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Apple: hands down the most successful American
company.
Between the ubiquity of their devices and
the almost fanatical loyalty of their customers,
it should come as no surprise that Apple recently
became the first trillion-dollar company listed
on the American stock market.
And yet, just twenty years ago Apple was on
the verge of bankruptcy and it wasn’t Steve
Jobs that saved them, but rather their greatest
rival at the time, Microsoft.
This video is brought to you by Dashlane.
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with the link in the description.
The Apple of 1997 was a very different company.
It wasn’t selling smartphones, they weren’t
even invented yet, but what they were selling
was computers.
Back then Apple was a computer company and
that was even reflected in their name, but
by all accounts it was a company in decline.
Apple’s computers were simply too expensive
to be massively popular.
They did have good margins, but their market
share was abysmal.
You see, Apple refused to license its operating
system to other companies, which had no choice
but to go to the only other player in town,
Microsoft.
Now, keep in mind back in the 1990s the vast
majority of computers were used for commercial
purposes.
Their main value was the software they had,
and if your computer didn’t have the necessary
programs developed for it, well then it was
effectively useless for big companies.
In 1997 Microsoft had a staggering 90% market
share, and unsurprisingly almost all the software
that was being developed at the time was made
for Windows.
Every software developer had to make a choice:
he could spend only as much money as necessary
to create programs for Windows, or throw almost
twice as much to also support Apple, which
had less than 10% market share.
It’s also worth noting that throughout this
period Steve Jobs wasn’t even part of the
company: the Apple board of directors had
forced him out in 1985.
But in 1997 the situation was truly desperate:
sales were declining rapidly and after a series
of unsuccessful CEOs, the Apple board actually
brought Steve back.
In February they acquired Next, the company
Steve had started after leaving Apple.
But by that point Apple’s finances were
in such bad shape that Steve Jobs didn’t
actually receive cash for this purchase; instead
he received Apple shares, specifically 1.5
million of them.
But even that wasn’t enough.
By the end of July Apple had less than 90
days worth of cash left in the bank.
Apple was worth less than $3 billion and had
lost over a billion in a single year.
But then, on the 6th of August 1997, Steve
Jobs made an announcement that shocked the
world.
I'd like to announce one of our first partnerships
today, a very very meaningful one, and that
is one with Microsoft.
You probably noticed that the crowd’s response
was hesitant: they just could not comprehend
how Apple could possibly partner with their
biggest competitor, who was driving them out
of business.
As the announcement progressed, things got
worse.
Next, we have taken a look at browsers out
there and Apple has decided ... Apple has
decided to make Internet Explorer its default
browser on the Macintosh.
Since we believe in choice.
The speech was sounding like a surrender statement.
And lastly, Microsoft is making an investment
in Apple.
Microsoft is buying $150 million worth of
Apple stock at market price.
It is non-voting shares.
Notice the keyword here: non-voting.
Microsoft wasn’t trying to acquire Apple,
instead it was just funding it.
But it wasn’t just cash that Bill Gates
was offering.
The second part of this is Microsoft is committing
to release Microsoft Office on Macintosh for
the next five years.
The issue with software I mentioned earlier
that was basically bringing Apple down, was
being solved by Bill Gates single-handedly.
No one would ever purchase an Apple computer
without Microsoft Office on it and here is
Bill Gates giving it away for shares at market
price, which he could have just purchased
off of the market.
So why did Bill Gates do it?
Why save Apple on the eve of what would’ve
been their death at the hands of Microsoft?
Well, as you probably guessed, Bill Gates
wasn’t doing this out of the kindness of
his heart.
In fact, back then Bill Gates had a rather
negative reputation.
He wasn’t really into philanthropy yet;
instead, he was seen as a cutthroat businessman
willing to do anything to succeed in his industry.
And by all accounts Microsoft was successful;
so successful in fact, that it was attracting
the attention of antitrust regulators.
The Department of Justice had been preparing
its case against Microsoft since 1993, and
obviously Bill didn’t want his company broken
up, so what better way to show that Microsoft
isn’t a monopoly than by literally propping
up his competition.
Less than a year after the Apple partnership,
the DOJ summoned Bill Gates for a painstaking
three-day-long deposition.
By the way, you can tell a lot about someone
based on how they act during these things.
Did you ever have any discussions with any
representative of Real Networks concerning
what products Real Networks should or should
not offer or distribute?
No.
Notice how long he takes before giving an
answer, carefully considering how his responses
could be used against him.
A program designed to assist in the performance
of a specific task, such as word processing,
accounting or inventory management.
I’d say it’s a pretty vague definition.
Is it accurate as far as it goes?
I’d say it’s vague but accurate.
Throughout the deposition he’d attack definitions
and remain as vague as possible because he
knew that by saving Apple a year earlier he
had really saved Microsoft.
The DOJ, of course, eventually gave up and
in 2001 cleared Microsoft with minimal punishments.
And as to what happened with the Apple shares
Microsoft had, well, Bill Gates got rid of
them as soon as they had served their purpose.
Once the Department of Justice had settled
with Microsoft, Bill Gates converted his preferential,
non-voting Apple shares into regular stock.
In total he ended up with 18.2 million shares
of Apple, which he sold in 2003.
Now, keep in mind this was after the dot-com
bubble had crashed and in 2003 Apple’s stock
price was still extremely low compared to
its pre-bubble heights.
So just how much money did Bill Gates miss
out on?
Well, Apple has been performing so well since
2003 that its stock has split twice in that
time, once at a 2:1 ratio in 2005 and a second
time at a 7:1 ratio in 2014.
Thus the 18.2 million shares then would be
254 million today.
As of August 2018 Apple’s stock price is
roughly $210 a piece, which would make Microsoft’s
former stake be worth $53.5 billion today.
So yeah, Bill Gates might have missed out
on a few billion dollars, but hey at least
he doesn’t have to worry about remembering
all his passwords thanks to services like
Dashlane.
Dashlane makes managing passwords a breeze:
it generates strong passwords, stores them
safely across all of your devices and automatically
fills them in wherever you need them.
Dashlane is so convenient and secure that
honestly I wouldn’t be surprised if Bill
Gates himself has it installed on his computer.
The beautify of Dashlane is its versatility:
it’s available on every popular desktop
and mobile device and integrates flawlessly
with every browser.
And it’s not just a password service: it
actively protects you by offering a VPN for
every one of your devices, and it also monitors
the Dark Web to make sure your data hasn’t
been leaked by hackers.
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make your digital life much easier and much
safer, and to help you get a taste of their
amazing features, I’m giving you a free
trial of Dashlane and 10% off their premium
service if register using the link in the
description.
Anyway, thanks for watching.
Make sure to like, subscribe, leave a comment,
check out my Patreon, check out my Skillshare
class and register for Dashlane and I think
that’s it.
You’ll be hearing again from me in about
two weeks, and until then, stay smart.
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Video info
VocabularyHow Microsoft Saved Apple (And Why They Did It)
Apple: hands down the most successful American company.Between the ubiquity of their devices and the almost fanatical loyalty of their customers,it should come as no surprise that Apple recently became the first trillion-dollar company listed
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