In August 1997, one of tech’s fiercest rivals became an unlikely lifeline for the other. Apple was just months from bankruptcy, and a $150 million cash infusion from Microsoft — its longtime competitor — helped stabilize the company at the exact moment Steve Jobs was retaking the reins.
Apple Was on the Brink of Collapse
Apple’s situation in 1997 was dire, not just difficult. Apple was reportedly just 90 days away from going completely bankrupt, the result of a string of product problems, poor business decisions, and machines widely perceived as clunky and unpopular. The company had been near bankruptcy after several poor years of Macintosh sales, compounded by the rise of Intel-based PCs running Windows.
Jobs’s Return Set the Stage
The path to the Microsoft deal started with Jobs coming back into Apple’s orbit. Apple had acquired NeXT, the company Jobs founded after leaving Apple in 1985, and initially brought him back only as an advisor — but by July 1997, Jobs organized an effort to remove CEO Gil Amelio, and Apple’s board installed Jobs as interim CEO. One of Jobs’s first moves as interim CEO was canceling underperforming product lines like the Newton and Cyberdog before making an even bolder move: reaching out to Microsoft.
The Announcement That Shocked Macworld
The deal was revealed in dramatic fashion in front of a live audience. On August 6, 1997, Steve Jobs revealed the $150 million Microsoft investment at the Macworld Expo, a controversial cash infusion that helped save the company. Bill Gates appeared on a giant screen behind Jobs during the keynote — an unexpected, almost surreal moment for the audience watching. Reaction from the crowd wasn’t universally warm — some attendees reportedly booed at the sight of Gates appearing alongside Jobs.
What Was Actually in the Deal
The agreement went well beyond a simple cash transfer. Alongside the $150 million investment in non-voting preferred stock, the two companies agreed to a broad patent cross-licensing arrangement, with Microsoft committing to support Microsoft Office for the Mac for five years while Apple agreed to make Internet Explorer the default web browser on Mac computers. In exchange, Apple also agreed to drop its lawsuit over Windows allegedly copying elements of the Mac operating system. The broader five-year partnership also included collaboration on Java.
Why Jobs Framed It as a Win, Not a Surrender
Jobs anticipated the backlash from Apple’s loyal base and addressed it directly during the announcement. Jobs told the audience, “We have to let go of the notion that for Apple to win, Microsoft needs to lose,” adding that Apple instead needed to focus on doing a good job itself — welcoming outside help where it could get it.
Why Microsoft Agreed to the Deal
The investment wasn’t simply generosity between rivals — it served Microsoft’s interests too. The arrangement was mutually beneficial: Apple got much-needed cash, while Microsoft kept a weakened competitor afloat, which helped ease growing concerns at the time about Microsoft’s monopolistic position in the industry.
A New Board Signaled a Broader Turnaround
The Microsoft deal wasn’t the only major change announced that day. Jobs also unveiled a reorganized Apple board of directors, keeping only two members from the prior board while bringing in a new group that included Intuit CEO William Campbell, Oracle’s Larry Ellison, and former IBM and Chrysler CFO Jerome York. Mike Markkula, Apple’s first major investor from the 1970s, was among the most notable departures from the old board.
How the Investment Paid Off
In hindsight, Microsoft’s investment turned out to be a remarkably good bet, even if that wasn’t obvious at the time. Had Microsoft held onto its Apple stock through to 2023, the original $150 million investment would have been worth roughly $184.5 billion. The turnaround that followed was dramatic — just 21 years after the deal, Apple became the first U.S. company in history valued at $1 trillion.
Join The Discussion
The Microsoft-Apple deal remains one of the more surprising alliances in tech history — a rival stepping in to prop up the company it would go on to compete with for decades. Do you think Microsoft’s motives were more about goodwill, avoiding antitrust scrutiny, or simple business calculation, and how do you think the tech landscape might look different today if Apple hadn’t survived 1997?
