In the mid-1990s, Apple was in a severe financial crisis. The company faced poor management decisions, a lack of innovation, and increasing competition, especially from Microsoft, whose Windows operating system dominated the personal computer market. Despite being fierce rivals, there was a time when Microsoft stepped in to prevent Apple from going bankrupt, marking a surprising twist in the history of the tech industry.
Background
In 1997, Apple was struggling to survive, and its future looked bleak. At this time, Steve Jobs returned to the company as CEO after Apple acquired NeXT, the computer company he had founded after being ousted from Apple in 1985. One of Jobs’ first actions was to resolve a long-standing lawsuit Apple had filed against Microsoft in 1994. The lawsuit accused Microsoft of copying the graphical user interface (GUI) of Apple’s Macintosh operating system, which led to a legal battle.
However, in a move that surprised many, Bill Gates and Microsoft came to Apple’s aid. In August 1997, Microsoft made a $150 million investment in Apple, purchasing non-voting shares in the company. This move was controversial, as Microsoft was Apple’s primary competitor in the personal computer space.
The Deal
The deal involved the following key elements:
Apple’s Lawsuit Against Microsoft: In exchange for the investment, Apple dropped its lawsuit against Microsoft. This was beneficial for Microsoft, which was already facing its own legal challenges, particularly an investigation by the U.S. Department of Justice for potential antitrust violations.
Internet Explorer on Macs: As part of the deal, Apple agreed to make Microsoft’s Internet Explorer the default web browser on Mac computers. This was significant because Apple’s own browser, Netscape Navigator, was losing market share to Internet Explorer, which had become the dominant web browser.
Reactions and Impact
When Jobs announced the deal at the 1997 Macworld Boston conference, the reaction was mixed. Many Apple fans were furious, seeing it as a betrayal since Microsoft was considered a fierce rival. Some viewed it as a necessary evil to save the company, while others were skeptical.
Despite the backlash, the investment turned out to be beneficial for both companies. The $150 million infusion of cash helped Apple survive and eventually recover. This investment set the stage for Apple’s renaissance in the early 2000s, leading to the development of iconic products like the iPod, iPhone, and Mac OS X.
For Microsoft, the deal helped avoid further legal issues and potential antitrust consequences, including the risk of a breakup. It also improved relations with Apple, which proved valuable in the long run as the two companies would experience periods of both rivalry and collaboration in the years to come.
Long-Term Effects
The 1997 investment marked a pivotal moment in the tech industry. While it was controversial at the time, it ultimately helped stabilize Apple, setting the company on a path to becoming one of the most successful businesses in the world. Meanwhile, Microsoft continued to dominate the software and operating system markets.
Over the years, both companies evolved in different directions. Under Jobs’ leadership, Apple became a leader in consumer electronics and design, while Microsoft shifted focus towards software, cloud computing, and services. In the end, Microsoft’s 1997 investment in Apple remains one of the most surprising and significant chapters in tech history, demonstrating how even fierce competitors can help each other when faced with larger challenges.
