Name: How Microsoft Saved Apple (And Why They Did It)
Uploaded: 2018-08-22T18:00:57.000Z
Duration: 9 min 19 s
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Apple: hands down the most successful American
company.

Between the ubiquity of their devices and
the almost fanatical loyalty of their customers,

it should come as no surprise that Apple recently
became the first trillion-dollar company listed

And yet, just twenty years ago Apple was on
the verge of bankruptcy and it wasn't Steve

Jobs that saved them, but rather their greatest
rival at the time, Microsoft.

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The Apple of 1997 was a very different company.

It wasn't selling smartphones, they weren't
even invented yet, but what they were selling

Back then Apple was a computer company and
that was even reflected in their name, but

by all accounts it was a company in decline.

Apple's computers were simply too expensive
to be massively popular.

They did have good margins, but their market
share was abysmal.

You see, Apple refused to license its operating
system to other companies, which had no choice

but to go to the only other player in town,
Microsoft.

Now, keep in mind back in the 1990s the vast
majority of computers were used for commercial

Their main value was the software they had,
and if your computer didn't have the necessary

programs developed for it, well then it was
effectively useless for big companies.

In 1997 Microsoft had a staggering 90% market
share, and unsurprisingly almost all the software

that was being developed at the time was made
for Windows.

Every software developer had to make a choice:
he could spend only as much money as necessary

to create programs for Windows, or throw almost
twice as much to also support Apple, which

It's also worth noting that throughout this
period Steve Jobs wasn't even part of the

company: the Apple board of directors had
forced him out in 1985.

But in 1997 the situation was truly desperate:
sales were declining rapidly and after a series

of unsuccessful CEOs, the Apple board actually
brought Steve back.

In February they acquired Next, the company
Steve had started after leaving Apple.

But by that point Apple's finances were
in such bad shape that Steve Jobs didn't

actually receive cash for this purchase; instead
he received Apple shares, specifically 1.5

By the end of July Apple had less than 90
days worth of cash left in the bank.

Apple was worth less than $3 billion and had
lost over a billion in a single year.

But then, on the 6th of August 1997, Steve
Jobs made an announcement that shocked the

I'd like to announce one of our first partnerships
today, a very very meaningful one, and that

You probably noticed that the crowd's response
was hesitant: they just could not comprehend

how Apple could possibly partner with their
biggest competitor, who was driving them out

As the announcement progressed, things got
worse.

Next, we have taken a look at browsers out
there and Apple has decided ... Apple has

decided to make Internet Explorer its default
browser on the Macintosh.

The speech was sounding like a surrender statement.

And lastly, Microsoft is making an investment
in Apple.

Microsoft is buying $150 million worth of
Apple stock at market price.

Microsoft wasn't trying to acquire Apple,
instead it was just funding it.

But it wasn't just cash that Bill Gates
was offering.

The second part of this is Microsoft is committing
to release Microsoft Office on Macintosh for

The issue with software I mentioned earlier
that was basically bringing Apple down, was

being solved by Bill Gates single-handedly.

No one would ever purchase an Apple computer
without Microsoft Office on it and here is

Bill Gates giving it away for shares at market
price, which he could have just purchased

Why save Apple on the eve of what would've
been their death at the hands of Microsoft?

Well, as you probably guessed, Bill Gates
wasn't doing this out of the kindness of

In fact, back then Bill Gates had a rather
negative reputation.

He wasn't really into philanthropy yet;
instead, he was seen as a cutthroat businessman

willing to do anything to succeed in his industry.

And by all accounts Microsoft was successful;
so successful in fact, that it was attracting

The Department of Justice had been preparing
its case against Microsoft since 1993, and

obviously Bill didn't want his company broken
up, so what better way to show that Microsoft

isn't a monopoly than by literally propping
up his competition.

Less than a year after the Apple partnership,
the DOJ summoned Bill Gates for a painstaking

By the way, you can tell a lot about someone
based on how they act during these things.

Did you ever have any discussions with any
representative of Real Networks concerning

what products Real Networks should or should
not offer or distribute?

Notice how long he takes before giving an
answer, carefully considering how his responses

A program designed to assist in the performance
of a specific task, such as word processing,

Throughout the deposition he'd attack definitions
and remain as vague as possible because he

knew that by saving Apple a year earlier he
had really saved Microsoft.

The DOJ, of course, eventually gave up and
in 2001 cleared Microsoft with minimal punishments.

And as to what happened with the Apple shares
Microsoft had, well, Bill Gates got rid of

them as soon as they had served their purpose.

Once the Department of Justice had settled
with Microsoft, Bill Gates converted his preferential,

non-voting Apple shares into regular stock.

In total he ended up with 18.2 million shares
of Apple, which he sold in 2003.

Now, keep in mind this was after the dot-com
bubble had crashed and in 2003 Apple's stock

price was still extremely low compared to
its pre-bubble heights.

So just how much money did Bill Gates miss
out on?

Well, Apple has been performing so well since
2003 that its stock has split twice in that

time, once at a 2:1 ratio in 2005 and a second
time at a 7:1 ratio in 2014.

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How Microsoft Saved Apple (And Why They Did It)

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