First read the Apple case that is in your textbook and also posted in the Modules section of Canvas. What are key forces in the general and industry environments that affect Apples choice of strategy?

CASE 32 APPLE INC.: WHERE'S THE NEXT INNOVATION? In April 2019, Apple CEO Tim Cook held the second quar- of over $45 to a high of $230 in August 2018, and when the ter earnings presentation at the Apple Park corporate cam- company reached a market capitalization of over $1 trillion pus in the 1,000-seat auditorium named the Steve Jobs in 2018, that made it the most valuable company in the Theater. Part of a 175-acre campus developed in 2017, the world. In addition, Cook had instituted Apple's first ring-shaped 2.8-million-square-foot facility with walls of dividend since 1995 in 2012, and bought back more than curved glass surrounding an inner greenspace courtyard $200 billion of shares, producing strong free cash flows and was possibly the last evidence of the direct vision and inno- an "impressive" balance sheet. This had made investors vation of Apple co-founder Steve Jobs. Originally envi- happy. sioned by Jobs in 2011 as a center for creativity and Cook had done what CEOs of public companies are sup- collaboration, the building honored his legacy, memory, posed to do-drive up value. But revenue from the flagship and enduring influence. Jobs, who died in 2011, would have products-iMac, iPad and iPhone-was falling or stagnant, turned 64 in February 2019. As Apple's current CEO Tim and only the services and other products sectors were see- Cook said, "Steve's vision for Apple stretched far beyond ing growth. In addition, operating margins were declining his time with us. He intended Apple Park to be the home of in products, indicating that high iPhone prices may have innovation for generations to come."! been the only thing keeping margins stable at around Yet the pace of innovation at Apple had slowed consid- 30 percent. If iPhone sales were increasingly challenged by erably. Since Steve Jobs's death, the only new physical prod- lower price competitors such as China's Xiaomi, and uct launched had been the Apple Watch in 2014. The iconic Huawei, something would have to change. Was Apple's iPhone, in FY2018 representing 63 percent of total reve- recent shift into services and other products going to be the nues, was over 10 years old, and even though upgrades kept answer? (See Exhibits 1 to 3.) "Other products included customers coming back, competition had eroded Apple's wearables such as the iWatch and the AirPod wireless ear- smartphone market share such that second quar 2019 phones, and home products such as the HomePod voice- iPhone revenues had declined by over 17 percent year over controlled smart speaker system. These were new, but year. Mac computer and iPad sales had declined as well. perhaps not as innovative as Apple's other products. Were Although Apple's FY2018 revenues were up by about expectations of major breakthroughs unrealistic? As one 16 percent overall, the bulk of that increase came from ser- analyst said, it is hard to find "ways to make the world's vices and other products such as the Apple Watch. In this most valuable company even more valuable when it's al- environment, there was some concern that although re- ready so big that conventional growth strategies-extending search and development spending was up in FY2018, re- product lines, moving into new territories-would barely search output had not produced any recent meaningful move the needle." breakthroughs. This posed yet again the unavoidable ques- Apple, Fortune Magazine's "world's most admired com- tion that still seemed to haunt the 42-year-old Apple: What pany" since 2008, had distinguished itself by excelling over happens to a modern company whose innovations and in the years not only in product innovation but also in revenue spirations are so closely tied to the vision of one leader and margins (since 2006 Apple had consistently reported when that leader's influence is no longer present? gross margins of over 30 percent). By 2019, Apple Inc. was Tim Cook was considered a highly effective leader, yet known for having top-selling products not only in desktop had been criticized for "lack of ambition and vigor," for be- (iMac) and notebook (MacBook) personal computers but ing perhaps too cautious about entering new product cate- also in online music and "app" services (iTunes and App gories, pursuing acquisitions, or driving employees to Store), mobile communication devices (iPhone), digital achieve almost impossible stretch goals. On the other consumer entertainment (Apple TV), tablet computers hand, investors had been mostly very pleased with the stock (iPad), operating systems (macOS and iOS), software (Sa- performance under Cook. Since he was named CEO in fari web browser) and online services (iCloud), as well as August 2011, Apple share price had risen from an average wearable technology (Apple Watch, AirPods) and home ac- cessories (HomePod, Beats products), mobile payment sys- This case was prepared by Professor Alan Eisner of Pace University and tems (Apple Pay), and a subscription-based music Professor Pauline Assenza, Western Connecticut State University. This case is streaming service (Apple Music). Additional services roll- based solely on library research and was developed for class discussion rather ing out in 2019 included Apple TV+ original content, sub- than to illustrate either effective or ineffective handling of an administrative scription services Apple Channels, Apple News+ and situation. Copyright 2019 Alan B. Eisner. C252 CASE 32.: APPLE INC.: WHERE'S THE NEXT INNOVATION? Second Quarter Comparison 2018 to 2019 Three Months Ended Six Months Ended March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018 Change Change Net sales by category: iPhone (1) $31,051 $37,559 (17)% $ 83,033 $ 98,663 (16)% 9,763 Mac (1) 5,513 5,776 (5)% 12,929 12,600 3% iPad (1) 4,872 4,008 22% 11,601 19% Wearables, Home and Accessories (1/2) 5,129 3,944 30% 12,437 9,425 32% Services (3) 11,450 9,850 16% 22,325 18,979 18% Total net sales $58,015 $61,137 (5)% $142,325 $149,430 (5)% (1) Products net sales include amortization of the deferred value of unspecified software upgrade rights, which are bundled in the sales price of the respective product. (2) Wearables, Home and Accessories net sales include sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and Apple-branded and third-party accessories. (3) Services net sales include sales from the company's digital content stores and streaming services, AppleCare, Apple Pay, licensing, and other services Services net sales also include amortization of the deferred value of Maps, Siri, and free iCloud services, which are bundled in the sales price of certain products. Three Months Ended Six Months Ended March 30, 2019 March 31, 2018 March 30, 2019 March 31, 2018 Gross margin: Products $14,518 $17,351 $45,940 $39,715 14,137 Services 7,303 6,071 11,394 $21,821 $23,422 Total gross margin Gross margin percentage: $53,852 $57,334 Products 31.2% 33.8% 33.1% 35.2% Services 63.8% 61.6% 63.3% 60.0% Total gross margin percentage 37.6% 38.3% 37.8% 38.4% Source: Quarterly Report Form 10-Q. Apple, March 30, 2019. operational details. Given Apple's global growth in multiple was the technical genius, and A. C. Mike Markkula Jr., product categories, and the associated complexity in strategic who had joined the team several months earlier, was the execution, CEO Tim Cook would be challenged to sustain the businessman. Jobs set the mission of empowering individu- level of innovation for which the company was known. als, one person-one computer, and doing so with elegance of design and fierce attention to detail. In 1977, the first Company Background version of the Apple II became the first computer ordinary people could use right out of the box, and its instant suc- Founder Steve Jobs cess in the home market caused a computing revolution, Apple Computer was founded in Mountain View, essentially creating the personal computer industry. By California, on April 1, 1976, by Steve Jobs and Steve 1980, Apple was the industry leader and went public in Wozniak. Jobs was the visionary and marketer, Wozniak December of that year. C254 CASE 32: APPLE INC.: WHERE'S THE NEXT INNOVATION? EXHIBIT 4 Apple Innovation Time Line Date Product Events 1976 Apple! Steve Jobs, Steve Wozniak, and Ronald Wayne found Apple Computer. 1977 Apple II Apple 111 1979 Apple logo first used. Apple employs 250 people; the first personal computer spreadsheet software, VisiCalc, is written by Dan Bricklin on an Apple II. 1980 Apple III Apple goes public with 4.6 million shares; IBM personal computer announced. 1983 Lisa 1984 Mac 128K, Apple Ilc John Sculley becomes CEO. Super Bowl ad introduces the Mac desktop computer. Jobs resigns and forms NeXT Software; Windows 1.01 released. 1985 1986 Mac Plus Jobs establishes Pixar. 1987 Mac II, Mac SE Apple sues Microsoft over GUI. 1989 Mac Portable Apple sued by Xerox over GUI. 1990 Mac LC 1991 PowerBook 100, System 7 Apple listed on Tokyo Stock Exchange. System 7 operating system upgrade released, the first Mac OS to support PowerPC-based computers. Sculley resigns; Spindler becomes CEO; PowerBook sales reach 1 million units. 1993 Newton Message Pad (one of the first PDAs) 1996 Spindler is out; Amelio becomes CEO: Apple acquires NeXT Software, with Jobs as adviser. 1997 1998 iMac 1999 iMovie, Final Cut Pro (video editing software) 2000 G4Cube Amelio is out; Jobs returns as interim CEO; online retail Apple Store opened. iMac colorful design introduced, including USB interface; Newton scrapped. iBook (part of PowerBook line) becomes best-selling retail notebook in October; Apple has 11% share of notebook market. Jobs becomes permanent CEO. iTunes software is a mobile device management application. First physical retail store opens, in Virginia. Apple releases iLife software suite. Apple reaches 25 million iTunes downloads 2001 iPod, OS X, iTunes software, Apple Store 2002 iMac G4, iLife 2003 iTunes Store 2004 iMac G5 2005 iPod Nano, iPod Shuffle, Mac Mini 2006 MacBook Pro 2007 iPhone, Apple TV, iPod Touch iPhone 3G, MacBook Air, App Store 2008 Jobs undergoes successful surgery for pancreatic cancer. First video iPod released; video downloads available from iTunes. Apple computers use Intel's Core Duo CPU and can run Windows software; iWork software competes with Microsoft Office. Apple Computer changes name to Apple Inc.; Microsoft Vista released. App Store launched for third-party applications for iPhone and iPod Touch and brings in $1 million in one day. iTunes Plus provides DRM-free music, with variable pricing; Jobs takes medical leave. iPhone 4 provides FaceTime feature; iTunes reaches 10 billion songs sold. iPhone available on Verizon Wireless; Jobs resigns as CEO, dies on October 5th. Tim Cook becomes CEO. 2009 17-inch MacBook Pro, iLife, iWork '09 2010 iPad, iPhone 4, Mac App Store 2011 iPad 2, iPhone 4S, iCloud Change 2016 2015 Apple Sales, 2015-2018 (dollars in millions and units in thousands) 2018 Change 2017 Net Sales by Reportable Segment: Americas $112,093 16% $ 96,600 Europe 62,420 14% 54,938 12% $ 86,613 $ 93,864 10% 49,952 50,337 Greater China 51,942 16% 44,764 (8)% 48,492 58,715 Japan 21,733 23% 17,733 5% 16,928 15,706 Rest of Asia Pacific 17,407 15% 15,199 11% 13,654 15,093 Total net sales $265,595 16% $229,234 6% $215,639 $233,715 Net Sales by Product: iPhone (1) $166,699 18% $141,319 3% $136,700 $155,041 iPad (1) 18,805 (2)% 19,222 (7)% 20,628 23,227 Mac (1) 25,484 (1)% 25,850 13% 22,831 25,471 Services (2) 37,190 24% 29,980 23% 24,348 19,909 17,417 Other Products (1)(3) Total net sales 35% 12,863 16% 10,067 11,132 $215,639 $265,595 16% $229,234 6% $233,715 Unit Sales by Product: iPhone -% 216,756 2% 217.722 43,535 211,884 231,218 iPad % 43,753 (4)% 45,590 54,856 Mac 18,209 (5)% 19,251 4% 18,484 20,587 (1) Includes deferrals and amortization of related software upgrade rights and non-software services. (2) Includes revenue from Digital Content and Services, AppleCare, Apple Pay, licensing, and other services Services net sales in 2018 included a favorable one-time item of $236 million in connection with the final resolution of various lawsuits. Services net sales in 2017 included a favorable one-time adjustment of $640 million due to a change in estimate based on the availability of additional supporting information. (3) Includes sales of AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and other Apple-branded and third party accessories. Sources: Annual Report. Apple Inc. 2017.: Annual Report. Apple Inc. 2018. EXHIBIT 2 Apple Product Performance-Percentage of Total Sales Product 2018 2017 2016 iPhone 63% 62% 63% iPad 7% 8% 10% Mac 10% 11% 10% Services 14% 13% 11% Source: Annual Report. Apple Inc. 2018. Apple Arcade for games, and Apple Card, a credit card to leverage "its unique ability to design and develop its own stored in Apple Wallet. (see Exhibit 4). operations systems, hardware, application software and ser- As the time line shows, most of the product innovations vices to provide its customers products and solutions with in- occurred after 1998, when Apple was under Steve Jobs's lead- novative design, superior ease-of-use and seamless ership. However, there was also a 12-year period in which Jobs integration." This strategy required not only product design was not in charge. The company's ongoing stated strategy was and marketing expertise but also scrupulous attention to Date Product Events 2012 2013 2014 iBook Author, iPhone, iPad Mini, Apple iBook supports textbook creation on iPad. Retina displays, skinny Macs. Apple Wallet Wallet stores coupons, tickets. Apple becomes world's most valuable company by market capitalization. Mega Mac, iPad Air Workstation in a small aluminum cylinder. iPhone 6 Plus, Apple Watch, Apple Pay Biggest iPhone yet, Apple Watch = computer on your wrist introduced in 2014, actual delivery in 2015, Apple Pay mobile payment service, acquisition of Beats Electronic for headphones, streaming digital content. Apple Music Streaming music subscription service, including Internet radio station Beats 1, blog platform Connect iPhone 7 iPhone 7 Plus, iPad Pro, Apple Seventh generation iPhone, AirPods wireless earphones, Apple Watch multiple AirPods, Apple Watch Series series included Nike and Hermes; over 1 billion Apple devices are in use worldwide. 2015 2016 2017 iPhone 8, iPhone 8 Plus, iPhone X Fall 2017 release. 2018 2019 HomePad, iPhone XS & XR, iPadPro HomePad smart speaker with voice control; Apple reaches $1 trillion market with Face ID, iPad Air with Apple Pencil value, becomes the largest publically traded corporation in the world by market support capitalization. Apple TV+, Apple Channels, Apple Apple TV+ will produce original content, Channels subscription gives access to News+, Apple Arcade, Apple Card premium network TV, News+ subscription gives access to digital magazines & newspapers, Apple Arcade gives access to games via the App Store, Apple Card is a credit card stored in Apple Wallet. Sources: Timeline of Apple Inc. products. Wikipedia; author estimates. In 1983, Wozniak left the firm and Jobs hired John Under CEOs Sculley, Spindler, and Amelio Sculley away from PepsiCo to take the role of CEO at Apple, John Sculley had tried to take advantage of Apple's unique citing the need for someone to spearhead marketing and capabilities. Because of this, Macintosh computers became operations while Jobs worked on technology. The result easy to use, with seamless integration (the original plug-and- of Jobs's creative focus on personal computing was the play) and reliable performance. This premium performance Macintosh. Introduced in 1984, with the now-famous Super meant Apple could charge a premium price. However, with Bowl television ad based on George Orwell's novel Nineteen the price of IBM compatibles dropping, and Apple's costs, Eighty-Four, the Macintosh was a breakthrough in terms of especially research and development (R&D), way above elegant design and ease of use. Its ability to handle large industry averages, this was not a sustainable scenario. graphic files quickly made it a favorite with graphic designers, Sculley's innovative efforts were not enough to substan- but it had slow performance and limited compatible software tially improve Apple's bottom line, and he was replaced as was available. That meant the product as designed at that time CEO in 1993 by company president Michael Spindler. was unable to help significantly Apple's failing bottom line. In Spindler continued the focus on innovation, producing the addition, Jobs had given Bill Gates at Microsoft some Macin PowerMac in 1994. Even though this combination pro- tosh prototypes to use to develop software and, in 1985, Mi- duced a significant price-performance edge over both previ- crosoft subsequently came out with the Windows operating ous Macs and Intel-based machines, the IBM clones system-a version of GUI for use on IBM PCs. continued to undercut Apple's prices. Spindler's response Steve Jobs's famous volatility led to his resignation from was to allow other companies to manufacture Mac clones, a Apple in 1985. Jobs then founded NeXT Computer. The strategy that ultimately led to clones stealing 20 percent of NeXT Cube computer proved too costly for the business to Macintosh unit sales. become commercially profitable, but its technological con- Gilbert Amelio, an Apple director and former semicon- tributions could not be ignored. In 1997, then Apple CEO ductor turnaround expert, was asked to reverse the compa- Gilbert Amelio bought out NeXT, hoping to use its ny's financial direction. Amelio intended to reposition Rhapsody-a version of the NeXTStep operating system-to Apple as a premium brand, but his extensive reorganiza- jump-start the Mac OS development, and Jobs was brought tions and cost-cutting strategies could not prevent Apple's back as a part-time adviser. stock price from slipping to a new low. However, Amelio's (256 CASE 32 - APRLE INC. WHERE'S THE NEYT INNOVATION decision to stop work on a brand-new operating system and market cap exceeded Microsoft's, making it the biggest tech jump-start development by using NeXTStep brought Steve company in the world." In 2011, Steve Jobs made his last Jobs back to Apple in 1997. product launch appearance to introduce iCloud, an online storage and syncing service. On October 4, 2011, Apple Steve Jobs's Return announced the iPhone 4S, which included "Siri," the One of Jobs's first strategies upon his return was to strengthen "intelligent software assistant." The next day, on October 5, Apple's relationships with third-party software developers, came the announcement that Steve Jobs had died. including Microsoft. In 1997, Jobs announced an alliance Apple continued to innovate, however, and on with Microsoft that would allow for the creation of a Mac ver- September 21, 2012, Apple had its biggest iPhone launch sion of the popular Microsoft Office software. He also made a ever with the iPhone 5.2 On September 19, 2012, Apple concerted effort to woo other developers, such as Adobe, to stock reached $702.10, its highest level to date, which made continue to produce Mac-compatible programs. Apple the most valuable company in the world. 2013 saw In late October 2001, Apple released its first major non- the iPhone 5C and the high-range iPhone5s, which intro- computer product-the iPod. This device was an MP3 music duced the Touch ID fingerprint recognition system. The player that packed up to 1,000 CD-quality songs into an ultra- iPhone 6 and 6 Plus, with larger displays, faster processors, portable, 6.5-ounce design: "With iPod, Apple has invented a and support for mobile payments, were released in Septem- whole new category of digital music player that lets you put ber 2014. The prototype of the Apple Watch was unveiled your entire music collection in your pocket and listen to it in 2014. Also introduced in 2014 was Apple Pay, a mobile wherever you go," said Steve Jobs. With iPod, listening to payment system meant to augment all Apple mobile prod- music will never be the same again." This prediction became ucts. February 2015 saw Apple reach the highest market even truer in 2002, when Apple introduced an iPod that cap of any U.S.-traded company. During 2016 Apple intro- would download from Windows-its first product that did not duced Apple Music, a streaming music service meant to require a Macintosh computer and thus opened up the Apple take advantage of its already strong relationship with artists "magic" to everyone. In 2003, all iPod products were sold and music publishers, and therefore positioned to success- with a Windows version of iTunes, making it even easier to fully compete with Pandora and Spotify. In addition, use the device regardless of computer platform. iPhone 7 and 7 Plus and the Apple Watch Series 2 all had a In April 2003, Apple opened the online iTunes Music positive response from customers. Apple products had Store to everyone. This software, downloadable on any com- more than 1 billion users worldwide by the end of 2017. puter platform, sold individual songs through the iTunes Apple had become a diversified digital entertainment application for 99 cents each. When announced, the iTunes corporation. Back in 2005 analysts believed Apple had Music Store already had the backing of five major record "changed the rules of the game for three industries-PCs, labels and a catalog of 200,000 songs. Later that year, the consumer electronics, and music and appears to have noth- iTunes Music Store was selling roughly 500,000 songs a day. ing to fear from major rivals." On top of steady sales of its In 2003, the iPod was the only portable digital player that computers, of the iPod, and of iTunes, the added categories could play music purchased from iTunes, and this intended of iPhone and iPad had shown substantial growth; but by exclusivity helped both products become dominant. 2013, Samsung had outperformed Apple in worldwide After 30 years of carving a niche for itself as the premier smartphone sales, 15 and Google's Android had captured provider of technology solutions for graphic artists, Web de- the largest market share of cell phone operating systems. At signers, and educators, Apple had reinvented itself as a digital the same time, both the Amazon Kindle Fire HD and entertainment company, moving beyond the personal com- Microsoft's Surface tablet had emerged to challenge the puter industry. The announcement in 2007 of the iPhone, a iPad. 2015 was marked by competition in the wearable tech product incorporating a wireless phone, a music and video space, and 2017 saw the Windows 10 operating system player, and a mobile Internet browsing device, meant Apple become four times more popular than the macos, the was also competing in the cell phone/smartphone industry. Microsoft Surface defeating iPad in user satisfaction, and That year, Apple changed its name from Apple Computer to customers frustrated that the MacPro had not yet been Apple Inc. redesigned to recover from its 2013 design misstep. Could Also introduced in 2007, the iPod Touch incorporated Apple continue to grow, and, if so, in what categories? Wi-Fi connectivity, allowing users to purchase and down- load music directly from iTunes without a computer. Then, Apple's Operations in 2008 Apple opened the App Store. Users could now pur- Maintaining a competitive edge required more than innova- chase applications written by third-party developers specifi- tive product design. Operational execution was also impor- cally for the iPhone and iPod Touch. tant. For instance, while trying to market its increasingly In 2010, Apple launched the large-screen touch-based diverse product line, Apple believed that its own retail tablet called the iPad and sold over 2 million of these stores could serve customers better than any third-party devices in the first two months.10 That same year, Apple's retailers. By the beginning of 2019, Apple had 506 stores stock value increased to the extent that the company's open, including 234 international locations. Some of these stores worldwide were considered architectural guarded secret and fiercely protected its innovative patents. wonders, including the iconic Fifth Avenue glass cube in For example, a well-publicized series of lawsuits in 2012 New York City. Apple had even received trademark protec-highlighted rifts between Apple and Samsung, who was tion for its retail stores' "distinctive design and layout."!? both a rival and supplier. Samsung smartphones had cap- Partly due to the appealing design of both the shopping ex- tured more market share than Apple's iPhones in the begin- perience and the products being sold within, Apple retail ning of 2012, and Apple argued that Samsung had stores had traditionally generated more sales per square succeeded with both its phones and tablets only by copying foot than any other U.S. retailer, including its closest luxury Apple's designs. Samsung replied by claiming that Apple rival Tiffany & Co.18 had infringed on Samsung's patents.22 U.S. intellectual To solidify its supply chain, Apple had entered into mul- property courts found in favor of Apple, but Japanese tiyear agreements with suppliers of key components. Apple courts found in favor of Samsung. The threat of ongoing had had historically excellent margins, partly because of its battle meant Apple needed to look for other suppliers of simpler product line, leading to lower manufacturing costs.19 chips and displays. Supply chain watchers pointed out that Apple had outsourced almost all manufacturing and final Apple still had a major challenge finding reliable suppliers assembly to its Asian partners, paying close attention to for increasingly scarce components, and that the continued scheduling and quality issues. Outsourcing to Asian manu- reliance on Foxconn as the sole manufacturer of the iPhone facturers was not without its problems, however. In 2012, meant that any disruption there could have major conse- headlines worldwide exposed China's Foxconn manufactur- quences for delivery.23 ing facility for labor abuses that led to worker suicide threats. Apple, as well as most other technology companies, used Status of Apple's Business Units in 2019 Foxconn facilities to assemble products, including the iPad and iPhone. After the story broke, Apple CEO Tim Cook The Apple Computer Business visited the Foxconn plant and reviewed an audit of working In the computer market, Apple had always refused to com conditions that found violations in wages, overtime, and pete on price, relying instead on its reliability, design ele- environmental standards. Apple stated that it remained gance, ease of use, and integrated features to win customers. "committed to the highest standards of social responsibility An opportunity for increased market share was realized across our worldwide supply chain,"20 and Cook announced when Apple began using Intel processors in the iMac desk- that Apple would be bringing some of the production of top and the MacBook portables, which allowed them to run Mac computers back to the United States, starting in 2013. Microsoft Office and other business software. They could do this without affecting the company's profit- However, in FY2018 Apple's worldwide Mac computer ability, because of automation cost savings.21 sales decreased 5 percent over the previous year, continuing Apple had also historically paid attention to research to signal the decline of this category since the introduction and development, increasing its R&D investment year after of the iPad in 2010. Overall it appeared that sales of desk- year. In the second quarter of 2019, Apple spent $3.9 billion top computers, especially, were slowing worldwide as the on R&D, an increase of 1 percent from the previous year. tablet and smartphone markets grew, and this was evident As one of Steve Jobs's legacies, Apple had traditionally kept in the worldwide PC market share data from 2018, where the specifics of its research and development a closely only Dell saw any significant growth (see Exhibit 5). Apple EXHIBIT 5 Worldwide PC Market Share, Calendar Year 2018 (units in thousands) 2018 Market Share 2017 Market Share 2018/2017 Growth Company 1. HP 2018 Shipments 59,986 2017 Shipments 58,809 23.2% 22.6% 2.0% 2. Lenovo 59,857 23.2% 58,049 22.4% 3.1% 3. Dell Inc 44,170 17.1% 41,822 16.1% 5.6% 18,021 7.0% 19,010 7.3% -5.2% 4. Apple 5. Acer Group 17,841 6.9% 18,033 6.9% -1.1% Others 58,621 22.7% 63,925 24.6% -8.3% Total 258,497 100.0% 259,647 100.0% -0.4% Source: Inventory and Processor Supply Issues Weigh Against Holiday PC Shipments, According to IDC.IDC, January 10, 2019