Controversial Macintosh deal precursor to Apple’s trillion dollar turnaround
THE biggest publicly listed company in history is also the biggest turnaround story in history, and it can be traced back to a controversial bargain struck with a sworn enemy.
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APPLE Inc’s recent milestone of a $US1 trillion market capitalisation is all the more stunning because the company came back from the brink of bankruptcy to get there. The biggest publicly listed company in history is also the biggest turnaround story in history.
And it can be traced back to a controversial “deal with the devil” that kept Apple alive, 21 years earlier almost to the day.
Founder Steve Jobs returned to the foundering company in 1997 when Apple bought his company NeXT for its desktop operating system, which would become Mac OS X (now simply macOS) and lay the framework for the mobile iOS. He found a company in disarray, with too many product lines and not enough sales, haemorrhaging hundreds of millions each quarter. A succession of hotshot CEOs had failed to turn things around, and conventional wisdom was that Apple was doomed.
Jobs had previously said, “If I were running Apple, I would milk the Macintosh for all it’s worth – and get busy on the next great thing.”
But to milk the Mac he had to keep it alive, and central to this was Microsoft Office, essential to most computer users at the time.
In return for Microsoft purchasing a stake in Apple and guaranteeing development of the Mac version of Office for five more years – a crucial show of confidence in what was widely seen as a dying platform – Apple dropped long-running legal action over Windows’ alleged copying of the Mac, and made Microsoft’s Internet Explorer the default web browser on the Mac.
Microsoft founder Bill Gates needed to keep Apple alive to help prove Microsoft wasn’t a monopoly, as he faced antitrust action by the US Department of Justice. But in the tribal platform wars of the ’90s, Mac users considered the deal tantamount to treason.
In 1984 Apple had launched the first Mac computer with a subversive Ridley Scott-directed Super Bowl commercial, painting Mac users as free thinkers in an Orwellian world dominated by IBM PCs. Now here was Gates appearing Big Brother-like on the big screen at Macworld Expo in Boston in 1997, as Jobs announced Microsoft was bailing out Apple. There were jeers from the hardcore Mac crowd, but Jobs cautioned that for Apple to win, Microsoft didn’t have to lose.
The deal even made the cover of TIME magazine (below), which reported details of Jobs and Gates’s phone call, and used a quote from Jobs on the cover: “Bill, thank you. The world is a better place.”
It would be the first of many TIME covers featuring Jobs, as Apple went on to have one hit product after another.
Microsoft purchased only a small percentage of non-voting stock, but a misconception soon arose that it had bought the entire company. Microsoft eventually disposed of most of its Apple stock, which today would be worth tens of billions.
A year after the deal Apple would release its first “i” product, the iMac, which leveraged the openness of the internet to reignite buzz around the platform. Three years later came the iPod, then in 2007 the iPhone – followed by the digital disruption of countless industries. Now Apple is bigger than Microsoft, which was unthinkable even a decade ago.
While Apple had pioneered handheld computing with the Newton – which Jobs axed upon his return to the company – ironically it was Gates’s obsession with tablet PCs in the 2000s that prompted Jobs to consider an Apple tablet. From that project came the final design for the iPhone, which not only saved the company but propelled it to its dizzying heights of today.
Lately, many of the Mac faithful who’d been “milked” during Apple’s darkest days, have complained the computer side of the company has been neglected, as Apple becomes an iPhone and online services giant.
Jobs died of pancreatic cancer in 2011, but not before launching “one more thing” – the iPad – and seeing the first signs of Apple 2.0 becoming the biggest publicly listed company in history.
His hand-picked successor, former chief operating officer Tim Cook, has presided over the company’s continuing rise, with new products from the Apple Watch to the HomePod, and the recent trillion-dollar milestone.
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