Bill Gates Saved Apple From Bankruptcy With $200 Million Investment In 1997 (2024)
For the first thirty years of the personal computer age, you had a pair of high-energy college dropouts both born in 1955 leading the pack: Steve Jobs and Bill Gates. In an oft mythologised bit of tech history, their paths once converged in a fairly direct way when Bill Gates offered a financial olive branch to a nearly bankrupt Apple Computers in the form of his US$150 million (AU$200 million) investment.
Similar to Albert Einstein and Neils Bohr in the sphere of 20th-century physics, the two had quite a well-documented professional rivalry that stemmed from the fact that there was nobody else operating on quite the same level. In Jobs’ biography, Walter Isaacson likened it to a “binary system” in astronomy terms – when the orbits of two stars are linked because of their gravitational interaction.
They were known to openly mock and chastise each other and even had a series of ongoing legal feudings to go along with it. For this reason, the announcement of the deal on August 6th, 1997 sent shockwaves across the business world. In its wake, the New York Times opinion section wrote that “even in cyberspace, the moment can only be described assurreal.”
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In typical Jobs fashion, the surprise announcement itself was pure theatre. At Macworld in Boston, a satellite video feed of then-Microsoft CEO Bill Gates was beamed into the auditorium above Jobs. This was met with loud booing from the Apple faithful in attendance, whom Jobs was left to console.
“We have to let go of a few notions here. We have to let go of the notion that for Apple to win, Microsoft needs to lose.”
With 24 years of hindsight to work with, it’s clear that the reverse of this was also true; both companies needed this deal to happen exactly when it did. As far as Apple was concerned, they were a far cry from the 21st century powerhouse we would come to know them as. Long before they revolutionised the music and communications industries, Microsoft dwarfed them in terms of their respective share of the desktop computer market, and Apple’s time was fast running out.
For Microsoft, the company was in the midst of an image-tarnishing antitrust fight over its heavy-handed promotion of IE during the height of the browser wars with Netscape. This allowed them to look like a noble competitor for a change, helping out the little guy with an investment that was barely noticeable for them financially.
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After receiving their much-needed cash injections, and an assurance that Microsoft would support Office for the Mac for five years, Apple gave Gates non-voting shares in return. Apple also agreed to drop a long-running lawsuit in which they alleged Microsoft copied the look and feel of the Mac OS for Windows, and to make Internet Explorer the default browser on its computers.
The Bill Gates Apple investment also allowed for Jobs’ Phoenix-like return to the company. After 18 months of losses for the company, the strength of this deal on the back of Steve Jobs elevated him from a mere advisor of Apple to their new “interim CEO”. After being fired in 1985, Jobs returned as top dog with a plan to undo everything his predecessor John Sculley had done.
Things look a lot different for both companies now. Apple’s market capitalisation is currently US$2.394 trillion (AU$3.24 trillion), with Microsoft’s sitting at US$2.286 trillion (AU$3.09 trillion). The rivalry between the companies and their figureheads continued long after pen was put to paper, continuing to shape the computer industry in lockstep.
Gates’ trust has since sold his shares in Apple, which ultimately exceeded AU$2 billion. When Jobs died in 2011, Gates honoured the Apple icon as both competitor and friend.
“Steve and I first met nearly 30 years ago, and have been colleagues, competitors, and friends over the course of more than half our lives,”Gates wrote.
“The world rarely sees someone who has had the profound impact Steve has had, the effects of which will be felt for many generations to come. For those of us lucky enough to get to work with him, it’s been an insanely great honour. I will miss Steve immensely.”
You can watch the two tech icons reminisce on the deal 10 years later below:
It was in early August 1997 that Microsoft rescued Apple from the brink with a life line of $150 million. Remember, that was a princely investment in those days. The deal was all the more remarkable because Gates and Jobs did not see eye to eye on most issues.
In 1997, Bill Gates invested US$150 million so Apple could survive and grow its business. But why did Bill Gates do it? In 1997, Steve Jobs, who returned to lead Apple, had to accept the harsh reality the company's financial reserves in the bank were less than 90 days.
In August 1997, Microsoft purchased $150 million of non-voting Apple stock. Additionally, Microsoft agreed to continue developing software such as Microsoft Office for the Mac platform for at least 5 years. Microsoft's infusion of cash helped stabilize Apple's finances.
Leadership and Vision is Invaluable Apple's near-bankruptcy in 1997 and its subsequent recovery is one of the most notable turnarounds in corporate history, largely attributed to strategic management decisions, product innovation, and a focus on design and user experience.
In 1997, Apple was in dire straits. The stock was trading at a 12-year low, they were losing gobs of money, and Michael Dell famously called for Apple to shut down and return its money to shareholders. Things were bad. It was at this bottom Steve Jobs returned.
Not to save them from bankruptcy, be "good guys," but as part of a settlement for pirating software from Apple. Microsoft's investment equated to owning 7% of Apple, in preferred stock.
Cupertino, California Apple today announced a new $410 million award from its Advanced Manufacturing Fund for II-VI, a leading manufacturer of optical technology. Today's award builds on an initial $390 million awarded from Apple's Advanced Manufacturing Fund in 2017.
This is precisely when Steve Jobs was brought back to revive the struggling company. To save his brainchild, Jobs made a deal with Microsoft, their biggest rival at the time, which bought non-voting shares worth $150,000,000 in Apple. For the perspective, that's worth more than $285M today (adjusted for inflation).
On August 6, 1997, Microsoft's Bill Gate invested $150 million in Apple which was in the brink of bankruptcy. Following the deal, Steve Jobs told Gates, “Bill, thank you. The world's a better place.”
Jobs realized Apple had strayed too far from its core mission of offering personal computers. He streamlined the product line and focused on producing just four total products, two desktop computers and two portable devices, with one set marketed for professionals and the other for consumers.
Perhaps, at least with respect to the $5.5 billion lawsuit filed in 1988 by Apple against Microsoft and Hewlett-Packard alleging copyright infringement and breach of contract.
How did the court rule in the Apple vs. Microsoft copyright case? In 1992, the court ruled in favor of Microsoft. The court found that most of the GUI elements that Apple claimed were infringed upon were not protected by their copyrights.
Why did Bill Gates save Apple from going bankrupt in 1997? Known as Apple Computer at the time, Bill Gates bought $150 million of non-voting shares in Apple Computer and even offered free access to Microsoft Office for five years for the company.
In late 1977, Apple began to develop the Disk II floppy disk drive and required an operating system to utilize it. The existing standard at the time was CP/M, but due to incompatibility with the 6502 processor and a perceived clunkiness, Apple contracted Shepardson Microsystems for $13,000 to write Apple DOS.
The largest bankruptcy in U.S. history occurred on September 15, 2008, when Lehman Brothers Holdings Inc. filed for Chapter 11 protection with more than $639 billion in assets. Lehman Brothers Holdings, Inc.
The most poignant moment of that fraught relationship happened 20 years ago. In August of 1997, Gates stepped in and saved Apple, which, at the time, was on the brink of bankruptcy. “Bill, thank you. The world's a better place,” Jobs told Gates after the Microsoft exec agreed to make a $150 million investment in Apple.
For Microsoft, 1997 is filled with big moves as the Company announces the immediate availability of Office 97, we sign an agreement to acquire WebTV Networks for approximately $425 million in stock and cash and Microsoft's Internet Explorer 4.0 is released to critical acclaim and enormous customer demand.
For one thing, Microsoft packaged it with built-in apps Write and Paint, which were reminiscent of MacWrite and MacPaint. Since Microsoft made up two-thirds of software sales for Mac at the time, it was in nobody's interest to break up the partnership.
Introduction: My name is Barbera Armstrong, I am a lovely, delightful, cooperative, funny, enchanting, vivacious, tender person who loves writing and wants to share my knowledge and understanding with you.
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