Apple, Microsoft elaborate on cross-licensing pact

Apple Computer Inc. will receive some form of financial reimbursement from Microsoft Corp.
Written by Margaret Kane, Contributor

Apple Computer Inc. will receive some form of financial reimbursement from Microsoft Corp. over the next two to three years as part of today's cross-licensing agreement, Chief Financial Officer Fred Anderson said today.

But in a conference call, Anderson said any payments would not be material--that is, they would be small enough to be incorporated in the rest of the company's income statement. For his part, Microsoft CFO Greg Maffei wouldn't discuss any financial aspects of the deal other than the $150 million in Apple stock that Microsoft has purchased. (See story, www8.zdnet.com/pcweek/news/0804/06ajobs.html.)

That investment was made at the request of Apple co-founder and board member Steve Jobs, according to Maffei.

"He wanted us to make a visible commitment to Apple and to the Mac, and he wanted us to become an investor," he said.

The commitment appears to have worked. Apple's stock skyrocketed $6.75 to $26.50 on the news, causing Maffei to joke that "the first day's return on the investment seems pretty good."

The broad cross-licensing pact between Apple and Microsoft, which will run for five years, covers any patents either company files during that period. Maffei said such deals are common among companies "you want to work closely with."

However, it is not clear now exactly how closely Microsoft and Apple will be working. So far, the companies have announced that Microsoft's Internet Explorer will be the default browser on the Mac OS, and that Microsoft has agreed to ship Macintosh versions of its Office suite for the next five years. But the deal does not cover Apple's next-generation Rhapsody operating system, Maffei said.

"We have not formally committed to release Office for Rhapsody," he said. "We're going to basically take the lead as they bring out new operating systems."

Maffei added that the two companies have held discussions regarding the Windows NT operating system but have not agreed to anything.

The other area of collaboration involves the Java Virtual Machine. In essence, Microsoft and Apple agreed that whatever one company does with Java, the other will do as well, so that both versions of the virtual machine will work together.

That could put a wrench in the works for 100% Pure Java, an initiative by Sun Microsystems Inc. to encourage application developers to build their products using only cross-platform, vendor-neutral technologies. Because so many Web sites run on Macs--64 percent, according to Jobs--the agreement with Microsoft will give a significant boost to Microsoft's attempts to get Java out from under Sun and its subsidiary JavaSoft's control.

"It's not what everybody's getting from JavaSoft, it's what JavaSoft is telling everybody else they can't get," Maffei said.

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