Microsoft's equity in Apple

On Wednesday I had a meeting with Rutger-Jan van Spaandonk who is the executive director and shareholder of the Core Group. In case you don’t know Core Group are the official distributors for Apple, Nintendo and Tom Tom in South Africa.

RJ is an interesting man and he gave us a full status quo of where his products are placed in the SA market which was fascinating. What was more interesting though was when he told Gregor, Carly and myself that Microsoft owns a small stake in Apple Inc.

The big Apple vs. Microsoft war seems rather pointless after news of this so I decided I wanted to quantify this statement with some facts.

Turns out that at the 1997 Macworld Expo, Steve Jobs announced that Apple would be entering into partnership with Microsoft. Included in this was a five-year commitment from Microsoft to release Microsoft Office for Macintosh as well as an investment of 150,000 shares of Apple Series A, nonvoting, convertible preferred stock worth $150 million.

Steve had this to say to the audience.

If we want to move forward and see Apple healthy and prospering again, we have to let go of a few things here. We have to let go of this notion that for Apple to win, Microsoft has to lose. We have to embrace a notion that for Apple to win, Apple has to do a really good job. And if others are going to help us that’s great, because we need all the help we can get, and if we screw up and we don’t do a good job, it’s not somebody else’s fault, it’s our fault. So I think that is a very important perspective. If we want Microsoft Office on the Mac, we better treat the company that puts it out with a little bit of gratitude; we like their software.

Microsoft found themselves in a monopolisation legal battle and Bill Gates recognised that if Apple failed Microsoft would have no case that there were other, alternative operating systems available to consumers. It was a win-win situation for both companies.

The 150,000 shares were convertible by Microsoft after August 5, 2000 into shares of the company’s common stock at a conversion price of $8.25 per share. During 2000, 74,250 shares of preferred stock were converted to 9 million shares and in 2001 the remaining 75,750 preferred shares were converted into 9.2 million of Apple’s common stock. All 18.2 million shares were sold by Microsoft in 2003.

Currently, Microsoft owns about 0.0046% of Apple through a Private Capital Management fund and Apple owns about 0.39% of itself the same way so whether Microsoft ever held any power in the company is questionable at best.