Microsoft was founded by Paul Allen and Bill Gates back in 1975 with the primary objective to develop and sell BASIC interpreters for the Altair 8800 — the spark that ignited microcomputer revolution. The Redmond tech giant rose to prominence in mid-1980’s as the main player in the personal computer operating system market. Since 1990’s, they have visibly diversified from the operating system market and made a number of corporate acquisitions, their largest one being LinkedIn and Skype. Both these acquisitions were made much later in the 20th century.
However, what many don’t know is that the firm invested $150 million in Apple to save it from bankruptcy in 1997. The company’s market capitalisation at that time stood at $149.68 billion, whereas, Apple was valued at merely $2.17 billion.
The year 1997 was particularly memorable in the technology world as for the first time ever, Steve Jobs and Bill Gates announced that the two companies had entered a historic agreement. In addition to this, Microsoft promised to support Microsoft Office for Mac while Apple agreed to make Internet Explorer its default web browser. The company invested roughly $150 million for shares of Apple non-voting preferred stock. The deal was fruitful for both the technology giants as Apple received the much-needed cash and Microsoft was able to alleviate an impression about their monopolistic power.
Since then, Apple has come a long way toward becoming one of the most valuable companies on the planet.
This makes one wonder: What really became of Microsoft’s $150 million investment?
Reportedly, Microsoft’s $150 million investment scoured 150,000 shares of preferred stock, convertible to common shares of Apple stock at a price of $8.25, redeemable after a three year period. Notably, Microsoft had converted all of its shares into common stock by 2001. By 2003, Microsoft had sold its entire stake in Apple.
It’s quite a wonder to imagine what would have happened if Microsoft had held on to their Apple shares till date.
Apple stock has been split twice on a 2-for-1 basis since the agreement, once in June of 2000 and again in 2005. Assuming that Microsoft’s shares would have split only once, they would ideally in possession of 36.2 million shares. Since Apple was last trading at $604.59, Microsoft’s share would have been worth $21.86 billion.