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

Other items of the agreement:

  • Apple and Microsoft have reached sweeping patent settlement and    cross-license.
  • Microsoft has committed to releasing Microsoft Office on the    Macintosh for at least the next five years. They are going to release    the same number of major releases as they release on Windows. The    first release will be out the end of the year and will be known as    Macintosh Office 98.
  • Apple has decided to make Internet Explorer its default browser.
  • Apple will collaborate with Microsoft on Java to ensure that they "get    the best \[Java implementation\] and ensure \[Macintosh and Windows\] have    compatible Java Virtual Machines."
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. Gates reflected on the recent developments and left the crowd cheering loudly by the time he was finished.

"Some of the most exciting work I've done in my career I've done with Steve on the Macintosh.  It's very exciting to renew our commitment to the Macintosh. We have over 8 million customers using Microsoft Office on the Macintosh...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 this year and we've got some real exciting features. It's a product that's going to require no setup. I think it's going to really set a new benchmark for performance and exploiting unique Mac features. In many ways, it's more advanced than what we've done on the Windows platform," Gates said.

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

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

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

Later this morning in a conference call, Microsoft Chief Financial Officer Greg 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 he wanted us to become an investor. The first day's return on the investment seems pretty good," he said, referring to Apple's stock, which jumped $6.75 today to close at $26.50.

Though the companies have signed a broad, five-year cross-licensing pact that is "common among companies you want to work closely with," Maffei said that 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 operating systems."

One topic they've discussed but not yet agreed on is Windows NT. Apple may license the OS in the future for their servers, Maffei hinted. Microsoft and Apple have agreed to support each other's Java VM features, throwing a nice wrench in the 100% Pure Java initiative no one but Sun seems interested 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 is telling everybody else they can't get," Maffei said