June 25, 1985: 30-year-old Bill Gates, at the time best known as a Mac developer, sends a memo to Apple CEO John Sculley and Macintosh boss Jean Louis Gassée.
His suggestion? That Apple licenses its Mac operating system and additional technology to other companies. Apple’s management ignores his advice. Five months later, Windows 1.0 is released.
Bill Gates’ advice
The fact that Gates sent such a memo is amazing considering the divergent paths that Microsoft and Apple took in the decade that followed. Despite briefly entertaining the idea of licensing Mac OS, Apple stuck to its guns as a maker of both hardware and software. Gates, meanwhile, dominated the computer industry by making Windows the standard on almost every non-Apple PC.
At the time, though, Gates wasn’t viewing it like this. In fact, he was willing to offer this advice to Apple.
“Apple must make Macintosh a standard,” he wrote in his June 1985 memo. “But no personal computer company, not even IBM, can create a standard without independent support. Even though Apple realized this, they have not been able to gain the independent support required to be perceived as a standard.”
He went on to argue that Apple should license Macintosh technology to 3-5 significant manufacturers for the development of “Mac Compatibles.” These would be ideally large companies such as AT&T, Digital Equipment Corporation, Hewlett Packard, Motorola, and others.
Microsoft, he continued, “is very willing to help Apple implement this strategy. We are familiar with the key manufacturers, their strategies and strengths. We also have a great deal of experience in OEMing system software.” (You can read the memo in its entirety here.)
John Sculley, it seems, was interested — although Jean Louis Gassée, who had taken over the Mac division from Steve Jobs, was staunchly against the idea. He thought that the Mac was so superior to other rivals that it would not face any serious competition. He also felt that Apple was better off sticking to its high profit margin strategy of selling Mac OS only on Apple’s own computers.
Ultimately, Apple decided not to go forward with it. The company then made the error of signing an agreement with Bill Gates, allowing him to use elements of the Mac’s look and feel in Windows.
Microsoft goes up, Apple goes down
The deal gave Microsoft a “non-exclusive, worldwide, royalty-free, perpetual, nontransferable license to use [parts of the Mac technology] in present and future software programs, and to license them to and through third parties for use in their software programs.”
At first, Jean Louis Gassée was quite correct: rivals couldn’t hope to measure up to what Apple was doing. Windows 1.0 was almost laughably bad, and certainly no real competition to Apple. But relations soured between the two companies when the new, improved Windows 2.0 arrived a few years later.
Apple sued, alleging that Microsoft had copied 189 different design elements illegally — only for Judge William Schwarzer to rule that the interface elements for the new Windows were covered by the existing license between Apple and Microsoft.
This set the tone for Apple and Microsoft’s trajectories in the first half of the 1990s. Microsoft went on to conquer the world with Windows 95, while Apple came dangerously close to bankruptcy. Ironically, it even licensed Mac OS to third-party manufacturers — only for this strategy to make things even worse.
It was only after Steve Jobs returned to Apple in the late 90s that the course of both companies reversed one more time.