Apple in 1997: About 90 Days From Running Out of Cash

In December 1996 Apple Computer bought a company that hardly anyone used. NeXT made powerful workstations and an elegant operating system, and it had sold very few of either. Apple paid $429 million in cash, plus 1.5 million Apple shares for NeXT’s founder, who agreed to come back as an adviser.

The founder was Steve Jobs. Eleven years earlier Apple had pushed him out. Now it needed him, because it was running out of time.

A company losing its way

By the mid-1990s Apple had become a cautionary tale. It made dozens of overlapping Macintosh models that confused buyers. It had licensed the Mac system to other manufacturers, which mostly took sales from Apple itself. Its own plan for a modern operating system had collapsed. Windows PCs, cheaper and everywhere, were taking its customers.

In March 1996 Apple warned that it would lose about $700 million in a single quarter. The new chief executive, Gil Amelio, a respected semiconductor executive, cut costs and reorganized the company. He also made the decision that would save it: to buy NeXT, mainly for its software. But he could not stop the losses. In July 1997, after another bad quarter, the board told him to go. Over his 17 months, the losses had wiped out every dollar of profit Apple had made since 1991, Cult of Mac calculated.

Jobs took charge, first as an adviser and from September 1997 as interim chief executive. He would later say that when he came back, Apple was about 90 days from running out of money.

Why Microsoft invested $150 million

On August 6, 1997, Jobs walked onto the stage at the Macworld conference in Boston to give his first major speech as Apple’s leader. It contained no new products. Instead he announced a partnership, and the name of the partner drew boos from the crowd: Microsoft.

The deal had several parts. The two companies settled a long-running patent dispute and agreed to share all their existing patents and those filed over the next five years. Microsoft promised to keep making its Office software for the Mac for five years, with as many major releases as on Windows. Apple would make Microsoft’s Internet Explorer the Mac’s default browser. And Microsoft would buy $150 million of non-voting Apple stock, which it agreed to hold for at least three years.

Then Bill Gates appeared by satellite on a giant video screen above Jobs, and the boos grew louder. Jobs told the audience that they had to let go of the idea that for Apple to win, Microsoft had to lose.

The $150 million was not much money. Apple had more than that in the bank. What mattered was the message. Office was the main reason many businesses used computers at all. If Microsoft stopped making it for the Mac, the Mac was finished. With the promise, customers and software developers could believe Apple would survive. Apple’s shares rose 33% that day.

Cutting to four

Inside the company, Jobs began cutting. He killed the Newton handheld computer and the deals that let other companies make Mac clones. He replaced most of the board. He reduced Apple’s long list of computers to four: a desktop and a laptop for consumers, and a desktop and a laptop for professionals. He took a salary of $1 a year.

With no new products to show yet, Apple launched an advertising campaign in the fall of 1997 that sold an attitude instead. “Think Different” showed black-and-white portraits of people such as Albert Einstein, Martin Luther King Jr. and Pablo Picasso. It did not mention a single computer. It told customers, and Apple’s own staff, that the company still believed in itself.

Outside, plenty of people thought it was too late. On October 6, 1997, Michael Dell, whose company was then booming by selling PCs directly to customers, was asked at a technology conference what he would do if he ran Apple. He said he would shut it down and give the money back to the shareholders. Apple’s whole stock market value was then about $2.3 billion.

For the fiscal year that ended in September 1997, Apple lost $1.04 billion.

The iMac

The first product of the new Apple came in August 1998. The iMac was an all-in-one computer in a curved, translucent blue case, designed by a young British designer named Jony Ive. It was simple to set up and made for getting on the internet. It had no floppy disk drive, which critics called a mistake. It sold about 800,000 units in its first five months.

Apple made a profit of $309 million in fiscal 1998. The turnaround had begun.

The NeXT purchase paid off too. Its software became the foundation of Mac OS X, released in 2001, and later of the operating system that runs the iPhone. In October 2001 Apple launched the iPod, then the iTunes store, then, in 2007, the iPhone. Each one turned Apple into a bigger company than it had been before.

From the edge to the top

Apple’s revenue for fiscal 2025 was a record $416 billion, with net income of $112 billion. In a single year it now earns about a hundred times what it lost in 1997, and more than the whole company was worth when Michael Dell suggested closing it.

What the record shows

• Focus is a strategy. Apple went from dozens of products to four, and could finally explain what it sold.
• Swallow pride when survival is at stake. Taking money and software from Microsoft was humiliating for Apple fans, and necessary.
• Buy the team, not just the technology. Apple bought NeXT for its software and got back the leader who would save the company.
• Confidence is an asset. The Microsoft deal brought in little money but convinced customers that Apple would last.

Jobs came back to Apple already rich, thanks to Pixar, which Disney later bought for $7.4 billion. Apple’s forgotten cofounder sold his 10% for $800 in 1976. And Microsoft built its own fortune on a famous bargain: an operating system bought for $75,000.