This Is How ARM Saved Apple From Going Bust in the 90s

This Is How ARM Saved Apple From Going Bust in the 90s

Apple has built the majority of its modern day fortunes upon the back of the low-voltage ARM chipset. Ever since the first iPhone, ARM chips have driven Apple’s biggest and best-selling products. Thanks to the success of iOS, which only runs on ARM, the futures of Apple and ARM are so intertwined that Cupertino now designs its own custom specced ARM chips.

Given how forward thinking Apple is, it probably wouldn’t surprise you to hear that the Mac maker once bought a 43% stake in ARM back in the early 1990s. What probably would surprise, you, though, is that Apple sold that stake at a loss… and that sale saved the company from total bankruptcy.

At a recent lecture, knighted entrepreneur Sir Hermann Hauser (who, in 1990, spun out ARM from another company he had founded in the late 70s, Acorn) told assembled guests how, with Steve Jobs in exile and the company teetering on ruin, Apple came to sell its massive stake in ARM in the 1990s.

“Larry Tesler was the guy who did the deal originally between Apple and Acorn when we spun out ARM,” said Hauser. “At that time, Apple bought a 43% stake of ARM for $1.5 billion, and it was Larry who did the deal back in 1990.”

A few years later, though, and Apple was in freefall under the leadership of John Scully. That was when Apple decided to sell ARM.

“John Scully was running Apple at the time, and they were in real trouble, real financial trouble, and in fact they were about to go bust,” said Hauser. “The reason they didn’t go bust was because they sold their ARM stake that they had originally purchased for $1.5 billion for $800 million.”

That’s a staggering $700 million loss, but if not for selling ARM, Hauser says, Apple might not even be here today to give us iPhones and iPads.

I find this story particularly fascinating because these days, ARM chips are powering what Hauser calls the fifth wave of computing: mobile. Not only are all of Apple’s mobile devices powered by ARM chips, but so are all of their competitors. Apple’s managed to do quite well for itself in the mobile arena,but imagine if they had kept their stake in ARM and eventually purchased the company outright. The mobile landscape today would look very, very different.

What do you think Apple as a company and the mobile landscape as a whole would look like today if Cupertino had held onto its ARM stake?

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  • Jordan Clay

    was the stake originally purchased at $1.3B or $1.5B?  The story says both.
    Or am I just misreading it.

  • cheesy11

    with big money, comes huge loss i guess, ahh well i dont think apple care now, their destinys are intertwined!

  • brownlee

    No, I fucked up. Fixed!

  • Arm Hol

    What, no “thank you” ?

  • Elguapo

    Déja vu 
     John Sculley argues that the Newton actually prevented Apple from going out of business”So while Newton failed as a product, and probably burnt through $100 million, it more than made it up with the ARM processor”http://www.cultofmac.com/how-t

  • brownlee

    I thought admitting I was an idiot was thanks enough, but if you need it expressly said: thanks for the spot, guys.

  • CharliK

    The article implies that Apple was so broke that had they not regained that $800mil they would have gone bankrupt. So the answer to the final question would be that if if they hung onto the stake there would very possibly be no Apple anything today

    Perhaps the better question if ‘what they had not ditched Steve Jobs AND had hung onto this stake’ because that combo might have been the tipping point to actually doing something with the stake and we could perhaps have had the iphone 3-5 years sooner. 

  • chano

    One year on and you are still a bozo’s definition of a bozo, Brownlee.

    Well done indeed.

  • chano

    One year on and you are still a bozo’s definition of a bozo, Brownlee.

    Well done indeed.

  • jamesdbailey

    This is pretty much completely wrong. Apple sold their ARM shares relatively slowly over a period of months or years. Not all at once. And by that time, John Sculley was a unpleasant memory at Apple.

    Take this article for example. Dated Feb 3, 1999 and Apple still held a 14.8% stake in ARM Holdings.
    http://news.cnet.com/Short-Tak

    BTW, this took about 10 minutes on Google. You might try it sometime.

  • Toyo Harada

    I’m pretty sure the quotes in this article are not based on actual history. Scully was gone way before Apple was about to go bankrupt. This was the 1996 – 1998 era (Gil Amelio and Steve Jobs.) If I remember correctly, it was Steve Jobs that actually decided to sell off the ARM shares. 

  • Jillmint

    Brownlee why even write anything when your simply pulling shit out of your ass and throwing it up on the web all the time? There are millions of morons out there but most of them are smart enough not to expose their ignorance on sites like this. Wallmart needs greeters and your just right for the job, give us all a break and close this site and apply for the greeter job now.

  • Giovanni Filero

    Completely crazy analysis! And a bit exaggerated numbers (for about three orders of magnitude): 1,5 billion dollars for 43% of a near start-up, 21 years ago! The “news editor” is drunk? Other explanations?
    For a account of the joint venture look at Los Angeles Times (11/28/1990) http://articles.latimes.com/19… 

  • Bazz

    It shows that the CEO is important!
    Where the company goes is also dependent on other things.
    Newton went no where because there was no community to add Apps to it ( few on internet – time not right to have critical mass)
    The genius of Jobs is that he added MUSIC to the latter day Newton – iPod – and that gave impetus to the App revolution!  
    But the farsightedness of Apple even in Scully’s watch needs to be remembered!
    Like previous great companies,- Xerox HP IBM – Apple in the future will be seen to not know what they had and gave it away cheaply!

  • Bazz

    RISC was Apple’s baby against the crap of x86 of the time and low power portability was what ARM provided – if Newton had take off then Scully would be the genus!
    43% was what Apple put into the design of the ARM! And is fair value.
    Apple except with 6809 had input with all its CPUs designed.
    See what Intel thinks of Apple today! For the lazy — Intel is forced to do what Apple wants and it like it!

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his girlfriend and two parakeets. You can follow him here on Twitter.

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