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If you are a long time Mac user, it is inevitable that at least one of your Windows loving buddies, will tell you the “absolutely false story” of how Microsoft and Bill Gates saved poor little Apple from death by giving them money in 1997. So how did Microsoft’s $150 million dollar investment in Apple stock do, for Microsoft?
Apple shares (AAPL) were selling at $5.43 a share in 1997, closing Friday at $122.06. The potential gain on these shares: $18.1 BILLION! Note: AAPL was selling at $127.53 up 5.31, and Microsoft shares were $27.99 down 0.27 while I write this. Updated for Apple stock that split twice since 1997, on June 21, 2000 and again on February 28, 2005.
By comparison, if Microsoft bought the same amount of its own shares, then selling at $17.67 and closing at $28.25 Friday, the gain would have been ONLY $89.8 million $1.9 billion. Note: Reader Nate points out correctly that Microsoft’s stock has split 3 times since 1997 making the value closer to 1.9 billion. Microsoft split February 23, 1998, May 29, 1999, and again on Feb 18, 2003. I also updated AAPL for the two splits they have. I originally thought these numbers I saw were already adjusted for the splits, but I guess not.
UPDATE: Microsoft SOLD these shares in 2001!
Do you think Apple Computer was a bad investment for Microsoft? This $150 million in non-voting shares of AAPL made them lots of money — BILLIONS, ended a lawsuit Microsoft was losing (also costing both companies lots of money), and helped get the DOJ off Microsoft’s back in the famous case that they lost as a convicted monopolist! Who helped whom? Your take?
Thanks to UNEASYSilence for pointing this out and starting my rant.
Except microsoft already sold those shares back in 2001.
What’s your evidence for Microsoft even still having these shares? According to many sources I have read over the years, Apple stopped reporting Microsoft as a major shareholder in around the year 2000.
I checked it out. You are right. I guess they wished didn’t now. Shows a big hole in the Microsoft saved Apple saga that is falsely portrayed by some. Thanks Siva!
You’re forgetting the fact that Microsoft’s stock has split 3 times since 1997. The actual value of $150M of Microsoft stock in 1997 is around $1.9B as of close on Friday. While its not as impressive as the $18B that you’d get from Apple, its certainly a lot better than the number you gave. Get your facts straight.
apple stock split in 2005
so many facts off
Thanks for pointing out my errors. I originally thought these numbers were already adjusted for the splits, they apparently were not.
I updated the post, the numbers were wrong, but the story is the same.
You also forget that Microsoft issues dividends, while Apple does not.
A little fact-checking prior to publication might be in order. Microsoft bought $150 million of convertible preferred shares which automatically converted to common stock at a conversion price of $8.25 per share upon sale. Microsoft sold the shares in two blocks, one in September 2000, and the other in the first quarter of 2001, converting their preferred shares to a total of 17.8 million shares of common stock.
One two-for-one split of Apple shares has occurred since that time, so if Microsoft still owned their original preferred shares, they would convert today to 35.6 million shares. At $127.57 per share (the price of AAPL at yesterday’s close), that would amount to $4.54 billion, or 30 times the original amount invested.
Thanks Jonathan for the input and information. But isn’t true that MS invested the original 150 million in 1997? There have been two AAPL splits and three for MS stock in that period.
Anyway, the point to this post was to point out that MS buying AAPL shares had a potential huge windfall, larger than if they bought their own stock with the main point is that MS did not save Apple. Apple saved Apple. The numbers I collected may have been off, but I think the point prevailed.
[...] by a ReelSmart post with some very strange math that claims the stock would somehow be worth over $50 billion, via [...]
There is no evidence that Microsoft ever sold off the common stock shares. The initial investment was for non-voting prefered stock shares which are handled differently than common stock, in 2000 and 2001 they were converted to common stock as Jonathan Lehr pointed out. The total amount of shares is less than 5% of Apple’s common stock, so they would not be listed as a major holder of 5% or more, Microsoft is not a trading institution, so they wouldn’t reported as owners under that heading. Basically, without having direct access to Microsoft’s stock portfolio, there is no way to know whether they sold the stock or not.
The only quotes from Microsoft employees I’ve ever seen on this matter come from an Engineer unfamiliar with the details of the deal and a short confirmation from a Microsoft PR rep that confirmed that the original agreement between Apple and Microsoft had been concluded, neither of which gave any indication as to what happened to the Apple common stock.
Joe,
What do you mean Microsoft is “not a trading institution”…. surely its traded on NASDAQ and on the Dow Jones Index?
Next you say Microsoft “sold its (Apple) shares in 2000 and 2001″ but then say it converted them too common stock. Was there 2 tranches of shares as I heard MS sold its Apple shares in 2002?
Excuse my ignorance!