August, 1997: Microsoft Rescues Apple?

Last week, the Wired web site noted Microsoft's "rescue" of Apple back in 1997. At the time, Apple was on life support and barely viable despite the return of Steve Jobs, so Microsoft's $150 million investment was definitely a welcome gift. But what was the story behind that money?Steve Jobs returned to Apple when the company purchased NeXT in late 1996. Soon thereafter, he began remaking the company in his own image by undoing much of what his predecessor and nemesis, John Sculley, put in place. Even by Jobs' "one more thing" standards, the 1997 deal with Microsoft was a stunner. When the deal was announced on stage by Jobs himself at MacWorld that year, even his fabled reality distortion field couldn't prevent a rumble of boos at the mention of Microsoft.

For its retrospective, Wired summarized the deal this way:

There were, however, other lawsuits that Apple agreed to drop in this deal, including one that Apple was almost guaranteed to win. At the time, PC video was in its infancy and Apple's Quicktime was a clear leader, particularly in performance. Apple had contracted with the San Francisco Canyon Company to write much of the optimized QuickTime code. When Intel and Microsoft came looking to the same company for a way to speed up their Video for Windows product, the company pulled a fast one and resold the same code. A federal judge granted Apple's request to stop Microsoft from distributing the stolen code, reducing Video for Windows to its previous snail's-pace performance.

Although Microsoft and Intel pooh-poohed the stolen code controversy, there is some evidence that they saw the dismissal of this lawsuit as a significant part of the Apple deal. In 1998, a news story in The Register reinforces the importance of this lawsuit in the overall deal. A thorough article at RoughlyDrafted.com touches on many other aspects of the deal that the Wired one neglects.

Looking back, perhaps the biggest unreported part of the deal was a transfer of mojo from Microsoft to Apple. Microsoft was at the top of its game in 1997, and Apple was in big trouble. The next decade would see Apple succeed in nearly everything they did, whereas Microsoft remained in the doldrums and lost ground to both Apple and Google. It's too bad for Microsoft that they reportedly sold off their Apple stock in the 2000-2001 time frame. If they had held it, they'd have turned their $150 million into several billion dollars.