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When Microsoft owned ~5% of Apple
In 1997, Bill Gates and Steve Jobs struck a $150m deal.
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Today, we’re taking about the time Microsoft invested $150m in Apple (1997).
Also this week:
People are gaming Google’s knowledge panel
How teens use social media
And some fire tweets (including the IRS)
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The time Microsoft owned ~5% of Apple
Steve Jobs was ousted from Apple in 1985 and went on to co-found another computing company, NeXT.
Apple’s CEO at the time was John Sculley, who Jobs had recruited away from Pepsi with the legendary pitch “Do you want to sell sugared water for the rest of your life? Or do you want to come with me and change the world?"
Sculley saw some success after Jobs left but the early-1990s saw a string of poor bets including on a hardware consumer device (Newton PA pad) and processor (PowerPC).
The company soon cycled through CEOs, going from Sculley to Michael Spindler in 1993 then to Gil Amelio in 1996.
In February 1997, Amelio did his most notable thing as Apple CEO by closing a deal to acquire NeXT for ~$430m. Jobs returned to Apple as an advisor and also received 1.5m Apple shares as part of the deal.
Jobs soon lost faith that Amelio and Apple could turn around the business. In June, he anonymously sold 1.5m shares of Apple for $22.5m. Many suspected it was his sale but he didn’t confirm until months later and kept a single ceremonial share.
His sale spooked the market and tanked Apple’s stock, which hit a 12-year low on July 3rd. Over the following week, Jobs convinced Apple’s board to find a new CEO. Amelio resigned and Jobs became interim CEO (spoiler alert: he never gave up the role).
Jobs quickly re-organized the board and struck a now-famous deal with Bill Gates that was instrumental in Apple’s comeback. The headline is that Microsoft bought $150m of non-voting Apple stock (~5% of Apple) and agreed to not sell it for 3 years.
While the cash infusion was helpful, the more important part of the deal was that Microsoft agreed to support Office for Mac and also a Mac-compatible Internet Explorer.
Apple had $1B+ in cash but the moves were a vote a of confidence to the market that Apple was still a major player (at the time, it had about 10% of the PC market vs. 90% for Microsoft).
Gates wasn’t being fully altruistic, though. He was long-time frenemies with Jobs, who famously jabbed Gates by saying that Microsoft “has no taste…absolutely no taste”.
Anyways, Microsoft was in a patent lawsuit with Apple because Gates & Co. had ripped off some Apple software (for a video player). Combine that with antitrust pressure from the US government and Gates felt that a healthy Apple would signal “competition” in the market and make Microsoft look like less of a monopoly.
The outlines of the deal come from a Steve Jobs email that is provided by the fantastic Twitter account Internet Tech Emails (it’s literally just old tech emails).
TLDR: Apple got the world’s most powerful tech company to invest $150m and a commitment to make Mac-compatible applications (Office, IE). Microsoft got a cross-licensing deal on a long-contested patent and some positive optics for “competition”.
Some other thoughts:
Microsoft sold its entire Apple stake in 2003: … for about $550m. BUT — if it kept the stake — it would now be worth $140B, which is a much bigger number than $550m.
Jobs worst stage performance: As part of the deal and to signal full confidence, Gates had to appear at the MacWorld conference. Jobs is legendary for his on-stage performances, but this one was less showy. First, he was wearing a black vest like a magician. Second, Apple beamed Gates onto a huge screen and he lorded over the proceedings (to a smattering of boos).
Apple comeback: Since July 1997, Microsoft’s market cap has gone from $150B to $2.2T (~15x). Meanwhile, Apple’s market cap has gone from $3B to $2.8T (my calculator broke doing this calculation so I did it by hand…and it’s 933x).
According to Walt Mossberg — who spoke extensively to both Gates and Jobs — the deal didn’t actually save Apple…the release of iMac in 1998 did.
Either way, the deal was a BIG deal.
Links and Memes
How teens use social media: Pew Centre dropped some fuego research showing what % of teens use the main social networks in 2022 vs. 2014/2015. YouTube (97% of teens use it) and TikTok (67%) are up big. Meanwhile, Facebook (32%) and Twitter (23%) are trending down. TLDR: Algorithmic videos rule the world. (Elsewhere: Friendster is unchanged from 0% to 0%).
Tricking Google’s knowledge panel: The evolution of Google search is to deliver you answers at the top of the first page without the need to click through to a website (this has caused a lot of consternations among publishers). One of the most valuable digital spaces in the world is the “Featured Snippet”, which tries to give a direct answer to a query.
Here’s a recent Google search I did (don’t ask why):
But yeah, www.WeGotThisCovered.com optimized its answer to win that “Featured Snippet”. Sites have been trying to game that box for a long time but Google recently made changes that make gaming harder: 1) for factual questions (“how much does The Rock bench?”), the search engine looks for consensus among many sources; and 2) for more subjective questions (“is The Rock the coolest person ever?”), Google tries not to provide a Featured Snippet.
Google may have to do the same thing with its Knowledge Panel, which pops up on the right side of search results for notable people. A great thread from @prstb shows how there’s a whole cottage industry to manipulate the panel. How? People are making fake IMDB profiles, music uploads and articles to make themselves look “noteworthy” and to get a knowledge panel. As a person with a single legit IMDB entry, I’m extremely offended.
The IRS be IRS-ing: The IRS just hired 87k new workers. As a former US taxpayer, I’m getting serious PTSD. There’s apparently a backlog of 10 million (yes, million) tax returns. And — as this thread shows — a major problem is antiquate tech.
I feel like there’s an opportunity here to do more targeted hiring, put in some new tech and — most importantly — save billions of dollars on red pen ink.
PODCAST ALERT! The Not Investment Advice (NIA) crew had a insightful and very funny interview with Planet Money co-host Mary Childs. She just wrote a new book “The Bond King” about the bond market and billionaire investor Bill Gross. She tells us how much crypto she owns, why bonds are more exciting than stocks and explains the real definition of “recession”.
…and here them fire tweets.
First, incredible Twitter team work here. @SelfTaughtStph did an audit of GMail’s color scheme and found three shades of blue on the screen. From there, @DarylGinn turned the discovery into a solid gag.
My wife and I have different sleep schedules, which makes this meme very relevant (but it’s Korean dramas instead of TikTok; you’ll have to decide who is watching)
And this tweet explains why only 23% of US teens use Twitter…
My buddy John W. Rich has been on fire. The tweet on the left made me spit out coffee (the IRS now wants Venmo to report any holdings over $600).
He also went insanely viral on the right and the reply section is out of control including a conspiracy theory that the US government is using the lottery as a way to trap time travellers LOLOL.