Apple Computer ends Cold War and partners with Microsoft

In a bid to remain viable and relevant, Steve Jobs announced today in hisBoston MacWorld Expo keynote address that Apple Computer has agreed toparticipate in a new partnership with their ex-rival Microsoft. The termsof the agreement state that Microsoft will invest $150 million in Appleby buying non-voting Apple stock at today's market price. Microsoft hasagreed to not to sell the stock for at least three years.

Other items of the agreement:

Steve Job's keynote was interrupted by cheers and boos at various points,all the more so when Microsoft CEO Bill Gates appeared via satellite. Gatesreflected on the recent developments and left the crowd cheering loudly bythe time he was finished.

"Some of the most exciting work I've done in my career I've done with Steveon the Macintosh.  It's very exciting to renew our commitment to theMacintosh. We have over 8 million customers using Microsoft Office on theMacintosh...we're very excited about the new release we're working on,this is called Mac Office 98. We do expect to get it out by the end of thisyear and we've got some real exciting features. It's a product that's goingto require no setup. I think it's going to really set a new benchmark forperformance and exploiting unique Mac features. In many ways, it's moreadvanced than what we've done on the Windows platform," Gates said.

After a rousing applause from the Mac faithful, Gates mentioned other Macsoftware Microsoft is working on.

"[The Mac version of Internet Explorer] is specially coded for theMacintosh; it's not just a port of what we've done in the Windowsenvironment. We're pleased to be supporting apple computer. We think Applemakes a huge contribution to the computer industry. We think it's going tobe a lot of fun...we look forward to feedback from all of you as we createnew Macintosh software."

Steve Jobs had other interesting news during the keynote. Apple's marketshare, he says, is hovering around 7% as their sales have fallen from $11billion in 1995 and %9.5 billion in 1996, to an estimated $7 million thisyear.  The changes start at the top, with four of Apple's board membersleaving to be replaced by Larry Ellison, Jerry York, Bill Campbell andSteve Jobs. The only members remaining from the previous administration areEd Ward and Gareth Chang. All of these men are computer insiders and willfocus Apple on its core markets: Education and "Creative Content" (designpre-press, and publishing). Unfortunately for Apple, Jobs said, thesemarkets are growing 20% per year while Apple's share there is falling. Jobsthinks Apple can reverse this trend.

Later this morning in a conference call, Microsoft Chief Financial OfficerGreg Maffei and Apple CFO Fred Anderson put the agreement in perspective.Maffei said the investment was made at the request of Steve Jobs.

"He wanted us to make a visible commitment to Apple and to the Mac, and hewanted us to become an investor. The first day's return on the investmentseems pretty good," he said, referring to Apple's stock, which jumped $6.75today to close at $26.50.

Though the companies have signed a broad, five-year cross-licensing pactthat is "common among companies you want to work closely with," Maffei saidthat Microsoft has no plans to support Apple's upcoming Rhapsody OS.

"We have not formally committed to release Office for Rhapsody," he said."We're going to basically take the lead as they bring out new operatingsystems."

One topic they've discussed but not yet agreed on is Windows NT. Apple maylicense the OS in the future for their servers, Maffei hinted. Microsoftand Apple have agreed to support each other's Java VM features, throwing anice wrench in the 100% Pure Java initiative no one but Sun seemsinterested in. Microsoft doesn't want to see Sun keep control of Java.

"It's not what everybody's getting from JavaSoft, it's what JavaSoft istelling everybody else they can't get," Maffei said