The Secret of Steve Jobs's Survival

Whenever Apple loses its way, the CEO's inspired innovations help it surge ahead of the PC pack. The latest example: DVD technology

By Charles Haddad

In 1964, Bob Dylan sang, "For the loser now will be later to win." Apple CEO Steve Jobs was only 9 at the time, but he must have been listening. He has lived his life by these words from Dylan's folk anthem The Times They Are A-Changin', having staged more revivals than a Pentecostal minister who speaks in tongues.

Jobs has made a career out of trying to stay ahead of the curve. That strategy has paid off big when he has correctly judged the zeitgeist -- and it has also led to some major missteps. His flops include the Lisa, the NeXtCube, the Mac Cube, and, yes, even the original Mac, which didn't catch on until the second model. Yet he rightfully remains a pillar of the computer industry.

The reason has as much to do with the nature of the industry as it does with Jobs's tenacity. In the race to sell computers, it's easy to bet on the wrong technology and find yourself bringing up the rear. But consumer taste and tech are forever shifting. With the right innovation and a little luck, a loser can soon retake the lead.


  No one understands better than Jobs how to use timing, luck, and innovation to stage a comeback. He retooled his failed NeXtStep operating system into OS X, which is fast becoming a hit with Mac-heads. His engineers redesigned the slumping iMac, morphing it from a fruity colored gumdrop into a ghostly white night-light with a floating screen.

His latest comeback play: DVD technology. In 2000, Jobs gambled that the ability to play movies on a computer would be the "wow" factor that would distinguish Macs from PCs. He added DVD players to all of the top-line Macs. It proved a bad bet. Sure, playing movies on Macs was cool, but not cool enough to lure buyers.

There was, however, one new feature that consumers did want. It was the ability to save -- or burn -- your own files, photos, and songs onto a CD. Compaq, in particular, picked up the scent of this trend. It added CD burners to half of its new PCs, and these models became big sellers. That success caught the eye of Jobs, who, to his credit, conceded, "We totally missed the boat" on CD burners.


  Never one to play follow the leader, he again gambled on jumping ahead of the curve. This time he installed drives that could not only play DVDs but store data on them, too. It was a big innovation. CDs can store movies -- hence the success of pirated films in Hong Kong -- but only at a higher compression rate that makes feature-length films jumpy and blurred. And he added software that made burning DVDs a snap.

This move has proven a success, according to the latest numbers from Apple and industry consultant Gartner Group. Apple recently announced that it has shipped nearly 500,000 computers with DVD recorders to date. That jibes with numbers tracked by Gartner, which says the PC industry shipped more than 600,000 DVD recorders last year. It said 400,000 of those recorders were shipped by Pioneer, which is Apple's major supplier.

Apple's lead is tenuous, though. Technology is again reshaping the playing field. Leading consumer PC makers Dell Computer and Hewlett-Packard started shipping computers with DVD recorders late last year. Their recorders use a newer technology than Apple's, one that better handles the storage and transfer of raw data.


  For example, Dell's DVD players can repeatedly store new data on one DVD while Macs can't. Given their heft in the market, Dell and HP could make their technology the new standard. As always, Dell is trying to grab market share through aggressive pricing. It began selling disks for its DVD recorder for $10 a piece, half the price of those Apple used. Pioneer and Apple quickly responded by matching Dell's price.

Apple and Pioneer still have one big advantage. Disks recorded on Macs will work with 90% of all consumer DVD players. That figure is only 60% for Dell's recorders, but it will go up over time as the technology improves. The good news is that Apple is changing with the market, too. It has already upgraded its recorders to Pioneer's second-generation technology. And it's pushing hard to establish its drives and software as the standard in video storage and editing, especially for professional filmmakers.

In the end, Dell will probably overtake Apple as the leader in DVD recording. But by then, Jobs will be on to the next cool innovation. For he knows that in the computer industry, the times are forever a-changing.

Haddad, Atlanta-based correspondent for BusinessWeek, is a long-time Apple Computer buff. Follow his weekly Byte of the Apple column, only on BusinessWeek Online

Edited by B. Kite

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