Microsoft’s USD 150 million investment in Apple

Microsoft Corporation’s now infamous hail-Mary pass to Apple to protect itself against antitrust allegations in America seemed like a good idea at the time.

Yet by some estimates, Microsoft Corporation’s USD 150 million investment back in August 1997 could be seen as a nail in its own coffin – with many people believing it to be one of the worst such deals in history.

After all, it revitalised a company on the brink of bankruptcy; enabling them to streamline their offering and come back fighting release the iPads, iPhones and game-changing laptops which effectively wounded the entire industry – and annexed whole continent’s worth of market leadership from a then-waning Microsoft.

But, all in all, the hypothesis that the investment ruined Microsoft depends on how one looks at it.

Well-planned aid; at least at the start

At the time, the investment made perfect sense.

Apple was just weeks away from filing for bankruptcy when Microsoft threw it the lifeline.

Microsoft also gave a public guarantee that it would continue to provide supporting software for Apple – which had dwindled from a 15% share of the PC market in 1992 to around 5%.

That investment and support was not so much a gesture of goodwill as a way for Microsoft to insure itself against antitrust allegations.

What many now term a risky gamble now was brandished a stroke of genius at the time, by proving Microsoft did not own a monopoly over the PC market.

In addition, the investment did entail a payoff for Microsoft, when it eventually sold its stake.

But it was that loan that enabled Apple to strengthen and consolidate its Mac business, pour resources into both the iPod and iTunes, and eventually give Apple the leg up it needed to become the technological behemoth it is today – with a current market valuation of USD 505 billion valuation.

(At its peak, Microsoft was worth USD 556 billion. Now, it is worth USD 320.)

A game of catch up

Nowadays, Microsoft engages in a constant game of catch up with Apple – at the very least in the tablet and smartphone market – and perhaps including the laptop and desktop industries as well.

In addition, Microsoft never made headway in the MP3 player industry.

The question therefore remains, should Microsoft have bailed out Apple?

Looking forward, Microsoft will have to make some drastic changes to ensure it does not suffer a near-death experience.

However, there is certainly room for both technology giants in the arena, and Microsoft certainly has its fingers in enough pies to ensure it stays afloat for the foreseeable future.

Yet it still stands at crossroads. Investors are clamouring for a new dawn, and now a new CEO is in the pipeline, the direction of the company could be dramatically altered.

This revolution may indeed already be in the pipeline – whilst Apple was recently ranked 46th on research and development spending by the European Union, Microsoft came in at an exceedingly healthy 3rd.

Yet only time will tell what this means for the two giants.

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