TOPICS > Nation

Microsoft Bites Into Apple

August 6, 1997 at 12:00 AM EDT

MARGARET WARNER: In Boston this morning at conference of Macintosh computer users and software developers, Apple Computer, Inc., founder Stephen Jobs made a surprising announcement. He said that Microsoft Corporation had agreed to invest $150 million in its longtime software rival, Apple.

STEVE JOBS, Co-Founder, Apple Computer: The era of setting this up as a competition between Apple and Microsoft is over, as far as I’m concerned. This is about getting Apple healthy, and this is about Apple being able to make incredibly great contributions to the industry to get healthy and prosper again. (applause)

MARGARET WARNER: There were gasps and some boos from the crowd at Jobs’ announcement. Then Microsoft chairman Bill Gates appeared on a huge screen via satellite.

BILL GATES, CEO, Microsoft Corp.: Some of the most exciting work that I’ve done in my career–and it’s been the work that I’ve done with Steve on the Macintosh. We’re very excited about the new release we’re building. This is called Mac Office 98.

MARGARET WARNER: The deal announced today is the latest episode in a 20-year battle between two companies that have helped reshape the world of technology for millions of Americans.

Steve Jobs founded Apple Computer in 1976. It made its own computers or hardware, but Apple’s real innovation was its software–an easy-to-use icon-based operating system that introduced millions of Americans to the mouse and its point and click function.

Microsoft was founded in 1975 by Bill Gates and partner Paul Allen. It didn’t make computers–only the software to run them. Initially, it pushed a rather complicated operating system called DOS. But in 1985, it came out with a new one called Windows that matched Apple’s point and click system.

And, unlike Apple, Microsoft allowed its software to be used in other companies’ computers. By the time the company unveiled Windows 95 two years ago, nine out of ten home computers sold in the U.S. came with the Windows operating system already installed.

In the process, Bill Gates became the country’s richest man and his company became a major American success story. For Microsoft, today’s move is just the latest in a series of acquisitions and alliances. Since 1994, Microsoft has joined forces with Teledesic, a satellite company, and UUNET Technologies, an Internet provider.

Last year, Microsoft invested $220 million with NBC News to start a 24-hour cable news network and news Internet Web site, called MSNBC. And in June, the company bought a $1 billion stake in Comcast, the nation’s fourth largest cable operator.

While Microsoft has seen its profits soar, Apple has been struggling, particularly since Steve Jobs left Apple to found a new company. For years, Apple has engaged Microsoft in legal battles, accusing it of stealing aspects of its operating system. And though a core of computer users remain loyal to the latest Apple products, the company’s overall market share has dropped dramatically. Today only 3 percent of computers sold are made by Apple.

MARGARET WARNER: During a year of corporate reshuffling and job cuts, Apple’s stock has fallen more than 50 percent. Today’s announcement had a big impact on the stock price, pushing it up nearly 35 percent. Microsoft’s stock went up just 1/8 of a point, essentially unchanged.