Microsoft's $200-million investment in Apple
designed to stop competitor from getting cored Aug 26 1997

You've probably seen or heard the news. It made the front page of the papers, and even surprised me by making it onto the three-minute news flashes I heard on my car radio that day: Steve Jobs announces, to boos from the audience, that Microsoft (a.k.a. The Great Satan) was investing $150 million in Apple Computers.

Well, like most things that make the headlines, there's both more and less to this story than meets the eye.

According to Microsoft chief financial officer Greg Maffei, Microsoft bought the Apple stock in response to newly appointed Apple board member Steve Jobs' request that they make a public demonstration of their commitment to Apple's future by investing in the company. Microsoft also made a commitment to release a version of its best-selling Microsoft Office Suite, updated for the Mac. Microsoft and Apple agreed to keep versions of the Java programming language compatible, so Java software could run on both Windows and Mac platforms, and Apple promised to make Microsoft's Internet Explorer the Web browser most easily installed on the Mac.

All in all, an odd agreement.

Microsoft invested some money in Apple stock, but in reality, the amount invested was fairly modest by the standards of either company. Microsoft has been investing in a wide range of companies and technologies, with the amounts discussed totalling several billions. And despite recent financial setbacks, Apple still has a hefty bank balance and didn't really need Microsoft's cash. The act was more symbolic than practical, and it resulted in Apple's stock price rising by about 25 per cent as other investors, believing that what was good enough for Bill Gates was good enough for them, jumped in. (As a result, Microsoft immediately gained close to $55 million on its investment.)

Microsoft publicly promised to upgrade the Mac version of Office, but that was something they were doing anyway. Indeed, they had previously promised to put more effort into keeping the Mac software up to date. In fact, Microsoft has always made a good profit selling software to the Mac market -- by some accounts, more money per machine, on average, than it makes on the more heavily competitive Intel market.

And there was still no commitment that the Mac versions wouldn't be released six months after the Windows versions, or that Microsoft would develop software for Apple's next-generation Rhapsody operating system.

The other two issues were mostly wins for Microsoft in relation to their enemies: Netscape and Sun. Apple will now ship Microsoft's Web browser rather than Netscape's, and has agreed to coordinate its Java development with Microsoft rather than with Sun.

All in all, the total package doesn't have much substance, and is more public tip of the hat by Microsoft towards Apple and Jobs.

There is another, darker, aspect to the deal, though. The continued good health of the Macintosh platform is of benefit to Microsoft -- not only because of the amount of software it sells to that market, but also because Microsoft is under ongoing scrutiny from the American government, concerned by cries of "Monopoly!" from its competitors. As a result, Microsoft needs to keep Apple around to maintain at least the appearance of competition among computing platforms.

Despite the votes of support from Microsoft and Wall Street, Apple has some real tasks ahead in the near future. They need to clearly decide whether to support the new pack of Mac-clone manufacturers or not. And they need to make a series of hard decisions about the company's direction and future. While the new OS 8 operating system has been a strong seller since its July release, Apple's share of the new computer market has continued to drop. It would be nice if they could stabilize their top management, and perhaps, just maybe, get a CEO.

In recent weeks, I've had a number of conversations with current Mac users who have been thinking of switching to the dreaded PC/Windows platform. These are always odd conversations. On the one hand, the Windows platform is much less alien than most Mac users have been taught to believe. And on the other, I think Macintosh has more of a future than many of the Mac users I've spoken to seem to fear.

At the same time, I can't quite see Steve Jobs -- one of the original Apple founders, who has recently returned to a position of influence after a decade in the wilderness -- as the source of Apple's salvation. A man with a great sense of vision and style, perhaps, and certainly with a great deal of charisma, but take a look at business historian Randall Stross's 1993 book Steve Jobs and the NeXT Big Thing to get a sense of how, through his being totally uninterested in the practicalities of bringing a product to market, NeXT, under Jobs' management, managed to blow $650 million of other people's money. That Apple was willing to pay $400 million to bring in Jobs and NeXT does not necessarily bode well for their good judgment.*

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Alan Zisman is a Vancouver educator, writer, and computer specialist. He can be reached at E-mail Alan