Apple III
In May 1980, at the National Computer Conference in Anaheim, Apple unveiled its new machine with unusual fanfare. The company rented out Disneyland for five hours, spent $42,000, and chartered British double-decker buses to transport 7,000 conference participants. This grandiose staging announced the Apple III, Apple's first computer aimed at professionals.
Times seemed promising. By late 1978, the Apple II was selling beyond all expectations. Silicon Valley engineers competed for positions at Apple, some accepting pay cuts in exchange for stock options. Richard Jordan, who left Hewlett-Packard during the summer of 1978, recounts this period of collective euphoria. With each halving of the stock price, teams felt invincible. Failure seemed impossible to them.
The project began in this exhilarating context. The Apple III featured a Synertek 6502A 8-bit microprocessor running at 2 MHz, twice the speed of the Apple II. Supporting up to 128 KB of RAM, it included a keyboard with integrated numeric keypad and a Shugart 5.25-inch floppy drive with 143 KB capacity. Four internal expansion slots remained compatible with Apple II cards, complemented by two serial ports. The machine could run in Apple II emulation mode, but revealed its true nature with its proprietary operating system SOS (Sophisticated Operating System), which insiders nicknamed "applesauce." An integrated real-time clock completed the equipment, while the display handled 24 lines of 80 columns in text mode and 560 by 192 pixels in monochrome graphics.
Steve Jobs led the project and imposed his vision. No fan: the aluminum chassis would suffice to dissipate heat. The size and shape of the case were decided without consulting the engineers, who then had to cram components into a space that was too small with inadequate ventilation. Feature creep worsened the situation: marketing, engineering, industrial design, manufacturing—each department added its requirements. The product swelled beyond its initial design.
Jerry Manock and Dean Hovey, the industrial designers, conceived the chassis before the motherboard was finished. Manock anticipated strict FCC standards on electromagnetic interference and chose a rather solid aluminum chassis. He contracted with Doher-Jarvis, an automotive parts manufacturer in Toledo. The external aesthetics—45-degree bevels, tilted keyboard, brown color—were meant to create a "house identity" for future Apple products.
Delays threatened the initial public offering scheduled for December 1980. Managers ignored engineers' warnings and launched production. By November, during the first deliveries, the nightmare began. In February 1981, Apple abandoned the real-time clock: the National Semiconductor chip failed to deliver on its promises. The price dropped to $4,190, with a $50 rebate for early customers.
March 1981 marked the beginning of volume deliveries and the full extent of the disaster. Twenty percent of machines arrived dead at customers' sites, with chips having dislodged during transport. Those that initially worked soon failed: heat caused components to expand and pop out of their sockets. Apple then recommended a solution that would become legendary: lift the front of the computer fifteen centimeters and let it drop to reseat the chips.
Other defects accumulated. Faulty connectors, case screws that pierced internal cables, a motherboard so dense it caused short circuits. The rush also affected software: programmers discovered the machine only nine weeks before shipment. Manuals were proofread the day they were sent to the printer, allowing so many errors through that an addendum became necessary.
Apple attempted a rescue in November 1981 with a revised version at $3,495. The company maintained that problems stemmed from manufacturing and quality control, not design. Yet the new version incorporated different chip sockets, updated software, memory expandable to 256 KB, and offered an optional 5 MB hard drive. Of the 7,200 original Apple IIIs, 2,000 were replaced free of charge.
Sales remained disappointing. Analysts estimated that Apple sold 3,000 to 3,500 units monthly, one-tenth of Apple II sales. In December 1983, InfoCorp counted 75,000 installed units versus 1.3 million Apple IIs. The poor reputation and lack of software exploiting SOS deterred buyers.
A final stand came in December 1983 with the Apple III Plus at $2,995. This version included 256 KB of RAM as standard, a functional clock, a new motherboard, SOS version 1.3, improved ports with DB-25 connectors, and a case facilitating card installation. Too late: on April 24, 1984, Apple discontinued development. After $60 million in losses, the line disappeared definitively from the catalog in September 1985.
Ironically, this failure did not diminish Apple's success. On December 12, 1980, the initial public offering broke all records. Shares issued at $22 climbed to $29 and sold out within minutes. At the close of the first day, Apple was worth $1.2 billion, achieving the largest IPO since Ford in 1956. Jobs's 15% stake would soon exceed $250 million.
The Apple III experience shattered the myth of invincibility born from the Apple II's success. This setback forced a restructuring. In January 1981, president Mike Scott divided development into three groups: personal desktop systems (Apple II/III), peripherals (drives, printers, modems), and professional systems (Lisa division). The R&D budget tripled to $21 million. These tensions cost Scott his position, replaced by Mike Markkula, while Jobs took the chairman role.
IBM's entry into the personal computer market in 1981 would paradoxically serve Apple. The giant legitimized this emerging sector. Apple acknowledged this with humor in a full-page advertisement in the Wall Street Journal: "Welcome IBM. Seriously."