By Al Fasoldt
Copyright © 1997, The Syracuse Newspapers
Everybody's buzzing about the news that Microsoft is buying a stake in Apple Computer. This unlikely alliance between the prosperous software company and the struggling computer manufacturer is both good news and bad news. Let's sort it out.
First, the facts: Microsoft, the world's largest software company, is buying $150 million in Apple company stock.
This means Microsoft will be an Apple shareholder and will make money on this stock if Apple prospers and will lose money if Apple takes a dive. But Microsoft won't have the right to vote at Apple's annual meeting and won't get any official say in how Apple is run.
Apple and Microsoft will share each other's ideas on how to make software. They'll use the same code for the wildly successful Java programming language—a big plus for anyone who wants to make sure Java code will work on the World Wide Web.
Microsoft will come up with an up-to-date Mac version of its latest office-and-small-business software, and Apple will push Microsoft's Web browser as the one Mac owners should use instead of the one from Microsoft's rival, Netscape.
That's it. Officially.
The real story is something else.
Unofficially, Apple was starving and found a 900-lb. gorilla at the door. The gorilla was carrying bags of groceries and acting real chummy. Apple let the gorilla in. Apple was smiling and the gorilla was smiling. They both had a feast.
Everybody knows what will happen next. The old joke about the 900-lb. gorilla rings true: What will the gorilla do? Anything it wants to.
That's the problem with the announcement made Wednesday morning at the Macworld Expo in Boston. Steve Jobs, father of the Macintosh, stood on the stage and did the one thing no Mac fan could have ever imagined. He introduced the gorilla as the friend of Mac lovers everywhere.
On a huge TV screen overhead, a 12-times-bigger-than-life visage of Microsoft chairman Bill Gates smiled down on Jobs and the crowd and insisted that Microsoft wants Apple to succeed. The Mac fans in the audience knew what that meant. They hissed and booed.
The idea that Microsoft is suddenly every Mac owner's pal is hard for anyone to swallow. It's true that Microsoft has always produced software for the Mac. But, in most cases, it's been second-class software. Ask any Mac owner.
In real life, Microsoft's main product, the Windows operating systems—there are three main ones in use—are the biggest rivals of the Mac. And, as anyone who has shopped for a computer lately can tell you, that rivalry has all but killed off the Mac in the consumer market. Of all new computers sold this year, only about 6 percent were Macs.
Apple and its Macintosh have been fighting for their lives. They've been fighting Bill Gates and Windows. Mac partisans make that very clear. They know who the enemy is. They know a 900-lb. gorilla when they see one. And they can smell a fish when the gorilla carries it into the kitchen and tells you it's time for dinner.
So what happened? Why did Steve Jobs, who has spent his adult life making fun of Microsoft, suddenly make a pact with the devil? Why did he agree to let Microsoft share all of Apple's software secrets?
The inside story seems to go this way:
Apple's stock had been falling steadily over the years. Despite occasional surges, the stock kept sliding down. Apple was losing the confidence of investors. This was very bad news, because it meant Apple would have a hard time getting backing from Wall Street. Layoffs and cost cutting could only go so far.
Worse yet, a group of investors—so far unidentified—was waiting for Apple's stock to fall even farther. According to a story I heard, if Apple's stock price hit another new low, these investors would quickly buy up the company. And who knows what would happen then?
So Steve Jobs turned to Bill Gates, the $36 billion man. Gates is probably the only man in America who would be able to send a lot of cash to Apple without trying to buy the company. Although Bill Gates would love to own Apple Computer, the U.S. Justice Department would quickly challenge any Microsoft takeover of Apple. Microsoft is already too big to go unnoticed by the trustbusters in Washington, and a buyout of Apple would put Microsoft in court for years.
According to my reports, Jobs asked Gates to pledge $150 million in purchases of Apple stock. Gates agreed, but only after getting the deal on sharing trade secrets and the agreement that Apple would promote the Microsoft Web browser.
The $150 million in pledges—it's not known yet how much Microsoft has actually spent so far—gave Apple stock a sudden boost, from a low of $13.68 a share in early July to a high of $26.31 a share Wednesday afternoon. On that day alone, the stock shot up more than $6 a share.
That keeps Apple Computer safe from a hostile buyout—for now. But getting the gorilla out of the house is not going to be easy. As a shareholder, Microsoft now has a stake in what happens to Apple and its Macintosh. But you can be sure that billion-dollar Bill will not let Windows lose any market share to the Mac.
Microsoft comes out ahead. If Apple's stock soars, its investment pays off. If Apple's stock falls again, Microsoft waits it out. (The deal it made keeps Microsoft from selling its Apple stock for three years.)
And Apple comes out ahead for now. It has some of the cash it needs to survive. It gets technical help. It gets moving again.
But the one thing Apple needs to move won't budge. It needs to get the gorilla out of the house. It needs to reassert its independence.
Microsoft was never Apple's buddy and won't be a good one now. Apple became the most innovative company in the computer business not because it had friends with big bankrolls but because it did things its own way. Those days are now over. Apple needs to bring them back.
Apple doesn't need a friend like Microsoft. Even when the gorilla smiles at you, you can never let him out of your sight.