Cheat Sheet

Three Strikes from Apple and Palm May Be Out

$150 million investment in Apple was a small percentage to their cash at the time. The $150 million was part of a settlement for using QuickTime source code in Windows Media. An "accident" caused by Microsoft's and Intel's 3rd party contracting company working on Windows Media who worked on QuickTime earlier. This suit was going badly for Microsoft but they had an ace in the form of Office for Mac. Rather than choosing lose-lose, both companies settled.

Apple got $150 million by selling AAPL at market value to Microsoft, Office for Mac for at least 5 years and cross licensing with Microsoft for also 5 years.

Microsoft got the suit dropped, IE as default browser on Macs, and cross licensing with Apple for 5 years.

This was their win-win. Microsoft sold the last of this AAPL in 2004. Even at that time, the gains were in multiples. The $150 million investment was not so much infusion of capital as it was infusion of confidence to a "beleaguered" Apple. Office 98 for Macs, continued IE development on Macs and the 5 year cross licensing agreement also served that role.

The rest of rebuilding Apple was up to Apple. And yes, iPod was a great success for the company. It was their effort in a market that did not take off on its own. And certainly, it was an effort not foreseen and executed by anyone else. But it was not just the device. The integration with iTunes was the key to its success. Much like HW is limited without good SW, the new model is HW driven by SW supported by service. No one were able to integrate it like Apple. They've all tried in the late 90s and early 2000s but failed miserably. This new HW, SW, service model continues with iPhones. When 3.0 is released it will extend this model to include HW extensions.

Here's an interesting pattern. Many people states that what Apple brings has already been done. This is true elementally speaking. MP3 players, Music stores, Smart phones, 3rd party mobile apps and some 3rd party hw extensibility for mobile devices did exist before Apple's entry into the market. But ultimately, they are not reaching the wider market because of poor integration and usability. I think history shows that Apple has often integrated all of it and made it into platforms that work. That's just not because of a single device like the iPod. Many of Apple's competitors often fail by executing elementally like this.


On May 21 10:15 AM Anthony C wrote:

> How soon we forget that mighty Apple would have disappeared about
> a decade ago if it wasn't for an infusion of funds from none other
> than Microsoft! And what saved them after that desperate measure?
> A single product: the iPod. If the iPod hadn't become a hit I think
> that Apple would have become just another PC clone maker. Palm has
> the opportunity to make a big recovery and looks like the Pre is
> a device to do it for them. Palm is not dead, they are just Apple
> 12 years ago.