dramatic effect, he paused again, and then explained: “I’d like to announce one of our first new partnerships today, a very meaningful one, and that is one with Microsoft.” The Microsoft and Apple logos appeared together on the screen as people gasped.
Apple and Microsoft had been at war for a decade over a variety of copyright and patent issues, most notably whether Microsoft had stolen the look and feel of Apple’s graphical user interface. Just as Jobs was being eased out of Apple in 1985, John Sculley had struck a surrender deal: Microsoft could license the Apple GUI for Windows 1.0, and in return it would make Excel exclusive to the Mac for up to two years. In 1988, after Microsoft came out with Windows 2.0, Apple sued. Sculley contended that the 1985 deal did not apply to Windows 2.0 and that further refinements to Windows (such as copying Bill Atkinson’s trick of “clipping” overlapping windows) had made the infringement more blatant. By 1997 Apple had lost the case and various appeals, but remnants of the litigation and threats of new suits lingered. In addition, President Clinton’s Justice Department was preparing a massive antitrust case against Microsoft. Jobs invited the lead prosecutor, Joel Klein, to Palo Alto. Don’t worry about extracting a huge remedy against Microsoft, Jobs told him over coffee. Instead simply keep them tied up in litigation. That would allow Apple the opportunity, Jobs explained, to “make an end run” around Microsoft and start offering competing products.
Under Amelio, the showdown had become explosive. Microsoft refused to commit to developing Word and Excel for future Macintosh operating systems, which could have destroyed Apple. In defense of Bill Gates, he was not simply being vindictive. It was understandable that he was reluctant to commit to developing for a future Macintosh operating system when no one, including the ever-changing leadership at Apple, seemed to know what that new operating system would be. Right after Apple bought NeXT, Amelio and Jobs flew together to visit Microsoft, but Gates had trouble figuring out which of them was in charge. A few days later he called Jobs privately. “Hey, what the fuck, am I supposed to put my applications on the NeXT OS?” Gates asked. Jobs responded by “making smart-ass remarks about Gil,” Gates recalled, and suggesting that the situation would soon be clarified.
When the leadership issue was partly resolved by Amelio’s ouster, one of Jobs’s first phone calls was to Gates. Jobs recalled:
I called up Bill and said, “I’m going to turn this thing around.” Bill always had a soft spot for Apple. We got him into the application software business. The first Microsoft apps were Excel and Word for the Mac. So I called him and said, “I need help.” Microsoft was walking over Apple’s patents. I said, “If we kept up our lawsuits, a few years from now we could win a billion-dollar patent suit. You know it, and I know it. But Apple’s not going to survive that long if we’re at war. I know that. So let’s figure out how to settle this right away. All I need is a commitment that Microsoft will keep developing for the Mac and an investment by Microsoft in Apple so it has a stake in our success.”
When I recounted to him what Jobs said, Gates agreed it was accurate. “We had a group of people who liked working on the Mac stuff, and we liked the Mac,” Gates recalled. He had been negotiating with Amelio for six months, and the proposals kept getting longer and more complicated. “So Steve comes in and says, ‘Hey, that deal is too complicated. What I want is a simple deal. I want the commitment and I want an investment.’ And so we put that together in just four weeks.”
Gates and his chief financial officer, Greg Maffei, made the trip to Palo Alto to work out the framework for a deal, and then Maffei returned alone the following Sunday to work on the details. When he arrived at Jobs’s home, Jobs grabbed two bottles of water out of the refrigerator and took Maffei for a walk around the Palo Alto neighborhood. Both men wore shorts, and Jobs walked barefoot. As they sat in front of a Baptist church, Jobs cut to the core issues. “These are the things we care about,” he said. “A commitment to make software for the Mac and an investment.”
Although the negotiations went quickly, the final details were not finished until hours before Jobs’s Macworld speech in Boston. He was rehearsing at the Park Plaza Castle when his cell phone rang. “Hi, Bill,” he said as his words echoed through the old hall. Then he walked to a corner and spoke in a soft tone so others couldn’t hear. The call lasted an hour. Finally, the remaining deal points were resolved. “Bill, thank you for your support of this company,” Jobs said as he crouched in his shorts. “I think the world’s a better place for it.”
During his Macworld keynote address, Jobs walked through the details of the Microsoft deal. At first there were groans and hisses from the faithful. Particularly galling was Jobs’s announcement that, as part of the peace pact, “Apple has decided to make Internet Explorer its default browser on the Macintosh.” The audience erupted in boos, and Jobs quickly added, “Since we believe in choice, we’re going to be shipping other Internet browsers, as well, and the user can, of course, change their default should they choose to.” There were some laughs and scattered applause. The audience was beginning to come around, especially when he announced that Microsoft would be investing $150 million in Apple and getting nonvoting shares.
But the mellower mood was shattered for a moment when Jobs made one of the few visual and public relations gaffes of his onstage career. “I happen to have a special guest with me today via satellite downlink,” he said, and suddenly Bill Gates’s face appeared on the huge screen looming over Jobs and the auditorium. There was a thin smile on Gates’s face that flirted with being a smirk. The audience gasped in horror, followed by some boos and catcalls. The scene was such a brutal echo of the 1984 Big Brother ad that you half expected (and hoped?) that an athletic woman would suddenly come running down the aisle and vaporize the screenshot with a well-thrown hammer.
But it was all for real, and Gates, unaware of the jeering, began speaking on the satellite link from Microsoft headquarters. “Some of the most exciting work that I’ve done in my career has been the work that I’ve done with Steve on the Macintosh,” he intoned in his high-pitched singsong. As he went on to tout the new version of Microsoft Office that was being made for the Macintosh, the audience quieted down and then slowly seemed to accept the new world order. Gates even was able to rouse some applause when he said that the new Mac versions of Word and Excel would be “in many ways more advanced than what we’ve done on the Windows platform.”
Jobs realized that the image of Gates looming over him and the audience was a mistake. “I wanted him to come to Boston,” Jobs later said. “That was my worst and stupidest staging event ever. It was bad because it made me look small, and Apple look small, and as if everything was in Bill’s hands.” Gates likewise was embarrassed when he saw the videotape of the event. “I didn’t know that my face was going to be blown up to looming proportions,” he said.
Jobs tried to reassure the audience with an impromptu sermon. “If we want to move forward and see Apple healthy again, we have to let go of a few things here,” he told the audience. “We have to let go of this notion that for Apple to win Microsoft has to lose. . . . I think if we want Microsoft Office on the Mac, we better treat the company that puts it out with a little bit of gratitude.”
The Microsoft announcement, along with Jobs’s passionate reengagement with the company, provided a much-needed jolt for Apple. By the end of the day, its stock had skyrocketed $6.56, or 33%, to close at $26.31, twice the price of the day Amelio resigned. The one-day jump added $830 million to Apple’s stock market capitalization. The company was back from the edge of the grave.
CHAPTER TWENTY-FIVE
Lee Clow, the creative director at Chiat/Day who had done the great “1984” ad for the launch of the Macintosh, was driving in Los Angeles in early July 1997 when his car phone rang. It was Jobs. “Hi, Lee, this is
