ISSUE 408: THE HIGH-TECH OFFICE--Alan
Zisman
Microsoft's $200-million investment in Apple
designed to stop competitor from getting cored Aug 26 1997
You've probably seen or heard the news. It made
the front page of the papers, and even surprised me by making it onto
the three-minute news flashes I heard on my car radio that day: Steve
Jobs announces, to boos from the audience, that Microsoft
(a.k.a. The Great Satan) was investing $150 million in Apple
Computers.
Well, like most things that make the headlines,
there's both more and less to this story than meets the eye.
According to Microsoft chief financial officer Greg
Maffei, Microsoft bought the Apple stock in response to newly
appointed Apple board member Steve Jobs' request that they make a
public demonstration of their commitment to Apple's future by investing
in the company. Microsoft also made a commitment to release a version
of its best-selling Microsoft Office Suite, updated for the Mac.
Microsoft and Apple agreed to keep versions of the Java programming
language compatible, so Java software could run on both Windows and Mac
platforms, and Apple promised to make Microsoft's Internet Explorer the
Web browser most easily installed on the Mac.
All in all, an odd agreement.
Microsoft invested some money in Apple stock, but in
reality, the amount invested was fairly modest by the standards of
either company. Microsoft has been investing in a wide range of
companies and technologies, with the amounts discussed totalling
several billions. And despite recent financial setbacks, Apple still
has a hefty bank balance and didn't really need Microsoft's cash. The
act was more symbolic than practical, and it resulted in Apple's stock
price rising by about 25 per cent as other investors, believing that
what was good enough for Bill Gates was good enough for them,
jumped in. (As a result, Microsoft immediately gained close to $55
million on its investment.)
Microsoft publicly promised to upgrade the Mac version
of Office, but that was something they were doing anyway. Indeed, they
had previously promised to put more effort into keeping the Mac
software up to date. In fact, Microsoft has always made a good profit
selling software to the Mac market -- by some accounts, more money per
machine, on average, than it makes on the more heavily competitive
Intel market.
And there was still no commitment that the Mac
versions wouldn't be released six months after the Windows versions, or
that Microsoft would develop software for Apple's next-generation
Rhapsody operating system.
The other two issues were mostly wins for Microsoft in
relation to their enemies: Netscape and Sun. Apple will now ship
Microsoft's Web browser rather than Netscape's, and has agreed to
coordinate its Java development with Microsoft rather than with Sun.
All in all, the total package doesn't have much
substance, and is more public tip of the hat by Microsoft towards Apple
and Jobs.
There is another, darker, aspect to the deal, though.
The continued good health of the Macintosh platform is of benefit to
Microsoft -- not only because of the amount of software it sells to
that market, but also because Microsoft is under ongoing scrutiny from
the American government, concerned by cries of "Monopoly!" from its
competitors. As a result, Microsoft needs to keep Apple around to
maintain at least the appearance of competition among computing
platforms.
Despite the votes of support from Microsoft and Wall
Street, Apple has some real tasks ahead in the near future. They need
to clearly decide whether to support the new pack of Mac-clone
manufacturers or not. And they need to make a series of hard decisions
about the company's direction and future. While the new OS 8 operating
system has been a strong seller since its July release, Apple's share
of the new computer market has continued to drop. It would be nice if
they could stabilize their top management, and perhaps, just maybe, get
a CEO.
In recent weeks, I've had a number of conversations
with current Mac users who have been thinking of switching to the
dreaded PC/Windows platform. These are always odd conversations. On the
one hand, the Windows platform is much less alien than most Mac users
have been taught to believe. And on the other, I think Macintosh has
more of a future than many of the Mac users I've spoken to seem to
fear.
At the same time, I can't quite see Steve Jobs -- one
of the original Apple founders, who has recently returned to a position
of influence after a decade in the wilderness -- as the source of
Apple's salvation. A man with a great sense of vision and style,
perhaps, and certainly with a great deal of charisma, but take a look
at business historian Randall Stross's 1993 book Steve Jobs
and the NeXT Big Thing to get a sense of how, through his being
totally uninterested in the practicalities of bringing a product to
market, NeXT, under Jobs' management, managed to blow $650 million of
other people's money. That Apple was willing to pay $400 million to
bring in Jobs and NeXT does not necessarily bode well for their good
judgment.*
|