Sleeping With the Enemy

On Aug. 6, 1997, at the Macworld conference in Boston Steve Jobs announced the unthinkable. He announced a strategic partnership with rival Microsoft. The surprised audience first clapped then booed when they realized what had just been announced. Earlier, Apple had sued Microsoft for patent infringement.

“Apple needs help from other partners … and relationships that are destructive are no help to anybody in this industry today…We have to let go of the notion that for Apple to win, Microsoft has to lose.”
Steve Jobs at the Macworld conference in Boston in 1997.

In 1997, Apple was struggling and Steve Jobs had just returned to save the company. Apple had lost more than a billion dollars with little sales growth. Microsoft on the other hand was the market leader and had loads of cash.

The Strategic Deal – From enemies to ending all legal hostilities

Apple and Microsoft signed a broad five-year patent-licensing agreement ending the legal hostilities.

  • For five years, Microsoft would release an Apple (or Mac) version of its leading Office product in addition to the Windows version. Bill Gates had remarked that around 8 million Microsoft users were on the Apple platform and the Mac Office 98 was more advanced than even the one on the Windows platform as it utilized the unique capabilities of the Mac.
  • Microsoft would invest $150 million in Apple shares (non-voting) and not sell it for three years.
  • Internet Explorer would be the default browser on the Macintosh platform. When the audience reacted negatively, Steve also announced that they would ship other browsers as well and it was up to the user to set any browser as their default. He also acknowledged Internet explorer as a good browser at the time.
  • Apple and Microsoft would ensure that each of their versions of the Java programming language were compatible.

Who won in the end

Some call the deal a masterstroke from Steve Jobs and credit his leadership skills. Well, the numbers do not lie – 14 year after the deal in 2011, Apple is the most valuable company with market capitalization at approx. $375 billion and ahead of Microsoft’s market cap at approx. $210 billion.

Below is a video of Jobs’s 1997 keynote