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Did Bill Gates save Apple from bankruptcy or Microsoft from the law?

Did Bill Gates really save Apple Computers out of the goodness of his heart?

January 31, 2019 / 01:25 PM IST
Valuation: $92.7 billion
Change in valuation: 16 percent
Change in rank: -1

Microsoft Valuation: $92.7 billion Change in valuation: 16 percent Change in rank: -1

In August 1997, Steve Jobs made a significant announcement that would alter the course of Apple’s future. He announced a partnership with Apple’s biggest rival at the time, Microsoft. To save Apple, then known as Apple Computer from bankruptcy, Bill Gates bought $150 million of non-voting shares in Apple Computer and offered Apple free-access to use Microsoft Office, which at the time was the primary software computer users demanded, on Mac PCs. This historic move saved Apple from bankruptcy. But why did Gates do it?

The Cut-throat Businessman

Today, people around the world know Bill Gates for his generosity and philanthropy, but back in the 1990s things were different, Gates had a reputation of a being a non-apologetic, cut-throat businessman willing to anything to succeed in the industry. And his approach worked; Microsoft at the time had grown so successful that it attracted the attention of Antitrust Regulators from the American Department of Justice (DOJ).

An Imminent Threat

The DOJ had been preparing a long, drawn-out case against Microsoft since 1993. In 1998, the Department of Justice sued Microsoft for violating the Sherman Act, a law that regulated the ability of conglomerates to assemble monopolies and stifle competition. The DOJ alleged that Microsoft had abused its monopoly on Intel PCs in its handling of operating system and web browser sales. The main issue of the case was whether Microsoft could bundle Internet Explorer web browser with its Windows OS.


A Monopolistic Approach

You have to understand, at the time web browsers weren’t freeware. And browsers like Netscape, Navigator or Opera had to be downloaded off the internet or purchased at a store. However, Microsoft’s planned to bundle their Internet Explorer web browser with the Windows OS, which would mean every Windows user would have Internet Explorer, eliminating the need to go out and purchase a new browser. This move would give Microsoft absolute monopoly as the Windows operating system made up for approximately 90% of total market share.

A Microsoft Victory

Bill Gates didn’t want his company broken up by a long-drawn-out court battle. So what better way to show Microsoft isn’t a monopoly than by supporting the competition. During the DOJ deposition, Gates remained as vague as possible with his replies; Bill was aware that by saving the competition (Apple) a year earlier, Microsoft couldn’t be deemed as a monopoly. Three years later, the DOJ dropped the case and cleared Microsoft with minimal punishments.

Ever wonder why Apple needed saving in the first place - Before Steve Jobs saved Apple, it was Bill Gates who rescued it from doldrums

The Mystery of the Shares

Once the case with the DOJ was settled, Bill Gates converted his non-voting stock in Apple into regular stock. In total Gates ended up with 18.2 million Apple shares, which he sold in 2003. Keep in mind that in 2003 Apple stock price was still considerably low. So how just how much money did Bill Gates miss out on – Apple has since been performing so well since 2003 that its stock increased twice in that time once at a 2:1 ratio in 2005 and a 7:1 ratio in 2007. Thus, the 18.2 million shares then would be approximately 255 million shares today. As of 2019, Apple’s stock price is worth roughly $165 a piece, which would make those shares worth roughly between 40 – 50 billion dollars.
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Carlsen Martin
first published: Jan 31, 2019 01:25 pm
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