When Microsoft Saved Apple

The rivalrous friendship of Bill Gates and Steve Jobs is the stuff of tech lore. But a poignant moment arrived in their relationship when Microsoft had to step in and save Apple from bankruptcy 💀.

“Bill, thank you. The world’s a better place”, Jobs told Gates shortly after Microsoft invested $150 million in Apple.

Today, Apple is a multi-trillion-dollar 💸 juggernaut and the largest publicly listed company in the world. But the ride to its valuation peak has been far from easy.

Return of the King 🤴

In the mid-1990s, Apple struggled with falling sales, internal conflicts, and a lack of direction. Steve Jobs returned as the company’s interim CEO in August 1997.

Once at the helm, Jobs canceled ❌ products such as the Newton and Cyberdog to limit its losses and reduce cash burn rates. He also reached out to Gates for a game-changing deal that shocked Wall Street.

Microsoft stepped in as an unexpected ally, investing $150 million 💰 in Apple in the form of non-voting shares. As part of the deal, the two tech disruptors agreed to a cross-licensing patent agreement, allowing the companies to use each other’s patents without legal disputes.

Microsoft committed to releasing the MS Office for Macintosh computers for at least five years, ensuring the availability of essential productivity tools 🛠 for device users.

Apple’s fortunes took a 360-degree turn with the return of Steve Jobs and the launch of revolutionary products such as the iPhone 📱 and the iPod soon after. The bail-out proved pivotal in tech history, enabling Apple to become the powerhouse it is today.

Today, Apple is valued at $2.75 trillion 🚀. In December 1997, its market cap stood at $1.6 billion.

Investing in Individual Stocks is Tricky

In the last 26 years, Apple has returned a whopping 105,000% ⬆️ to shareholders. But we can see that investing in individual stocks is quite tricky. In fact, it required three different stints from Steve Jobs as Apple CEO for the company to earn its place as an S&P 500 giant.

Despite its outsized gains in the last two decades, Apple returned 🙅‍♂️ 0% to shareholders between April 1986 and May 1997. Moreover, out of the 28,114 publicly listed companies in the U.S., the top 25% of stocks have created a third of shareholder wealth since 1926.

So, how do you invest? It makes sense to hold a majority of equity holdings in diversified index funds such as the SPY. Around 90% of large-cap mutual funds have failed 👀 to beat the S&P 500, which makes index investing key to building long-term wealth.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.