Stop the lies! The day that Microsoft 'saved' Apple

Summary:Last week, with Apple overtaking Microsoft in market capitalization — and with the floating of a crazy rumor that Microsoft's Steve Ballmer would talk up iPhone and Visual Studio 2010 at the keynote of next month's Apple Worldwide Developer Conference — news stories on the Web, in print and on the tube repeated a serious urban myth: that Microsoft "saved" Apple in the summer of 1997.

Last week, with Apple overtaking Microsoft in market capitalization — and with the floating of a crazy rumor that Microsoft's Steve Ballmer would talk up iPhone and Visual Studio 2010 at the keynote of next month's Apple Worldwide Developer Conference — news stories on the Web, in print and on the tube repeated a serious urban myth: that Microsoft "saved" Apple in the summer of 1997.

Here's the most common version of the myth from the San Francisco Chronicle:

Ironically, it was Microsoft that saved Apple in 1997, when it pledged to develop applications for the Apple operating system and invested $150 million in the company.

The partnership allowed Apple to go about narrowing its focus to building well-designed products for consumers. ...

Oops, didn't happen. This urban myth won't die and as we can see, it's now accepted in the Apple-Microsoft canon.

Here's the truth:

Back in the summer of 1997, Apple was in trouble with its developers, installed base and investors. The was chaos in Apple's product lines, SKUs with competing capabilities and positioning. Licensees for the Mac OS were clamoring over a go-ahead for new models. Just six months before, Cupertino had brought back Steve Jobs with his NeXT OS to create Apple's next-generation OS, but its arrival on the Mac would not come for a long long while.

And then there were worries about Microsoft Office for the Mac. As I wrote in a post about the anniversary of the keynote:

But the most important announcement of the hour — the one vital to the millions of users who used the Mac every day to get their work done — was Microsoft’s pledge to keep developing Microsoft Office for the Mac.

Worry over MS Office was a concern expressed then by the professional Mac community on the pages of MacWEEK where I worked as a senior editor. MS Word and Excel were used in all professional content workflows and Mac businesses. And in academia and government. And everywhere else. They were critical applications.

At the Macworld Expo Boston keynote address, Steve Jobs told the crowd that Apple needed to improve its relationships. "It needs help from other partners; it needs to help other partners."

Of course, these "partners" Jobs mentioned weren't the ones that most of the attendees hoped to hear about — its Mac OS licensees. Instead, that partner was Microsoft. Surprise! The crowd around me in the Armory hall booed the announcement.

"One [relationship] stood out as one that hasn’t been going so well, but has the potential to be great for both companies: Microsoft,” Jobs said that day.

Read: Better living without MS Office

Then, like Big Brother in the famous Apple Superbowl ad, Microsoft CEO and Chairman Bill Gates appeared above us on a huge overhead projection and made his own set of promises. The first was an investment of $150 million in Apple stock.

Gates then said that Microsoft would continue to develop a Mac version of Office for at least 5 more years. In addition, the next version of Office would be a real Mac program and not warmed over Windows leftovers. "It will be more advanced than what's on the Windows platform."

This is the event that has been framed as Microsoft "saving" Apple. That Gates and Microsoft did a good deed for Apple, offered a helping hand out to the poor GUI interface cousin that was seeing bad days. And after the announcement, Apple's stock went up, which some saw as proof. Analysts revised their predictions of Apple's future prospects from "dead or dying" to "doomed."

Here are some backstory that recasts the myth in a different light:

•Microsoft's $150 stock investment was the result of a settlement of a lawsuit. In fact, the investment was just an initial payment for other "substantial balancing payments" that would be spread out over then next few years, then Apple CFO Fred Anderson said at the time.

The exact amount of the settlement is still unknown as far as I am aware. I've seen estimates from $500 million to more than $1 billion.

•The two companies would cross-license all their existing patents, and any new patents that would become available during the next five years.

•That Apple would make Internet Explorer the default browser for the Mac. If this seems strange, then understand that it meant that Microsoft would support IE for the next 5 years, during a time when IE was the primary browser on the market and when sites were designed specifically to support it.

What was this legal action that gave Apple so much leverage over Redmond? It was a strange one: the Apple Computer v. San Francisco Canyon Co. lawsuit.

Stephen Howard-Sarin, now the vice president for business & finance brands at CBS Interactive, and I co-wrote the story for the Dec. 12 issue of MacWEEK (there weren't the 24/7 Apple channels that we now have on the Internet back then; I believe we broke the story).

Apple suit: Video for Windows cribbed from QuickTime code

Charges of copyright infringement and wrongdoing were raised last week by Apple, which filed an intellectual-property suit against The San Francisco Canyon Co., a small third-party contractor for Apple. But the scope of the court action encompasses industry giants Microsoft Corp. and Intel Corp.

Canyon worked on digital video software for both Apple's QuickTime for Windows and Intel's Display Control Interface (DCI). Apple alleges its copyrighted code found its way into the shipping version of Microsoft's Video for Windows and will be used in future software from both companies. ...

The suit alleges that a senior officer of Intel, after seeing demonstrations of QuickTime for Windows and Video for Windows at Comdex/Fall '92 in Las Vegas, asked Canyon to provide software to Intel that would make Video for Windows' speed comparable to that of QuickTime. Seven months later, Canyon delivered its code to Intel, giving video for Windows 1.1D performance parity with QuickTime for Windows 1.1. ...

A few months later, Apple added Intel and Microsoft to the action. In later testimony, Apple showed that thousands of lines of "significant programming code" for video acceleration used in Windows came directly from Apple's QuickTime for Windows.

A couple of years go by and the companies were all kisses and hugs for the keynote address to the Boston Macworld Expo.

So, is there any ring of "irony" here as the reports make it sound? Not much to my ears. Microsoft and Intel got their fingers caught in the source code and paid for it. Microsoft hired a larger team of former Apple programers, which didn't help Apple directly, and Microsoft Office returned to being real Mac programs instead of lackluster ports.

If we want to look for irony here, perhaps it can be found in the news that both Apple and Microsoft have recently issued public statements supporting H.264 for Internet video. Steve Jobs' pitch gets a high marks from Microsoft’s Dean Hachamovitch, general manager of the Internet Explorer division.

Group hug!

Topics: Windows, Apple, Enterprise Software, Hardware, Microsoft


David Morgenstern has covered the Mac market and other technology segments for 20 years. In the recent past, he founded Ziff-Davis' Storage Supersite, served as news editor for Ziff Davis Internet and held several executive editorial positions at eWEEK. In the 1990s, David was editor of Ziff Davis' award-winning MacWEEK news publication a... Full Bio

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