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

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.

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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, Hardware, Microsoft, Operating Systems, Software

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  • And also...

    The stock Microsoft bought was non-voting and at a bargain basement price. No doubt they sold it a few years later for a considerable profit (Apple's share price went from around $12 in 1996 to $140 before the IT bubble burst in 2000).

    At the time Jobs came back to Apple, there was no public decision on a new OS, Apple was futzing around with Pink and Taligent. When the time came to make a decision, there was a choice of NeXT or BeOS, luckily (perhaps predictably) NeXT was chosen.

    I think that had Jobs stayed at Apple in the 80's, Mac OS would have been UNIX based in 1990, instead we got Mac OS 7 (which was still miles ahead of Microsoft's equivalent - MS-DOS 6 + Windows 3.1). Gates saw the future too and introduced Windows NT in 1993, but the lesser Windows was such a cash cow that it was kept as Windows95/98.
    Fred Fredrickson
    • Apple had **$2 BILLION IN CASH** back in 1997; $150m from MS did not "save"

      <b>Apple had **$2 BILLION IN CASH** back in 1997; $150m from MS did not "save" Apple</b>
      DDERSSS
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @denisrs

        And they were haemorrhaging a billion a year. Guess what that means?

        MS saved Apple by instilling confidence in the investors.
        Sleeper Service
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @Sleeper:

        *bzzt!* wrong. Microsoft and Intel (as outlined above) had to make massive payments of up to $1bn just by itself. Also, Apple was not "haemorrhaging a billion a year", they lost $1bn *that* year, and that was right as Gil Amelio was being kicked out. (Jobs had returned in December of 1996, but wasn't installed as an interim CEO until mid-1997 - this became permanent for him after the company began improving sales).

        Notice that your assertion of stock price swing had bugger-all to do with actual sales (especially when it comes to machines priced as they were in the mid 1990's).

        QED: your assertion is, well, crap.
        Random_Walk
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

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      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @DeRSSS They had cash, but they were burning through it at a high rate. It was about confidence in Apple's future, not so much that Apple needed a 150 million.
        His_Shadow
    • RE: Stop the lies! The day that Microsoft 'saved' Apple

      @Fred Fredrickson

      According to the author of Apple Confidential, M$ sold short on that $150 million stock purchase.

      The stock went UP. They must have been badly burned by the time they were allowed to sell it.

      I'm glad to see this article. I've seen this myth repeated five times just the last four months.
      Jkirk3279
    • UNIX is not Magic!

      @Fred Fredrickson <i>I think that had Jobs stayed at Apple in the 80's, Mac OS would have been UNIX based in 1990,</i>

      I am sick of Mac users saying how OS X is Unix. Having a Mac does not make you a Unix Admin or a hacker, just like driving a jeep does not make you jungle explorer. How many Mac users could actually change permissions on a file? Mac users are the equivalent of soccer moms driving SUV to Wall Mart and slowing down to drive across even the smallest pot hole on the road.
      hamobu-22333136139518773481685514128812
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @hamobu

        Neither does using Linux or unix make you a Unix Admin or hacker. It's not a given either way. Nor was it FF's point.
        Maybe Possible
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @Maybe Possible

        Linux users don't really brag about the heritage of their OS.
        hamobu-22333136139518773481685514128812
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @hamobu - whatever. I've changed file permissions, via the CLI, in OS X.

        And it's well documented. OS X's proprietary, closed-source APIs are built on FreeBSD. You cannot deny fact.

        I wish Apple had bought BeOS at the time, however... BeOS cremated EVERY operating system of the time and still would today, due to being better-built, with native SMP and multithreading from the get-go, and not needing to be retrofitted to take advantage of multiple processors.
        HypnoToad72
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @hamobu-22333136139518773481685514128812 <br><br>*quote*Linux users don't really brag about the heritage of their OS.*quote*<br><br>They don't have to because Linux is accepted as an OS cool enough for geeks while Mac OS X is often ridiculed as being good only for computer illiterate people.
        star-affinity
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @hamobu-22333136139518773481685514128812

        @hamobu-22333136139518773481685514128812 <br><br>*quote*Linux users don't really brag about the heritage of their OS.*quote*<br><br>They don't have to because Linux is accepted as an OS cool enough for geeks while Mac OS X is often ridiculed as being good only for computer illiterate people.
        star-affinity
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @hamobu-22333136139518773481685514128812 <br><br>*quote*Linux users don't really brag about the heritage of their OS.*quote*<br><br>They don't have to because Linux is accepted as an OS cool enough for geeks while Mac OS X is often ridiculed as being good only for computer illiterate people.
        star-affinity
  • of course microsoft saved apple...

    they saved apple from total destruction... but the subtext is what is more important here, and that is: Did Microsoft do this because they are a benevolent company? ... and the answer to that is "No".

    If Apple died, who is going to be competing with Microsoft in the desktop space? It will basically become a monopoly. This would have created such a massive problem for Microsoft that they NEEDED to save Apple, not for Apple's sake but for their own sake. Apple was Intel's AMD of yore. A little player who can stick it to the big guy but not really threaten them in any big way.

    Looking forward, Microsoft shrank, Apple diversified and grew in other markets - and although Microsoft is still technically "king" in the spaces that it has always dominated - office, desktop and business applications - Apple has dominated in other areas and has thus demonstrated the keen perception of Steve Jobs at the helm.

    You don't keep a CEO like Steve down for long, so even if Microsoft didn't save Apple, Steve may have still been able to achieve such amazing heights of success though another vehicle company - perhaps another iteration of NeXT or via some other means. Apple is where it is today thanks to Steve Jobs and thanks to the serendipitous situation with Microsoft. It's not really the king because of itself, it's the king because of Steve Jobs.

    When Stebe Jobs retires - which would be some time down the track, it may be hard to say what will happen to Apple. A brilliant CEO is great as long as s/he lives forever. Unfortunately we aren't at that stage yet.
    buoynscom
    • So Gates had a crystal ball?

      @buoynscom
      It is another urban myth that MS "saved" Apple to prevent anti-trust action. Firstly, the famous DoJ case was brought in 1998, the year after the deal with Apple. And the suit was in regard to Netscape (which was already effectively defunct), it had nothing to do with Apple. It was about MS abusing its monopoly to leverage the browser market, Apple didn't have a browser until Safari in 2003.

      Further, MS was still declared to have a monopoly in desktop desktop systems anyway, so even if that [b]was[/b] the motive, it didn't work.
      Fred Fredrickson
      • what do you mean "crystal ball"?

        @Fred Fredrickson
        Thank you for your response and for your counterpoints on the anti-trust issue. However I don't know what "So Gates had a crystal ball?" means, some sort of stab at something I guess - but anyway - on to the topic at hand: Indeed Microsoft did screw up royally with the Netscape debacle. Unfortunately we're still stuck with the exact reasons and ramifications for Microsofts actions towards Apple in 1997 and if we are to be frank, we just don't have enough solid information to make a definitive judgement as to whether it really was that important to Apple or not. That being said, Microsofts actions couldn't have hurt Apple, so it's effect was either zero at worst or a net positive at best. Whether that net positive means the difference between Apple pulling through is something that will perhaps always remain controversial - and while the title of this article is 'stop the lies' defiantly, having a cool head and no affinity to either company with personal bias will always present the logical outcome: There's no way to know for sure.

        On a personal level, if somebody helped me in the past, I'd acknowledge their help later down the track even if it turend out to be not as major as everyone thought. I just think it's raw pride on both sides that either makes people believes/disbelieves what happened in 97 to be significant or not. For Apple to "owe" Microsoft would sour the victory of overtaking it in marketcap. For Microsoft fanboys (if they actually exist besides those Xbox people) its giving into those crummy Mac users.

        Since history has already been written, I think it's sensible enough to acknowledge the actions of Microsoft in helping Apple. To dismiss it as nothing really does seem rather spiteful from a third-person point-of-view --- but as I said in my original post --- the subtext I feel is more important here, and that Microsoft isn't a benevolent company, whatever it did, it did out of self interest.
        buoynscom
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @buoynscom
        Nice spin. I think MS/Intel could have been in huge trouble for what they did with Quicktime code. So who actually helped who? I thinks it's more like Apple could have ruined MS & Intel's reputation in the tech world (along with a much larger monetary judgement), caused major problems for MS in the antitrust case & sent Windows Media player back to what it was garbage. MS cut a deal to get them off the hook. They got off easy. I wouldn't exactly call that help...but you would.
        SquishyParts
      • RE: Stop the lies! The day that Microsoft 'saved' Apple

        @Fred Fredrickson not "crystal ball", it's "crystal balls", a nice way of saying that he was a bit on the fragile side and as we can see by AAPL growing 10 fold while MSFT has stagnated at $25/share over the last 10 years, it's a pretty fair assessment.
        geotopia@...