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Apple in 2011: Huge momentum, and a tragic loss

This will always be remembered as the year that Steve Jobs died, but Apple also demonstrated again and again why it is a dominant force in consumer technology.

Apple Store at Grand Central
Apple capped off an eventful 2011 with the opening of its store in New York City's Grand Central Terminal.
Sarah Tew/CNET

It was a bittersweet year for Apple. In 2011, the company broke sales records and pulled in its biggest profits ever, but lost CEO and co-founder Steve Jobs, who passed away in October.

Jobs began the year by taking what would be his last medical leave of absence from the company, once again leaving COO Tim Cook in charge. Jobs maintained his position as CEO for most of the year, emerging in public only to help launch the iPad 2 in March, and iCloud and iOS 5 at Apple's WWDC event in June. His last public appearance was to pitch Cupertino's city council on the company's plans to build a second campus.

Jobs stepped down as CEO of Apple in August, with the company's board electing to put Cook in charge, and name Jobs as its chairman. Jobs died at home on October 5, the day after Cook and company took the wraps off Apple's newest iPhone.

Also of note were two departures from Apple's top ranks. In March, Mac software VP Bertrand Serlet, a 22-year Apple veteran decided to leave the company to pursue scientific endeavors. Before Apple, Bertrand had been at Jobs' NeXT Computer venture, which he joined after spending four years at Xerox PARC. Also leaving the company was Apple's retail chief, Ron Johnson, who was brought in to help construct Apple's first retail efforts, and spent the next 10 years building it into an empire. Johnson departed to become the CEO of retailer J.C. Penney in November.

Despite the changes up top, Apple had its best year ever, recording earnings of $25.9 billion on $108 billion in revenue. The company closed out its fiscal year with $81 billion in cash and securities, managing to surpass what the U.S. treasury has hoarded away. In that rise, Apple also hit another milestone, passing Exxon Mobil to become most valuable company based on market capitalization, an honor Exxon took back later in the year.

As in 2009, Apple's product launches in 2011 were mainly refreshes of existing hardware. Nowhere was that more clear than the iPhone 4S, a souped-up version of the iPhone 4 with a speedier processor, better camera, and a new voice assistant application called Siri. The voice assistant quickly became the defining feature of the phone, which developers were eager to hack and add more features to.

Customers and press were expecting something entirely different from Apple though, which led to initial disappointment. Rampant rumors, and a several-month delay from Apple's usual iPhone unveiling had many thinking Apple was going to come out with an entirely new device. Despite that, the iPhone 4S went on to become Apple's fastest-selling product in its first few days on sale, with Apple and its carrier partners having trouble keeping units in stock.

Steve Jobs, iPad 2 unveiling
Steve Jobs at the unveiling of the iPad 2 in March. James Martin/CNET

In the months ahead of the 4S launch, the inexplicable happened: Apple managed to lose another prototype iPhone. Unlike the media circus that followed last year's unintended sneak preview of the iPhone 4, shots of this particular prototype did not emerge. In this case, the big aftermath was a black eye for Apple's security detail, which tracked the missing device to a San Francisco home, where they allegedly threatened the resident and his family about their immigration status following an unfruitful search for the unit. That resident later said he was under the impression that Apple's security team members were the police, and they did not properly identify themselves otherwise. He's since gotten a lawyer, and is preparing to file a lawsuit against the tech giant.

Another smudge mark on Apple's 2011 record was the discovery of an unencrypted location-tracking file found being stored on the iPhone. Researchers took the data, which covered up to a year's worth of location entries, and suggested that it could be used to track where users were going, including where they lived. Apple stayed mum on the subject for a week, later addressing it as a "bug" and saying that the file was used to speed up how fast it could track people, as well as fuel a crowd-sourced location database. A software update a few weeks later cut the database down to seven days, as well as keeping the file from being stored on local machines, however that didn't stop the incident from being referred to as "locationgate."

Coming back to hardware, the other star in Apple's product lineup during the year was the iPad 2. The new gadget added speedier insides, a slightly tweaked exterior, and dual cameras, giving people a way to use the company's FaceTime video chat to talk to one another. The device spurred some of the biggest lines outside of Apple's stores ever, and brought in considerably stronger sales than its predecessor.

Also on the hardware front, 2011 brought Thunderbolt, formerly known as Lightpeak, a high-speed data port that came out of a collaboration between Apple and Intel. Apple was the first computer manufacturer to bring it to market, which it did with an update to its MacBook Pro line in February. Throughout the year, Apple upgraded the rest of its computers and display line to work with the new technology, short of the Mac Pro desktop.

Beginning in July, Apple introduced Lion, the latest version of Mac OS X. It was Apple's least expensive upgrade, coming in at $30, and the first to be offered only as a digital download as opposed to a disc. That was made possible by the Mac App Store, which launched as part of a software update in January. Lion went on to become the fastest-selling version of Mac OS X in its first day on sale.

Meanwhile, the iCloud service represents a shift toward a future in which people keep much or all of their digital goods on remote servers rather than a desktop at home or a gadget in the pocket. The upcoming cloud sync service succeeds MobileMe, the $99-a-year service Apple introduced three years ago. iCloud ferries files, apps, app data, and media across iOS devices, Macs, and PCs. It also syncs music across devices.

Apple's planned spaceship campus
In 2011, Apple proclaimed that it sees a spaceship-like campus in its future. Apple

Not all was good news in Apple's software realm though. Apple's reboot of its Final Cut Pro video-editing software was met with skepticism from many longtime users, who chided Apple for not making the program compatible with files from previous versions of the software, as well as for cutting important features. Apple countered by comparing the overhaul to making the move to Intel processors, and promising to bring back some features in the next major version of the software. Competitors then swooped in, offering steep discounts to switchers.

In terms of anniversaries, both Apple's retail stores and the iPod turned 10 years old this year, two areas of Apple's business that couldn't be more different. Apple's retail empire continued to expand during 2011, with the company opening up 40 new retail stores in its fiscal year, and reporting record visitor numbers. By comparison, the iPod continued to see a decline in sales, and Apple passed over giving it any sort of upgrades or the fanfare of its own event.

Apple made headlines with its battles in the courtroom, in particular its spat with Samsung. The row began as a lawsuit filed against the Korean technology giant in late April. Apple took aim at Samsung for "slavishly" copying its product designs, including the iPhone and iPad, as well as infringing on a number of its patents--an accusation that was repeated in lawsuits around the world. Samsung quickly fired back with its own legal claims, with both sides seeking to keep the other from being able to sell the products in various countries. While major decisions in that legal battle aren't set to shake out until next year, minor scuffles between the two companies have led to temporary injunctions in places like Australia.

Legal threats were also aimed at Apple's developers from a company called Lodsys, which claimed it owned patents that covered the feature. The patent holder began seeking out licensing deals with both high- and low-profile developers, something Apple attempted to get in the middle of legally. Like the spat with Samsung, a major decision on that front won't be happening by the end of the year.

Apple also bolstered some of its own legal defenses, making up the lead investor in a consortium of tech companies involved in the purchase of Nortel Networks' patent portfolio. A filing with the SEC in July uncovered the fact that Apple had put in $2.6 billion of its own money to fund the overall purchase price of $4.5 billion. Nortel's portfolio was a hot item, containing patents covering wireless 4G, data networking, optical voice, Internet, and semiconductor technologies.

Last but not least were a wealth of rumors about products that did not materialize during the year, but could arrive in 2012. On that list is a TV set, a product that was mentioned to be one of the projects Jobs was keenly interested in before his death. That tidbit, as well as several other details were laid out in author Walter Isaacson's authorized biography of Jobs, which was released in October, and quickly became a bestseller. Other items on the rumor list include completely redesigned MacBook Pros, the aforementioned iPhone 5, and a follow up to Apple's iPad 2 with a spiffier screen.