Microsoft manager admits to copying 'Mac look and feel'

tuaw ^

[Gomez]

We've been saying it for years, but everyone thought that we Mac-heads had a chip on our shoulder from the once-sour relationship with Microsoft. Finally, however, the truth has come to light; a group manager from Microsoft has gone on record and admitted the source of some of Windows 7's prettier bits and pieces.

Simon Aldous sat down with PCR for an interview and when he was asked to comment on the agility of Redmond's latest operating system, he had this to say:

"What we've tried to do with Windows 7 – whether it's traditional format or in a touch format – is create a Mac look and feel."

While I am glad that people at Microsoft are finally accepting the superiority of OS X, it still stung a little when Simon started to backtrack saying that Vista was more stable than OS X.

Update: It looks like the Windows team had a few things to say about Simon's earlier remarks noting that "his comments were inaccurate and uninformed." It is, in my opinion, difficult to deny that the OS X dock has had a positive impact on how people use their computers whether they be PCs or Macs. That being said, I'm glad Microsoft didn't take this one lying down.

[PreciousLiberty]

Since you’ve chosen to ignore wide swaths of what I wrote, I’ll only address one response (the rest was largely redundant with what I’d already written regardless).

“BeOS: blather and nonsense. Please don’t post crap like this thinking I’m some code-slave in the next cubicle you can spin your nonsense to. There are lightweight Unix implementations written entirely in C++, there are large parts of the NT code base and supporting apps in C++, and there are large parts of Unix (like CDE) written in C++.”

So, you admit that since BeOS no OS has been written in object-oriented (as opposed to C subset) C++. Specifically as in accessing core OS functionality using C++ objects.

Game, set, match. C++ isn’t suitable for systems programming, nor really for any other large-scale undertaking.

Software development is rapidly moving beyond C++. I hope you’re happy advocating the “new COBOL”. LOL!

[FredZarguna]

No need to calm down. Check my pulse. It don't change. Stays 72, come shine or rain.

A lighthearted treatment of what is surely the worst word ever allowed into English, and an homage to the Everly Brothers from last year, originally appeared at http://www.freerepublic.com/focus/f-bloggers/2067567/posts#27

Further down this thread, The great Roscoe Karns also displays a picture of the typical "meme" interlocutor. Or is he a cogitator?

For context, the original post refers to the incredible overuse of meme which occurs on Democratic Underground. (Although one use is, in fact, excessive.)

[FredZarguna]

Apparently, you're illiterate. Read what I actually wrote: there are operating systems written in C++. There are no operating systems written in Objective-C. There are <1% of developers coding in Objective-C, despite it's having been around forever. If its use were not enforced, NO ONE would use it.

I understand you're a failed C++ coder. It's OK. We need garbagemen, too. Thankfully, I don't have to clean out your birdcages; I have more contract time than I can actually satisfy.

[dayglored]

> No need to calm down. Check my pulse. It don't change. Stays 72, come shine or rain.

Wave the flag, pop the bag, rock the boat, skin the goat... Great song. My band covers it.

> A lighthearted treatment of what is surely the worst word ever allowed into English, and an homage to the Everly Brothers from last year, originally appeared at http://www.freerepublic.com/focus/f-bloggers/2067567/posts#27

That's really good. Had me singing it by halfway through the lyrics. Nice!

> Further down this thread, The great Roscoe Karns also displays a picture of the typical "meme" interlocutor. Or is he a cogitator?

I'm beginning to see how it was that my use of meme got you going. Had no idea there was all this background... well I suppose I can avoid using it... wasn't attached to it anyway, just a convenience... and "gossip" has the additional benefit of a breathless and vaguely scandalous tone, which seems to attach to much of the anti-{the_other_computer} commentary here.

> For context, the original post refers to the incredible overuse of meme which occurs on Democratic Underground.

Had no idea -- I don't read D.U. Tried a few years ago, got so bored and grossed out that I figured I'd actually stumbled upon a parody of same. But no.......

> (Although one use is, in fact, excessive.)

You may yet convince me.

[uncommonsense]

I'll say this to preface my comments - I appreciate both Apple and Microsoft for their respective successes with products and target markets. Apple has a narrow, high-end consumer focus and they've managed to develop a cult-like following. Microsoft has a massive, complex product portfolio footprint, an unbroken record of obscene profitability, and they cater equally well to commercial and consumer customers at the mid-to-high end.

I went back and looked at Apple's 10K/Q reports, cash flow statements, etc. from '95/6/7. Apple was hemorrhaging badly. It's easy to mask major problems with FASB cash flow statement methods vs. the UCA cash flow method.

The $1.2 B in cash you quoted is a legally permissible number to report as "cash", but it's no better than accounting alchemy to use for calculating the capacity to pay obligations or service debt (but it's easy to dupe shareholders with). Apple didn't have anything close to $1.2 billion available to "run the business" (let's see if you can pay engineers or vendors with depreciation). They were about as financially strong as GM was last fall.

Cash from operations was sagging badly. The rating agencies had Apple appropriately rated at junk bond level. Apple was loosing market share, loosing money, losing employees, and they were concerned that developers would abandon their platform for the more lucrative MS OS's (read it in their own words in their SEC filings).

Apple was walking around with a tin cup looking for money to pay back their accrued "technology debt" (lack of proper / effective investment in product R&D). They got a major infusion from a certain Saudi Prince for instance. They also got $150 million from Microsoft. No where in any of their SEC filings did I see this mentioned as a settlement for copyright or patent violations. Material items such as the receipt of money for a huge IP settlement should be reported in an SEC filing. It was a straightforward cross license agreement according to all the published facts - mainly so Apple could get the latest MS Office suite released on the MAC so market share wouldn't erode further - causing an even greater 3rd party development exodus. This is according to internal emails that I read, which were published from recent court documents on antitrust litigation. There is evidence that Microsoft wanted to clear up an issue with Apple's Quicktime code from a contractor that got used by Intel for Microsoft, but no evidence that the $150 million was a settlement. I submit that there is more evidence that Apple was broke, needed cash, needed a competitive OS, plus needed Microsoft's business apps - then there is evidence that the $150 million was given to Apple as a settlement. Show me the smoking gun and I'll retract this analysis.

As for Job's NeXT Computing venture - they were utterly defunct. The way you spin it as a major Steve Jobs success story is worthy of a DNC press statement praising Obama's great accomplishments since taking office. Jobs failed to build a competitive, sustainable business with NeXT. He didn't learn his lessons from Atari or his first stint at Apple - that he's no genius when it comes to hardware. With Apple, he steadfastly clung to total design and manufacturing control over the hardware and OS. If he had been a little less myopic in this area, he would have thrown everything into porting the Mac OS to the Intel platform ahead of Microsoft's anemic Windows wrapper around DOS, and Jobs / Apple would have owned the desktop future - crushing Microsoft's primary profit engine. But, Jobs was obsessed with total control of the platform stack - including going to war against commodity hardware manufacturers where everyone but Steve Jobs could plainly see they could never win the battle - and it cost him his job and almost bankrupt Apple. He seemed to sober up some at the end of NeXT by sustaining a multiplatform strategy, but right now, I see Jobs / Apple making some of the same old mistakes with their hyper-proprietary iPhone/Tunes products. That's a major reason I don't want an iPhone. I'll go with Android before I'll commit to an iPhone (except, I won't discount the fact that there could be some good money to be made by developing the right, trendy app for the iPhone).

The fact that Apple grossly overpaid for NeXT Computing is no surprise (basically paid $400 million in '97, big bucks, for a nicely packaged free Unix OS, OO development tools - wrapped with a Mac GUI). Mismanagement of M&A happens all (if not most) of the time and in this case, it only proves
1) Apple had an uncompetitive OS, it needed a replacement, and they didn't have the time / ability to build it, and
2) Apple had crummy upper management who didn't know how run a profitable company, design an advanced OS, or value an acquisition.

These observations are not my opinions, they are well sourced historical facts from a time when I was steeped in pioneering globally distributed systems, massive object-relational data warehouses, building wireless mobile computing solutions, and some of the first SaaS products over the Web.

[FredZarguna]

which seems to attach to much of the anti-{the_other_computer} commentary here.

Actually, I agree. A lot of this is the usual juvenile "Marvel is better than DC", or "Ruth is better than Aaron" (Ruth is better than Aaron, but I'm not starting that one.) I have a Mac, I have a Red Hat and an Ubuntu, box and 4 different Windows boxes in addition to about two dozen hand-helds I have to support. What I really need is for a thread that flames on KVMs so I can get some decent recommendations. I've never had one I really like and the latest eight-way was murder ($). I code for money and there's a, uh, customer, born every minute.

Mars Hotel is, in my opinion the most underrated Dead Album. The fact that it and Allman Brothers Band Live at Fillmore East got me through a bitter divorce and my Candidacy Exam probably colors my judgment. Ex-physicists turned computer geeks must stick together, especially right wing ones.

FRegards,
FRed.

[FredZarguna]

That's a major reason I don't want an iPhone. I'll go with Android before I'll commit to an iPhone (except, I won't discount the fact that there could be some good money to be made by developing the right, trendy app for the iPhone).

This is actually my major beef with Apple, and one of the reasons' I hope Google does go with the open architecture, open tool-chain philosophy they've been pushing. I really do resent the fact that I (and more importantly my customers) have to do what Apple commands they do with their own hardware. I've told my hand-held customers that we'll use the iPod Touch as an interim solution for our niche applications since Palm hardware is now so difficult to obtain (and their product map has been a disaster since, like, forever.) and the PocketPC is (mostly) not in their sweet spot. But if the 'Droid turns out to be viable, they should be ready to switch.

You can say what you want about Microsoft -- and I've said things as nasty as anybody here -- but as a developer, they have in fact always taken very good care of me. Apple's determination to rule everything they sell from top-to-bottom is going to burn them in time.

[Swordmaker]

These observations are not my opinions, they are well sourced historical facts from a time when I was steeped in pioneering globally distributed systems, massive object-relational data warehouses, building wireless mobile computing solutions, and some of the first SaaS products over the Web.

Keep dancing. But you don't do it well. None of that background, although impressive, qualifies you for the knowledge you claim about Apple's history. Especially since what you have previously spouted was deliberately skewed.

Apple didn't have anything close to $1.2 billion available to "run the business" (let's see if you can pay engineers or vendors with depreciation). They were about as financially strong as GM was last fall.

Depreciation is never allowed to be considered CASH... and it isn't liquid by any means... no matter how much you want to pretend that's where Apple's cash was located. You're blowing smoke.

Exactly where does the negative amount for depreciation enter into CASH? Let's look at the 10Q assets:

Looking there I see CASH and CASH equivalents of 1.018 Billion and short term investments of .212 Billion... That easily makes 1.240 Billion in liquid assets.

In addition, there are .336 Billion in finished goods, some of which historically can be counted as liquid assets, depending on past sales rates.

Other assets such as Accounts Receivable (one way of hiding lack of real sales that represent cash) went DOWN... so they were making more cash sales rather than credit sales.

Looking at the liabilities we find that money owed to banks (borrowed) is DOWN while long term debt remained about the same.

Where are they hiding all this red ink that supposedly reduced their cash holdings? If what you say is true, the SEC would have had all of Apple's BoD up on charges. They didn't. Ergo, it is you who is distorting the facts.

As to the three interlocking agreements between Apple and Microsoft that settled the Quicktime lawsuit (which could have resulted in huge losses to Microsoft), the following paragraphs are taken from Sections 5 and 6, Paragraph 5.6 and 6.6 respectively of the Preferred Stock Purchase Agreement between Apple Computer Inc., and Microsoft Corporation dated August 5, 1997:

" 5.6 PATENT CROSS LICENSE AGREEMENT AND TECHNOLOGY AGREEMENT. The Company [Apple Computer, Inc.] shall have executed and delivered the Patent Cross License Agreement and Technology Agreement substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively."

. . .

6.6 PATENT CROSS LICENSE AGREEMENT AND TECHNOLOGY AGREEMENT. The Purchaser [Microsoft Corporation] shall have executed and delivered the Patent Cross License Agreement and Technology Agreement substantially in the forms attached hereto as Exhibit A and Exhibit B, respectively.

In other words, the sale would NOT take place until the Patent Cross License Agreements were in place. Which makes it very clear exactly what is going on here—the settlement of the lawsuit.

Incidentally, the attached exhibit for MS's licensing of Apple patents had blanks were the amounts of the licensing costs to Microsoft were to be inserted while the exhibit for Apple's licensing of MS patents had no such costs attached... but the actual two final agreements were placed under a court ordered seal.

Is that enough of a "smoking gun?"

As further evidence of who lost and who won, Paragraph 4.7 of Section 4, explicitly states that the purchaser knows that these shares are sale restricted! Stress mine:

"4.7 RESTRICTED SECURITIES. The Purchaser understands that the Shares to be purchased by the Purchaser hereunder are characterized as "restricted securities" under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Securities Act and applicable regulations thereunder such securities may be resold without registration under the Securities Act only in certain limited circumstances. The Purchaser is familiar with Rule 144 of the SEC, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Purchaser understands that the Company is under no obligation to register any of the Shares sold hereunder except as provided in the Registration Rights Agreement.

Whow... that's some limitation on MS's "investment." I can smell the cordite from here...

In addition, some reports indicate that Microsoft had to pay up to $2 billion to Apple in licensing fees over the next five years... and Apple's books seem to show that kind of income coming from undisclosed sources.

"What wasn't widely reported about the July 1997 agreement was the subtle mention of other payments Microsoft agreed to make in addition to investing a paltry $150 million in stock. That amount was never publicly disclosed, but Apple's financial records suggest it was substantial.

Despite losing $850 million the year before, over a billion dollars in 1997--of which around 600 million was related to buying NeXT, and suffering a billion dollar drop in revenues between 1997-1998, Apple mysteriously managed to maintain its investments and actually accumulated cash.

It wasn't until 1998 that Apple began selling off its shares in ARM, and those sales took place over several years. Prior to that, how did Apple manage to spend nearly two billion dollars more than it earned across two years, lose 14% of its income, and still manage to sit on the same $1.2 billion in cash without pawning anything?"—Source.

And another:

". . . Apple was ready to finally win a much bigger suit (1997) based on Microsoft's theft of QuickTime technology (via Canyon). Steve Jobs used this leverage to get Microsoft to do a patent "swap" where Microsoft pays Apple $500M-$2B over 4 years, and Microsoft also coincidentally bought some Apple stock ($150M) and started playing nice. Microsoft agreed to make Mac Apps for the next few years, and some other PR moves. Of course the press only reported the parts that reflected well on MS."—Source.

Somehow, Apple maintained itself during the build up of the iMac, all the way to the release of OS X in 2001.

With Apple, he steadfastly clung to total design and manufacturing control over the hardware and OS. If he had been a little less myopic in this area, he would have thrown everything into porting the Mac OS to the Intel platform ahead of Microsoft's anemic Windows wrapper around DOS, and Jobs / Apple would have owned the desktop future - crushing Microsoft's primary profit engine. But, Jobs was obsessed with total control of the platform stack - including going to war against commodity hardware manufacturers where everyone but Steve Jobs could plainly see they could never win the battle - and it cost him his job and almost bankrupt Apple."

He did??? More of your revisionist Apple history, UncommonNONsense. He did not have a chance to do it. Steve Jobs was not employed at Apple during that entire period—1985 to 1997—and in fact did not return to Apple until just before the release of Windows 98. It would be hard for an ousted Jobs to direct ANYTHING that Apple did during this period. Your scenario is trumped by the almost 12 year time span between Jobs ouster and the financial difficulties Apple was experiencing in 1997. His decisions had NOTHING to do with Apple's financial problems. Licensing MacOS to third party clone makers had everything to do with it.

You might also note that Steve Jobs got over-ridden on the pricing of the original Mac. Jobs wanted to sell it for $1699... but Sculley insisted on $2499, thus missing another opportunity to grab the initiative. That was the start of the disputes that eventually lead to Jobs resignation (not fired) from the BoD.

[Swordmaker]

1) Apple had an uncompetitive OS, it needed a replacement, and they didn't have the time / ability to build it, and 2) Apple had crummy upper management who didn't know how run a profitable company, design an advanced OS, or value an acquisition.

Actually, except for your gratuitous comment about valuing an acquisition, I agree. That's why they brought Steve Jobs back... and the proof is in the pudding that the decision was a good one.

[PreciousLiberty]

Ah, the ad hominem - always a sure sign of a lost argument. Better luck next time.

Enjoy C++ in all its glory, most of us have chosen more productive software development tools. You should think long and hard about the motivations behind Java, C#, and now Go. Many folk far smarter than yourself see C++ for what it is - a failed experiment that set software engineering back by at least a decade.

As to “less than 1% of programmers programming in Obj-C”, once again you pull “facts” straight out of your nether region. Between the iPhone, and MacOS X the number is quite a bit higher than that. Macs are now up to 10% of PC sales in the US, double the marketshare of just a couple years ago.

[uncommonsense]

Do you know the difference between a Balance Sheet and a Cash Flow Statement? You displayed a Balance Sheet. This DOES NOT show how much cash Apple was generating or using to RUN THE BUSINESS. For instance - Depreciation is listed as a Source of cash. The cash listed here left the bank sometime in the past and is then amortized over the appropriate number of years depending on the type of expense that the cash was used for.

A Balance Sheet (see Cash Flow statement at bottom and quote on Liquidity below) is the accumulation of accounts. The Cash Flow Statement shows HOW the balance was derived. You don't seem to have the background or knowledge to discuss Apple's financial condition. No one would show a Balance Sheet to have a discussion about Cash if they had any background whatsoever in finance.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated by operations during 1997 totaled $188 million. Cash generated by operations was primarily the result of decreases in accounts receivable and inventories, partially offset by the Company's net loss, adjusted for non-cash expenditures such as in-process research and development, as well as decreases in accounts payable.

You probably don't understand the ramifications of this statement. What this means is that Apple is only producing $188 million the run the business. Any gaps to cover costs must be made up by financing activities or selling additional equity. That's why the Microsoft deal was so critical. They got an injection of $150 million tax free. Apple didn't even have enough cash from operations to cover the tax payment if this was a settlement of a lawsuit. You can see that $188 million is not enough money to keep the parts and paychecks flowing. Since Apple was rated JUNK, financing isn't a good, or maybe even a viable option. Do the math.

Regarding your comments on the "lawsuit settlement"

"In other words, the sale would NOT take place until the Patent Cross License Agreements were in place. Which makes it very clear exactly what is going on here—the settlement of the lawsuit."

Sorry, I missed it. Where does it mention that this was in relation to the settlement of a lawsuit? That's correct... it DOESN'T. What I said very clearly before is:

I submit that there is more evidence that Apple was broke, needed cash, needed a competitive OS, plus needed Microsoft's business apps - then there is evidence that the $150 million was given to Apple as a settlement. Show me the smoking gun and I'll retract this analysis.

There is a section in their SEC 10Q/K reports titled "LITIGATION". Check your facts. There is nothing mentioned of material regarding a settlement with Microsoft. You made an assertion - you did not provide a shred of evidence. Assertions are not evidence or proof. My assertion is based on a financial analysis of Apple's condition, which according to both S&P and Moody's is JUNK GRADE:

LIQUIDITY AND CAPITAL RESOURCES [snip]

Cash generated by operations during 1997 totaled $188 million. Cash generated by operations was primarily the result of decreases in accounts receivable and inventories, partially offset by the Company's net loss, adjusted for non-cash expenditures such as in-process research and development, as well as decreases in accounts payable.

[snip]

Cash generated by financing activities in 1997 included the sale of $150 million of Apple Series A non-voting convertible preferred stock to Microsoft Corporation. Cash used by financing activities in 1997 included $161 million to retire notes payable to banks.

Over the last two years, the Company's debt ratings have been downgraded to non-investment grade. In October 1997, the Company's senior and subordinated long-term debt were downgraded to B- and CCC, respectively, by Standard and Poor's Rating Agency. In the second quarter of 1997, the Company's debt ratings were downgraded to B3 and Caa2, respectively, by Moody's Investor Services. Both Standard and Poor's Rating Agency and Moody's Investor Services have the Company on negative outlook. These actions may increase the Company's cost of funds in future periods. In addition, the Company may be required to pledge additional collateral with respect to certain of its borrowings and letters of credit and to agree to more stringent covenants than in the past.

The Company believes that its balances of cash and cash equivalents and short-term investments, and continued short-term borrowings from banks, will be sufficient to meet its cash requirements over the next twelve months. Expected cash requirements over the next twelve months include an estimated $130 million to effect actions under the restructuring plan, most of which will be effected during the first half of fiscal 1998. No assurance can be given that the $25 million in short-term borrowings from banks can be continued, or that any additional required financing could be obtained should the restructuring plan take longer to implement than anticipated or be unsuccessful. If the Company is unable to obtain such financing, its liquidity, results of operations, and financial condition would be materially adversely affected.

The Internal Revenue Service ("IRS") has proposed federal income tax deficiencies for the years 1984 through 1991, and the Company has made certain prepayments thereon. The Company contested the proposed deficiencies by filing petitions with the U.S. Tax Court, and most of the issues in dispute have now been resolved. On June 30, 1997, the IRS proposed income tax adjustments for the years 1992 through 1994. Although a substantial number of the issues for these years have been resolved, certain issues still remain in dispute and are being contested by the Company. Management believes that adequate provision has been made for any adjustments that may result from tax examinations.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN MILLIONS)

THREE FISCAL YEARS ENDED SEPTEMBER 26, 1997                                           1997     1996    1995
-----------------------------------------------------------------------------------  -------  ------  -------
Cash and cash equivalents, beginning of the period.................................  $ 1,552  $  756  $ 1,203
                                                                                     -------  ------  -------
Operating:
Net income (loss)..................................................................   (1,045)   (816)     424
Adjustments to reconcile net income (loss) to cash generated by (used for)
  operating activities:

  Depreciation and amortization....................................................      118     156      127

  Net book value of property, plant, and equipment retirements.....................       70      70        6
  In-process research and development..............................................      375      --       --
Changes in operating assets and liabilities, net of effects of the acquisition of
  NeXT:
  Accounts receivable..............................................................      469     435     (350)
  Inventories......................................................................      225   1,113     (687)
  Deferred tax assets..............................................................       83     (91)      42
  Other current assets.............................................................       36      45      (59)
  Accounts payable.................................................................     (107)   (374)     283
  Accrued restructuring costs......................................................       63     117      (47)
  Other current liabilities........................................................       (9)    212      (10)
  Deferred tax liabilities.........................................................      (90)   (348)      31
                                                                                     -------  ------  -------
    Cash generated by (used for) operating activities..............................      188     519     (240)
                                                                                     -------  ------  -------
Investing:
Purchase of short-term investments.................................................     (999)   (437)  (1,672)
Proceeds from sales and maturities of short-term investments.......................      963     440    1,531
Purchase of property, plant, and equipment.........................................      (53)    (67)    (159)
Cash used to acquire NeXT..........................................................     (384)     --       --
Other..............................................................................      (60)    (55)    (102)
                                                                                     -------  ------  -------
    Cash used for investing activities.............................................     (533)   (119)    (402)
                                                                                     -------  ------  -------
Financing:
Increase (decrease) in notes payable to banks......................................     (161)   (275)     169
Increase (decrease) in long-term borrowings........................................       --     646       (2)
Proceeds from issuance of preferred stock..........................................      150      --       --
Increases in common stock, net of acquisition of NeXT..............................       34      39       86
Cash dividends.....................................................................       --     (14)     (58)
                                                                                     -------  ------  -------
    Cash generated by financing activities.........................................       23     396      195
                                                                                     -------  ------  -------
Total cash generated (used)........................................................     (322)    796     (447)
                                                                                     -------  ------  -------
Cash and cash equivalents, end of the period.......................................  $ 1,230  $1,552  $   756
                                                                                     -------  ------  -------
                                                                                     -------  ------  -------
Supplemental cash flow disclosures:
  Cash paid during the year for interest...........................................  $    61  $   49  $    49
  Cash paid (received) for income taxes, net.......................................  $   (11) $   33  $   188

  Noncash transactions:
    Tax benefit from stock options.................................................  $    --  $    2  $    15
    Issuance of common stock for acquisition of NeXT...............................  $    25  $   --  $    --

[uncommonsense]

One last word on the subject to make sure you see the smoking gun that backs up my assertion:

Cash generated by financing activities in 1997 included the sale of $150 million of Apple Series A non-voting convertible preferred stock to Microsoft Corporation. Cash used by financing activities in 1997 included $161 million to retire notes payable to banks.

$150 million from Microsoft came in the form of equity, which is a non-taxable source of cash for Apple and was applied to a $161 million bank obligation for notes that became due. They NEEDED THE CASH to pay the banks. Remember, their cash generated from operations was only $188 million and they had a current obligation of $161 million. Along came Microsoft with $150 million cash provided in the only form Apple could afford - equity... Do the math.

Add that to Moody's / S&P's analysis:

the Company's debt ratings have been downgraded to non-investment grade. In October 1997, the Company's senior and subordinated long-term debt were downgraded to B- and CCC, respectively, by Standard and Poor's Rating Agency. In the second quarter of 1997, the Company's debt ratings were downgraded to B3 and Caa2, respectively, by Moody's Investor Services. Both Standard and Poor's Rating Agency and Moody's Investor Services have the Company on negative outlook. These actions may increase the Company's cost of funds in future periods. In addition, the Company may be required to pledge additional collateral with respect to certain of its borrowings and letters of credit and to agree to more stringent covenants than in the past.

[FredZarguna]

That's funny, since your posts have been filled with personal attacks from the beginning.

Now, speaking of nether regions, pull year head out of yours, and then check tiobe, langpop, or any any one of a half dozen other sites. By any measure of usage you want, Objective-C is a blip (if that). Tiobe says Objective-C has seen a huge increase in popularity, because it went from .05% to .8%. Don't worry, it'll go back to five or six coders again soon, once the teeny-boppers have discovered what an over-priced, over-hyped lemon the iPhone is.

I know logic and reasoning really aren't your thing, but here's a clue: the installed base of a platform has nothing to do with the number of people actually interested in coding for in a particular language.

[uncommonsense]

Ok, one last comment - I promise.

Bank notes contain multiple covenants related to corporate governance, significant events, benchmarks on solvency, cash ratios, capacity to pay, and debt ratings. This is a universally applied commercial lending practice.

When a company receives a downgrade from a major credit rating agency, it means the financial strength of that company has deteriorated in a material way. When a company is downgraded to "non-investment" grade (junk), that means its ability to operate as a going concern is highly questionable.

The downgrade event triggers a mandatory review by senior / executive risk managers within each lending institution and collateral granter or guarantor that has a stake in the company. Are you with me so far?

Depending on the severity of the situation, corrective action is mandated by the lenders/guarantors to protect investments or collateral pledged. A downgrade to junk status is "dire" and causes a feeding frenzy by senior and subordinate stakeholders to jockey for repayment position. No one wants to be #2 in line and therefore, repayment calls have to go out immediately for the debt obligations.

It's obvious that the S&P/Moody's downgrades created a mandatory loan covenant review event, and given the magnitude of the downgrades, it created a substantial breach of the covenant agreements. There is no way that any lender could avoid taking immediate corrective action by demanding early repayment. Looking the other way on public event of this magnitude would be a terminable infraction at a minimum, causing them to be barred from practicing in the industry, or prosecuted for a multimillion dollar breach of fiduciary responsibility. Martha Stewart got jail time for misleading authorities on a $40K investment.

How do I know all this? I led the design of the industry leading solution for originating and managing commercial and consumer lending. It required meticulous assurance that all of the state/fed/quasi-fed agency laws, regulations, and industry/institution standards and policies were automated correctly. The system had about 15 million lines of code, thousands of rules, and the schema had about 9,000 attributes. Nontrivial.

This should be enough information to paint a pretty clear picture on why people besides just me, assert that Apple was bailed out by Microsoft purchasing $150 million in Apple stock.

Now if you're up to it, show me something a little more concrete than your exceedingly weak postulation that a reference in an SEC report to a cross license agreement (which was mandated by law since it was the creation and sale of equity) somehow proves conclusively that Microsoft wasn't bailing out Apple with the investment and it was actually a settlement for a patent infringement violation.

[Swordmaker]

Sorry, I missed it. Where does it mention that this was in relation to the settlement of a lawsuit? That's correct... it DOESN'T.

No, it doesn't, but this did NOT happen in a vacuum. The Lawsuit was settled and the agreement to buy the $150 million in preferred stock INCLUDES the requirement that the cross agreements SETTLING that lawsuit must be included before the sale could be completed. It was a REQUIREMENT of the sale... not an option.

There is a section in their SEC 10Q/K reports titled "LITIGATION". Check your facts. There is nothing mentioned of material regarding a settlement with Microsoft.

The litigation section has always been used to report potential liabilities to Apple... not litigation instigated by Apple. In this instance Apple sued Canyon for passing on Apple IT, The suit later brought in both Microsoft and Intel as defendants when discovery showed that both were aware of the infringement and agreed to it. This suit was dropped by Apple when Microsoft agreed to buy the stock and cross license the patents. The terms of the licenses were sealed... and therefore could not be revealed. Apple won.

[uncommonsense]

OK. So you don't have proof that the $150 million was for the settlement of IP (or won't give it up).

For you, fact that Apple would require consideration from Microsoft (i.e. $'s) to get access to Apple's IP and make IE the default browser on Macs, is proof that this is a settlement? You said (in an oddly worded sentence):

the agreement to buy the $150 million in preferred stock INCLUDES the requirement that the cross agreements SETTLING that lawsuit must be included before the sale could be completed. It was a REQUIREMENT of the sale... not an option.

That statement is about as credible as your previous statement on Cash and Depreciation:

Depreciation is never allowed to be considered CASH... and it isn't liquid by any means... no matter how much you want to pretend that's where Apple's cash was located. ... You're blowing smoke.

Exactly where does the negative amount for depreciation enter into CASH? Let's look at the 10Q assets:

I'm afraid I gave you way too much credit for understanding and interpreting financial statements! Have you ever taken an accounting class? At least I got a good laugh out of your ignorance of the topic (no offense Mr. snarky). If you think that I'm blowing smoke, then I'd say you've been hitting the bong a bit too much. Go look at the cash flow statement that I posted previously, or click here to see Apple's Cash Flow Statement that covers 1995 - 97, and pay special attention to the words "Depreciation and amortization". Yep, it's a component of Total Cash that then shows up as one Cash amount in the Balance Sheet. Sheeh!

And your statement on revenue recognition (revrec) is a hoot:

"In addition, some reports indicate that Microsoft had to pay up to $2 billion to Apple in licensing fees over the next five years... and Apple's books seem to show that kind of income coming from undisclosed sources."

Perhaps you didn't know this, but it's illegal to hide revenue, loans, and selling of equity from the SEC and IRS. So your statement is complete nonsense!

The simple fact is that you are either misreading or misconstruing something here. The filings DO NOT say what you are asserting. There are preliminary documents pertaining to the terms of the Equity agreement that need to be executed first - it's NOT stipulating that a LAWSUIT must be settled first.

Don't believe me, here's what Apple said about the deal:

In August 1997, the Company and Microsoft entered into patent cross licensing and technology agreements. In addition, for a period of five years from August 1997 as subject to certain limitations related to the number of Macintosh computers sold by the Company, Microsoft will make future versions of its Microsoft Office and Internet Explorer products for the Mac OS, and the Company will bundle the Internet Explorer product with Mac OS system software releases and make that product the default Internet browser for such releases. While the Company believes that its relationship with Microsoft has been and will continue to be beneficial to the Company and to its efforts to increase the installed base for the Mac OS, the Microsoft relationship is for a limited term and does not cover many of the areas in which the Company competes with Microsoft, including the Windows platform. Accordingly, Microsoft's interest in producing application software for the Mac OS not covered by the relationship or upon expiration of the relationship may be influenced by Microsoft's perception of its interests as the vendor of the Windows operating system. In addition, the Microsoft relationship may have an adverse effect on, among other things, the Company's relationship with other partners. There can be no assurance that the benefits to the Company of the Microsoft relationship will not be offset by the disadvantages.

There it is in black-and-white for all of you Apple Juice drinkers to ignore:

"Microsoft will make future versions of its Microsoft Office and Internet Explorer products for the Mac OS."

...and...

"the Company will bundle the Internet Explorer product with Mac OS system software releases and make that product the default Internet browser for such releases"

...and...

"does not cover many of the areas in which the Company competes with Microsoft, including the Windows platform"

What can be more clear - MS WILL OFFER OFFICE and IE ON THE MAC, it GIVES MS BROWSER PREEMINENCE, it DOES NOT COVER WINDOWS.

P.S. You should seriously consider taking some remedial accounting classes. Just a thought Mr. Snarky...

[PreciousLiberty]

“That’s funny, since your posts have been filled with personal attacks from the beginning.”

Projecting again, are we?

Name one.

At any rate, I don’t have time to correct your misconceptions further. As I said, enjoy the shining glory (not) of C++.

[Swordmaker]

If, as you claim, MS merely, out of the goodness of it's black heart, just decided to bail out Apple, something you claim is a very risky investment, why are the Patent cross licensing agreements so important to the sale of sale restricted preferred stock? Why not just buy the stock? Why not just buy Common stock (Apple had sufficient stock already authorized for such an equity sale) which would have given MS voting power? Microsoft had to pay Apple undisclosed license fees for five years to use the patents for Quicktime which they had previously misappropriated (the judge in the case issued an injunction against MS using Apple's IP). Apple was granted the use of MS's patents at no cost. These are documented facts. These agreements were required by Apple to be completed, signed, and delivered in writing as part of the sale contract in what could have been, if it were not for the unusual circumstances of the transaction, a very ordinary investment agreement without such baggage. As soon as these agreements were signed and MS had purchased the stock Apple dismissed the Quicktime infringement lawsuit. That was NOT a coincidence which you seem to maintain.

Oh, and for understanding financial statements? I've run businesses for thirty years and my degree granted to me 38 years ago was in Business Administration with a concentration in Finance. As for knowing what a Balance Sheet is, it is a snap shot of the situation at a specific point in time. A Cash Flow report shows the gross changes between to such points in time and the information it can impart is dependent on how far apart those points are. For example a yearly cash flow report will not tell you anything about the seasonal nature of sales that certain businessses might experience as all of the events are aggregated together between the beginning balance and the ending balance. A series of quarterly cash flow reports might be more useful to learn those data. And yes I know that cash is fungible, but a mere statement that $161 million in bank loans were paid off does not mean that a $150 million incursion of cash from the sale of preferred stock was used to make that paydown. So doing the math gets no one no where. (In fact Apple paid off $275 million in notes payable to banks the year before and may have used the long term debt they also incurred that year. But perhaps that might have had more to do with flooring their inventory?) I also noted that Apple acquired $999 million in short term investments and paid out $384 million in cash to acquire NeXT in 1997.

I also see that Apple has a stable of short term investments that they apparently roll over as they mature. While not as liquid as some other assets, if timed right, they need not be rolled over and can be a source of cash to subsidize operations. I note that Apple did not do that in 1997 and in fact add $33 million to the kitty.

I do not see the picture then to be as bleak as you want to paint it. it look to me that Apple had already turned things around and was positioning itself for future improvements. Would I have invested in Apple given these numbers at the time? Hell, NO! (I wish I had the foresight to have bought when MS did at $16.25 but that's 20 20 hindsight) But that also raises the question of why would Microsoft?

I don't believe the altruistic charitable motive and I know there was certainly more of a reason than a desire to get the FREE Internet Explorer on the Mac along with Netscape Communicator. . . or to continue sales of a product they had already announced was cancelled, MS Office for Mac, which as part of the settlement they reversed the cancellation of and agreed to develop and support for five years.

in any case, none of this is germain to your statements about the competence of Steve Jobs as a manager.

[Swordmaker]

"In addition, some reports indicate that Microsoft had to pay up to $2 billion to Apple in licensing fees over the next five years... and Apple's books seem to show that kind of income coming from undisclosed sources."

Perhaps you didn't know this, but it's illegal to hide revenue, loans, and selling of equity from the SEC and IRS. So your statement is complete nonsense!

Did I say they HID it? No, read what I wrote again... "Apple's books seem to show..." means they reported it. Of course I know it. Apple has never broken out details on their product sales of breakdowns of where it came from. They don't report Joe Blow Computer sales bought x dollars of product or XYZ company paid us Y dollars for use of our franistan patents. Including revenues from licenses is among those that are not reported as a separate line item on SEC reports... nor is it necessary... so long as the income is reported.