A quick look back at when Microsoft invested $150 million in Apple 26 years ago today

1997 was a major year in the history of Apple, and indeed in the entire computer and tech industry. The company had been near bankruptcy after several poor years of sales of its Macintosh products. It also saw the rise of Intel-based PCs running Microsoft's Windows operating system.

Early in 1997, Apple bought out NeXT, the PC OS company that had been created by Apple co-founder Steve Jobs, who resigned from Apple back in 1985. Initially, Apple brought back Jobs just as an advisor, but in July 1997, Jobs organized an effort to remove Gil Amelio as Apple's CEO. The company's board then put Jobs in as its interim CEO.

Jobs immediately went to work, and one of the first things he did was to get the company to talk with Microsoft. In short, Apple needed some cash to jumpstart the company into new ventures. 26 years ago today, on August 6, 1997, Jobs was on stage at the MacWorld event in Boston, when he announced something that no one in that audience expected; a partnership with Microsoft that included a $150 million investment in Apple.

The talks initially began between Microsoft and Apple to resolve a number of patent disputes but quickly expanded beyond that. In addition to settling the patent issues, Microsoft pledged to develop its Office apps for Mac PCs for at least five years. Apple and Microsoft also pledged to collaborate on Java development, and Apple pledged to make Microsoft's Internet Explorer the default web browser for Macs.

The reaction from the audience to that MacWorld presentation was mixed. Some clapped while others were silent, and there were even some boos. That mixed reaction escalated when Microsoft CEO Bill Gates appeared in a satellite live stream on a big screen behind Jobs.

That image of Gates looming over Jobs became iconic in Apple's history. Less than two years later, in June 1999, it was replicated in the TNT TV biopic movie Pirates of Silicon Valley, with Anthony Michael Hall playing Gates, and Noah Wyle playing Jobs.

The Washington Post reported on the event at the time, and got some quotes from a couple of the MacWorld attendees on the Microsoft-Apple partnership:

"I think it's just another way for Bill Gates to take over the world," said Steve Ferlazzo, a longtime Macintosh user who attended the event.

Others were more sanguine. Peter Hanson, a partner in Sienna Software Inc., a Toronto company that makes a popular astronomy program for the Mac, said any news from Jobs that helps to turn around Apple is welcome, even if it involves Microsoft. "We've been with the Mac since 1984 and will keep with it," he said. "It's just been a tough couple of years."

Mac-History.net reports that Jobs later regretted that image of Gates towering over him at MacWorld. He's quoted by his official biographer, Walter Isaacson, as saying:

That was my worst and stupidest staging event ever. It was bad because it made me look small, and Apple look small, and if everything was in Bill’s hands.

Even Gates reportedly admitted that he "didn't know that my face was going to be blown up to looming proportions."

Microsoft's $150 million investment meant that it owned seven percent of Apple with 150,000 shares of preferred stock. Microsoft had pledged to continue to own shares in Apple for three years. In 2001, Microsoft converted its investment into common stock, which mean it owned 18.1 million of Apple shares. Finally, just two years later, Microsoft sold off all of its shares in Apple for $550 million.

Most people would think that was a pretty solid return on an investment after six years. However, what if Microsoft had kept that relatively small amount of ownership Apple until today? Apple has split its stocks a number of times since Microsoft turned the preferred stock into common stock. In 2005, Apple had a 2-1 stock split, followed by a huge 7-1 split in 2014, and then a smaller but still big 4-1 stock split in 2020.

Doing the math, Microsoft would have owned 1.013 billion shares in Apple if it stuck with its investment until today. Its stock closed on Friday at $181.99 a share. That means Microsoft's $150 million investment would have been worth a whopping $184,465,064,000 today.

Today, the tech industry is much different than it was in 1997, when Apple basically asked Microsoft for some money. While Microsoft continues to rule the PC desktop and laptop operating system business with Windows, Apple's success in other types of hardware with the iPod, iPhone, iPad, and Apple Watch have made it a bigger company than Microsoft in terms of its market cap. One wonders if those folks in the MacWorld audience who booed Bill Gates on screen feel differently now.

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