz memory bus, a half-a-mega pipeline cache, 2X accelerated graphics port graphics, so it doesn't get any bigger or badder than this. Well, I have an iMac. So we've got the consumer K6233, the fastest, meanest, baddest Pentium II you can buy, 400 megahertz, and iMac.

All right, Phil. Three, two, one, go. There we go.

Thank you, Phil. Thank you, Phil.