# microsoft bought apple shares?



## frompc2mac (Oct 25, 2003)

I'm in an economics class and my teacher keeps saying microsoft bought a really huge amount of apple shares to keep them ffrom going out of business. He said Apple would have gone out of business, but that would put microsoft in trouble for having a monopoly so they're paying to keep apple open. He's said this like 4 times now..though im not sure where he gets his info. So I figured I'd ask you guys about it. Any validity to this?


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## Carex (Mar 1, 2004)

It is valid. I don't recall the details, others might. When they were initially in trouble (Microsoft), they made a deal invest in Apple to make it look like they weren't trying to run everyone out of business. 

Politics (and business) makes strange bedfellows.


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## dthompson101 (Jan 16, 2001)

Yup, they bought shares $150 million worth, but they were non-controlling shares from what I recall and I believe that they no longer have these shares either. They sold them back to Apple...

Not totally sure on the whole setup of it...


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## MannyP Design (Jun 8, 2000)

I believe this was around the return of Jobs. Microsoft invested in 150 million non-voting Apple shares.

http://www.pbs.org/newshour/bb/cyberspace/july-dec97/apple_8-6a.html

EDIT: Doh! Dave beat me to the punch!


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## minnes (Aug 15, 2001)

if you call about 2 percent of the company a huge lot, it seems that the public got the impression that percentage was much closer to 100 percent.


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## lindmar (Nov 13, 2003)

Pirates of Silicon Valley is a good film to track down to see all of this....
ITs played by actors but its still cool!

Also, BBC did a special a while back on Apple VS Microsoft and that was quite the documentary... I have it on my b/w somewhere....

Cheers


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## simon (Nov 2, 2002)

Microsoft saves Apple - what a crock ... 

Apple announced that Microsoft was investing 150 Million in non-voting stock. In return Apple was making Internet Explorer the default browser on the Mac, it would also drop the outstanding patent infringement lawsuit against Microsoft. Beyond that, Apple also announced a "broad" cross license their patents with Microsoft (for an undisclosed sum, though it's generally agreed it was another 150 million).

I also think the Microsoft agreed to continue development of the Apple OS verion of Microsoft Office (5 year deal I believe) 

article about it here:

Microsoft buys Apple Stock


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## GratuitousApplesauce (Jan 29, 2004)

Yikes, frompc2mac, I’d be really wary of anything else that teacher tells you if he insists on parroting urban legends as fact. Type Apple + Microsoft + “$150 million” into Google and find out the facts. Right off the top there are stories from Wired News and others, a little further down you can find Apple’s press release. Get the facts and email them to him.

Apple was not in danger of folding in ‘97 or any other year, it was not a bail-out. Apple had and still has several billion dollars in the bank. $150 million bucks might be closer to what Apple spent on janitorial services that year.

Obviously MS had an angle here and many speculate that, with their anti-trust troubles that year, (which the Bush Administration subsequently did away with) it was important for them to be perceived as fostering diversity in the computer industry and not looking like a monopolist. By investing in Apple they probably helped that perception. 

Or maybe Gates just found some spare change in one of his pants pocket and decided to have some fun with it.


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## Pelao (Oct 2, 2003)

Simon has the correct story. there is no way this "saved" Apple. In fact, you could argue Apple should have maintained it's lawsuit. the only positive was that MS would continue to develop Office for Mac for 5 years - as Simon says (ha ha) the 5 years is up. This is a potential weak spot for Macs.

Anyway, nope, MS didn't save Apple.


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## Macaholic (Jan 7, 2003)

A crock indeed. Not a valid point on the part of your professor.

Apple was losing between *twentyfive and SIXTY MILLION DOLLARS A QUARTER!* About $1.6 billion over a year and a half. And Apple has an $8 billion annual break-even point. If Apple didn't change more than getting that investment from Microsoft, that money would have bled away in less than a year. No, it wasn't Bill gates who saved Apple; it was Steve Jobs.

Jobs struck the deal with Microsoft. Jobs trimmed and revamped the line -- most notably doing the iMac _which can be considered the TRUE saviour of Apple_. Jobs collected the awesome teams at Apple and guided the transition of the NeXT OS from an obscure footnote in computing history to arguably the best operating system on the planet: Mac OS X. And then there's Jobs doing doing the G5, the iPod and the iTMS that has revolutionized music and sought to solve a seemingly unsolvable problem (well, it's the best solution yet and its trying its best).

Bill Gates had no hand in any of this.

I'm not saying "Steve Jobs coded every line of Mac OS X with his very own two hands!", but HE IS the guiding visionary of Apple.

Besides, it's not all charity on Microsoft's part. According to their own info circa 1999, there's about 10,000,000 users of Office/Mac. Multiply that by the US price and you get $4.6Bln. Toss in say another 5 million users buying the upgrade at $299.00 from Office 98 to Office X and that's another US$1.4bln in Microsoft's coffers (that number of upgrades is just a number of mine for argument's sake).

So really, $150,000,000.00 is chump change. For Microsoft -- and Apple.

And besides, Microsoft recouped about a third of its investment *the day the deal was announced* at Macworld in Boston, as the stock price soared by more than 30 percent.

This article from around the time of the deal states that the Office/Mac user base was at around 8 million. This shows an increase in users by Microsoft's own numbers in comparison to the earlier referenced article. And finally, this page at Microsoft states that about 60 percent of Office for Mac customers operate in mixed Windows-Mac environments. So, given the entrenched and traditional uses of a Mac in many companies (graphics for advertising is just one example) and where the bean counters and admin use Windows in those companies, Office/Mac isn't only a crucial service to Mac users; it's also a crucial service to the admin departments in their dealings with the creative ones.

Some food for thought for your professor.

**gets off podium**


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## used to be jwoodget (Aug 22, 2002)

Macaholic: "I'm not saying "Steve Jobs coded every line of Mac OS X with his very own two hands!", but HE IS the guiding visionary of Apple."

Apparently Jobs has never coded. He's a visionary and perfectionist (and opportunist) but not a computer programmer. Jon Rubenstein leads to programmers (much like Steve Wozniak in the early days).


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## IronMac (Sep 22, 2003)

Hrmm...while the gist of most of these posts are correct, I'd like to have a closer look at Macaholic's post:

A. _there's about 10,000,000 users of Office/Mac._ 

Looking at the press release provided, it says that

* Cohen is one of 10 million customers using Microsoft products on their Macs.*

This does not mean that there are 10 million users of Office for Mac. It simply means that there are 10 million people using MS products on their Macs. Later on, the article goes on to say that about 1 million copies of Office 98 for Mac has been sold.

B. You cannot say that MS received $4.6 billion from selling Office for Mac..well, that number doesn't work in any case once you take into account A. In fact, MS does not net $461 per copy sold through CDW. There's something called "margin" here. At best, they probably get about 70% of the retail price. I used to sell software and the best that we could get from suppliers was about 35%.

And Pelao, MS is still coming out with Office in May...got to get my copy then. I'm curious to see how compatible it will be with the Windows version.


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## Pelao (Oct 2, 2003)

IronMac,

yes, I am happy that MS is coming out with the updated Office this spring. But nevertheless some analysts reckon this is a weak spot for Apple: if MS stopped developing Office for Mac many corporate users may have yet another reason to avoid Macs

Personally (and this is a bit off topic) I think Office is on the brink of losing at least some dominance. More and more alternatives are coming out and they will mature rapidly in the next few years. I doubt if any will replace Office, but the choices are becoming more valid.


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## IronMac (Sep 22, 2003)

Yeah, if MS ever decides to drop Office support for Mac it will be a big blow for the platform. There are other alternatives out there but they are not as polished as Office. My g/f uses OpenOffice (or was it the other one?) and she likes it enough that she doesn't miss Office.


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## PosterBoy (Jan 22, 2002)

Apple didn't have the billions of dollars in the bank at the time either, they were bleeding money like there was no tomorrow coming out of Amelio's turn at the helm (and those before him).

As I recall, the $150 million investment was pretty much to secure Microsofts interest in continuing to develop Office for Mac, a software package that could then (and realistically could still) make or break the platform. Apple agreeing to make IE the default browser was also part of this.

The other part of the deal, the dropping of the patent infringement suit, was I believe a 2 way deal. MS gets to look at features that Apple developed, but Apple was free to copy the best of what MS engineers came up with, too.

Bill Gates didn't save Apple. Steve Jobs, along with Jonathan Ive and the rest of the senior team he assembled, saved Apple. Bill Gates did guarantee the viability of the Mac platform for many, many users by agreeing to continue developing office though.


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## gordguide (Jan 13, 2001)

" ... Apple didn't have the billions of dollars in the bank at the time either, they were bleeding money like there was no tomorrow coming out of Amelio's turn at the helm (and those before him). ..."

Apple's losses in 1996 and 1997 (the date of the MS deal) were huge; but there were other factors at work.

The 2nd quarter loss of $ 740 million in 1996 remains a record to this day; there was also a 2Q loss of $ 708 million in 1997. Sensational numbers, to say the least.

But, as always, there's more to it than that. The Q3 '96 loss was only $32 million; Q4 saw a $25 million net profit. Q1 '97 followed with a loss of $116 million, then the $708 million of Q2 97. The Q2 97 loss caused Apple's cash reserves to fall to $1.4 Billion, the only time (before or since) that I'm aware of in the last 20 years when it fell below $2 billion.

So, before the loss they literally did have "billions in the bank" and right after that quarter of 97 they once again had "billions in the bank" while during that quarter they only had "thousands of millions in the bank".

The above figures are net from all operations; they do not represent the performance of Apple's Macintosh revenue. The operating figures are Q2-96/ $360 million loss; Q3-96/ $116 million loss; Q4-96/ $ 34 million profit; Q1-97/ $124 million loss; Q2-97/ $186 million loss.

Now, how do we go from a Q2-97 operational loss of $186 million (the money from Macs) to a Q2-97 loss of $ 708 million (All of Apple's business; ie profit from Filemaker, etc). Well, there's the interesting part.

The operational loss of $186 million could easily have been a profit; Apple had a half-billion in unfilled, ordered product that quarter.

There was a charge of $155 million for severance and restructuring charges related to the layoff of about 3,000 employees. That's the kind of charge that warms the heart of a financial analyst; it means profit for the future. Nothing makes Wall Street happier than unemployment.

But, the majority of that loss was due to a charge for the purchase of NEXT, Inc. Yes, the second highest loss in Apple's history is responsible for what most people would agree saved the company (honorable mention to the iMac, but NEXT came first) and what would eventually become OS X. And Gil Amelio was the CEO who approved this purchase; he was not head of Apple during the Q2-96 loss.

[ April 04, 2004, 02:20 PM: Message edited by: gordguide ]


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## PosterBoy (Jan 22, 2002)

Sorry, meant to say "didn't have the billions in the bank they do now".

Which is (part of) the reason why the Cube fiasco wasn't so dangerous as the Performa fiasco a few years earlier.


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## Macaholic (Jan 7, 2003)

> Macaholic: "I'm not saying "Steve Jobs coded every line of Mac OS X with his very own two hands!", but HE IS the guiding visionary of Apple."
> 
> Apparently Jobs has never coded. He's a visionary and perfectionist (and opportunist) but not a computer programmer. Jon Rubenstein leads to programmers (much like Steve Wozniak in the early days).


Actually, Jon Rubenstein is the hardware guy. Bertrand Solel is the OS guy -- but Avie Tevanian is "THE MAN" for OS development. He's the main guy.

As I alluded in my post, Jobs is the visionary, under whom all these guys work away.


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## Macaholic (Jan 7, 2003)

Thanks for the sharper focus on my post, IronMac. Yes, the retailers get a cut, as do others. I missed that point in my flurry of a post









I maintain that Office is about as important to MS as ut is to the Mac userbase, though, and that they make a tidy profit on it.


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## gordguide (Jan 13, 2001)

Perhaps now that Balmer is head of MS this could change, but it's my personal feeling that Bill Gates has a very soft spot for Microsoft Word on the Macintosh; he built his entire company on it and it provided most of the profit used to build Windows. I don't see MS killing it anytime soon.


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## Macaholic (Jan 7, 2003)

Monkeyboy Balmer was back there, too. But he's so kookie that you can never predict what he'll do


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## gordguide (Jan 13, 2001)

Ummm, yeah, what Macaholic said.


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## Gerbill (Jul 1, 2003)

Microsoft Word IS a Mac application. If you could look at old, old software versions you would find that the first version of Word for Windows, as well as all subsequent versions, were based on Word for Mac - Word for DOS was a completely different program, (which, in the world of command-line apps, sucked big-time compared to WordPerfect for DOS, BTW.). 

Cheers :-> Bill


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## gordguide (Jan 13, 2001)

MS Word for Windows 1.0 is a port of MS Word 4x (I think, might be 3x) for Macintosh. It's one of the reasons Microsoft changed the name from version numbers to meaningless names like Word98; they didn't like the Mac version number being higher.

It's also probably the greatest reason Word became the dominant WP program on Windows; it really was a Mac program with all the usual ease-of-use already built in, something that it's competitors struggled with (e.g. WordPerfect). Microsoft's marketing efforts at the time suggested that Windows/Word worked "just like a Mac".

There was a short list of differences between the Mac and Windows versions that were easy to remember, while for the most part everything worked exactly the same on both platforms.

Of course, after a few revisions Word for Windows became rather bloated and lost a lot of that ease-of-use, but the early versions are quite simple to use.

WordPerfect actually became more easy to use at the same time Word for Windows was getting harder, but by then MS had shifted the marketing efforts to emphasize features over usability.

[ April 05, 2004, 02:37 PM: Message edited by: gordguide ]


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