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Steve Jobs's $1.1 billion AAPL windfall & Steve Ballmer's $11 billion MSFT blunder

post #1 of 52
Thread Starter 
After taking over as Microsoft's chief executive in 2000, Steve Ballmer presided over the liquidation of Apple's stock his company had acquired three years earlier in its $150 million investment in Apple. In retrospect, that was a fantastically bad idea.



Apple's Steve Jobs divests ARM, settles with Microsoft



Apple's own 1990 investment in its joint partnership with Acorn to build the ARM Architecture for mobile processors resulted in a two part windfall for Steve Jobs seven years later: a valuable stake in the "Windows" of mobile chip platforms and a wide supply of high performance, highly efficient components perfectly suited for powering iPods and other coming inventions.

Jobs had returned to Apple's helm in 1997 to turn around the company he founded twenty years earlier but had been exiled from for just over a decade. While he had nothing to do with Apple's original ARM investment brokered under John Sculley, Jobs was greatly aided in turning around Apple by the $1.1 billion he recouped from selling off that stake at its peak after ARM Holdings' Initial Public Offering in 1998.

ARM
Source: Google Finance


Just prior to that, Jobs had let go of Apple's $1.2 billion lawsuit pursuing patent claims and code theft damages against Microsoft. In exchange, the two companies agreed to an amicable cross-licensing deal and a show of support involving Internet Explorer and Office for Macintosh and a $150 million investment by Microsoft in Apple that would be held for at least three years.

Microsoft's Steve Ballmer divests AAPL



As Jobs unloaded Apple's ARM holdings, Microsoft was also itching to dump its show investment of $150 million worth of Apple preferred shares. In 2000 the non-voting stock was converted into 18.2 million common shares at $8.25 per share, and were subsequently sold off between August 2000 (the earliest date allowed) and 2003.

Apple split its stock in June 2000, right before Microsoft's conversion. The stock also split again in 2005. Additionally, the market crashed in 2000, causing Apple's shares to plummet from a split-corrected peak of around $30 to a new baseline that hovered around $10 over the next three years before beginning to take off in 2004, just after Microsoft bailed.

2000s MSFT AAPL
Source: Google Finance


That means Microsoft's liquidation of Apple shares, initiated in the first year of Ballmer's new role as Microsoft's chief executive, provided it with about $182 million, a return on its investment of about 20 percent. Had Microsoft held its Apple shares, they would today be worth around $9.1 billion.

Opportunities cost



Additionally, with the dividends Apple began paying last year, Microsoft would also be earning over $222 million annually in mad cash just holding those shares. That's enough to buy every one of Microsoft's 99,139 employees worldwide a nicely equipped 13" Retina Display MacBook Pro and a new iPad, every year.

If Ballmer were as magically prescient as Jobs appeared to be in unloading Apple's ARM shares at just the right time to cover Apple's embarrassing losses with an external windfall priced at its peak, Ballmer might have instead retained and then sold Microsoft's Apple shares last year.

That would have similarly covered Microsoft's $6.2 billion "impairment charge" related to its beleaguered acquisition of Quantive, back when those 18.2 million Apple shares would have been worth $11.5 billion, or alternatively, at their peak in last September, when they would have reached above $12.7 billion.

Baller would have had more than enough left over to also hide this year's $900 million "inventory adjustment" related to Surface RT, Microsoft's beleaguered iPad contender.

Microsoft's blunder in throwing away its Apple shares at their lowest point of the 2000s certainly isn't the only example of Microsoft's investments gone wrong under the Ballmer administration, however.
post #2 of 52

Good god- why is this guy still there? One disaster after the next.

You almost feel sorry that they keep letting him continue to constantly f#@k up!

 
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post #3 of 52
Hindsight is 20/20 with investment decisions, really? Who would have ever thought that? Hopefully scholars and historians are documenting this rare occurrence so that future generations will learn from it. 1smile.gif

-kpluck

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post #4 of 52
Quote:
Originally Posted by kpluck View Post

Hindsight is 20/20 with investment decisions, really? Who would have ever thought that? Hopefully scholars and historians are documenting this rare occurrence so that future generations will learn from it. 1smile.gif

-kpluck

I'm sorry but AAPL had no where to go BUT up. After the introduction of the smash iMac in 1998/1999 and the rumors of OSX it was inconceivable to sell at that point. This guy is just BAD.

 
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"And yet they haven't loved Google Wallet which you claimed was the exact same thing and kept posting...
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Where's the new Apple TV?
 
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post #5 of 52
Originally Posted by pazuzu View Post

Good god- why is this guy still there? ...

 

Because nobody else wants the job?

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post #6 of 52
It's AAPL, not APPL (that's petrol). Other than that, good article.

I sure hope they keep Ballmer on as CEO; I don't watch TV so am missing out on comedy.
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post #7 of 52
Well honestly, no one could have predicted where Apple would be going over the next decade or so. I certainly didn't, and I've had Apple shares during the 1990's. I didn't buy back in until the middle od 2004.

On the other hand, Apple really needed that money from ARM share sales. Too bad, because if Apple still owned their one third, it would be worth $6.5 billion today, and Apple would have a lot of control over where the ARM industry is going.

We can't predict the future.
post #8 of 52
Quote:
Originally Posted by pazuzu View Post

I'm sorry but AAPL had no where to go BUT up. After the introduction of the smash iMac in 1998/1999 and the rumors of OSX it was inconceivable to sell at that point. This guy is just BAD.
Not really. It wasn't until a couple of years later that Apple began to dig out of their hole.
post #9 of 52
Originally Posted by pazuzu View Post
Good god- why is this guy still there? One disaster after the next.

You almost feel sorry that they keep letting him continue to constantly f#@k up!


Sorry? I'm elated! In fact, if you have throwaway income and are a fan of Apple, you should really buy shares in Microsoft so you can petition the board to KEEP BALLMER THERE. Him as CEO is the best thing to happen to Microsoft since… 

 

What, I guess since before Gates decided to steal Mac OS.

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post #10 of 52
Quote:
Originally Posted by melgross View Post

Well honestly, no one could have predicted where Apple would be going over the next decade or so. I certainly didn't, and I've had Apple shares during the 1990's. I didn't buy back in until the middle od 2004.

On the other hand, Apple really needed that money from ARM share sales. Too bad, because if Apple still owned their one third, it would be worth $6.5 billion today, and Apple would have a lot of control over where the ARM industry is going.

We can't predict the future.

 

Quote:
Originally Posted by melgross View Post


Not really. It wasn't until a couple of years later that Apple began to dig out of their hole.

Microsoft didn't need the money and again there was nowhere for AAPL to go except up unless you think Apple was going to fold in 2000 which no one did after 1998/99.

We may not be able to predict the future but we sure as hell can decipher what incompetence is. 

 
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"And yet they haven't loved Google Wallet which you claimed was the exact same thing and kept posting...
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Where's the new Apple TV?
 
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post #11 of 52
Quote:
Originally Posted by Tallest Skil View Post


Sorry? I'm elated! In fact, if you have throwaway income and are a fan of Apple, you should really buy shares in Microsoft so you can petition the board to KEEP BALLMER THERE. Him as CEO is the best thing to happen to Microsoft since… 

 

What, I guess since before Gates decided to steal Mac OS.

Books will be written about this guy's tenure for years- he's virtually destroying it. It's been great for AAPL  but at this point it's beyond pathetic- it's rather sad.1wink.gif

 
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Where's the new Apple TV?
 
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post #12 of 52

As brain gets older, it loses its flexibility and charm.  It is not his fault.  Need new brains which have new ideas and agendas in it!!!

 

Our politicians are the same. Need new blood!
 

post #13 of 52

Judging what others did with their money in the stock market with the benefit of 20/20 hindsight is futile.  Furthermore, a 20% ROI is nothing to sneeze at.  We should all be so lucky to make those kinds of 'mistakes'.

 

There's so many great reasons call Ballmer a buffoon.  In my opinion, this one is really stretching it.

post #14 of 52

As we have all learned, Bill Gates have more confidence in Jobs than most people. Gates made a bet on Jobs, but was not in charge to really cash in on the bet. Ballmer had no faith in Jobs, or Apple, he had no clue what was going to happen. So 20% return was better than nothing or the write down if Ballmer was actually right. The question would be if Gate stuck around longer would he held the position.

 

Yeah hindsight is 20/20, but I had faith and knew Jobs would pull it out, Yeah I sold, but also bought back in, I road the ups and sold and downs and bought. I still own today and ridding the up to a profit yet again and when the market wants to pound on Apple yet again I will buy at the lows yet again. these massive 20 to 30 % swings over months is great for making money.

post #15 of 52

Apple may have lost $1b by not keeping ARM.

But it have lost much more by not buying out all 3rd party multi-touch patents and ip before 2007 release of iPhone.

Without multi-touch Android would have been far from where it is now.

post #16 of 52
Quote:
Originally Posted by jason98 View Post

Apple may have lost $1b by not keeping ARM.

But it have lost much more by not buying out all 3rd party multi-touch patents and ip before 2007 release of iPhone.

Without multi-touch Android would have been far from where it is now.

 

Aggressively using patents that they don't include in their products isn't Apple's style.  Apple isn't a patent troll.

post #17 of 52

"AAPL had no where [sic] to go BUT up."

 

I'm guessing you had no skin in the game at the time. Those of us who did didn't all feel that way.

Although I felt pretty good in my investment in AAPL, it was seen as an incredible risk. Had I felt fully confident, I would have invested all my free cash back when it was  at $13 and would be several times a millionaire today (as you undoubtedly are.) But the fact is, it was a scary time to put money in AAPL and I didn't add to my initial investment until it after it topped $60. Even then it was in installments. Despite my stunning "stupidity," I did pretty well.

Even when the iPhone was released, the market thought Apple would fail.

 

Quote:
Originally Posted by pazuzu View Post

I'm sorry but AAPL had no where to go BUT up. After the introduction of the smash iMac in 1998/1999 and the rumors of OSX it was inconceivable to sell at that point. This guy is just BAD.

post #18 of 52
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post #19 of 52
That dividend could have been one of Microsoft's biggest profit centres.
post #20 of 52
All the Woulda-Coulda-Shouldas
Layin' in the sun,
Talkin' bout the things
They woulda-coulda-shoulda done...
But those Woulda-Coulda-Shouldas
All ran away and hid
From one little did.

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post #21 of 52

 

 

Current Apple vs Microsoft score

16012.87 vs 31993.25

 

post #22 of 52
Quote:
Originally Posted by jason98 View Post

Apple may have lost $1b by not keeping ARM.
But it have lost much more by not buying out all 3rd party multi-touch patents and ip before 2007 release of iPhone.
Without multi-touch Android would have been far from where it is now.

I noticed you're attempting to turn the premise of the article around, but the facts don't support your claim.

ARM Holdings' stock price crashed after Apple sold off the bulk of its holdings 1999-2001. It has only since recovered to the same ~$40 territory recently, and is not dramatically increasing. So no, Apple didn't leave anything on the table by selling off ARM a decade ago.

Microsoft, on the other hand, got Apple stock at the bottom after the dot com crash and after Apple (rudely) split the stock. They sold it before it appreciated.

Apple also has tons of patents. It just takes 2-3 years to go to trial in the US. You haven't seen anything yet. Prepare to be blown away.
post #23 of 52

$11B is a lot of money. But it's a large drop in a large Redmond bucket. In more or less the same period of time, Microsoft has spent 20 times that much to buy back its own stock.

post #24 of 52
I suspect M$ sold the stock in a dismissive spite. Who wants stock in a toy company?

We owe M$ for unifying the computer industry by administering one format overthrow after another. They threw out a lot of good, but at least it is now somewhat normalized.

M$ is an error prone company with an mistake at the helm. I'm glad M$ didn't prosper from the wild upside in AAPL stock.
post #25 of 52
Quote:
Originally Posted by PhilBoogie View Post

It's AAPL, not APPL (that's petrol). Other than that, good article.

I sure hope they keep Ballmer on as CEO; I don't watch TV so am missing out on comedy.

That and calling him Baller LOL.

You'd better explain 'petrol' to the Yanks 1wink.gif
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post #26 of 52
Quote:
Originally Posted by StruckPaper View Post

$11B is a lot of money. But it's a large drop in a large Redmond bucket. In more or less the same period of time, Microsoft has spent 20 times that much to buy back its own stock.

Which was such a great investment compared to Apple stock...... /s
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post #27 of 52
Quote:
Originally Posted by DESuserIGN View Post

"AAPL had no where [sic] to go BUT up."

I'm guessing you had no skin in the game at the time. Those of us who did didn't all feel that way.
Although I felt pretty good in my investment in AAPL, it was seen as an incredible risk. Had I felt fully confident, I would have invested all my free cash back when it was  at $13 and would be several times a millionaire today (as you undoubtedly are.) But the fact is, it was a scary time to put money in AAPL and I didn't add to my initial investment until it after it topped $60. Even then it was in installments. Despite my stunning "stupidity," I did pretty well.
Even when the iPhone was released, the market thought Apple would fail.
Yet you didn't still sell did you? The fact it it was rock bottom. No where to go- but up. It's called a long term investment.
 
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post #28 of 52
Quote:
Originally Posted by jragosta View Post


Which was such a great investment compared to Apple stock...... /s

Most share buybacks are equally "great" investment, especially in the long term.

post #29 of 52
Quote:
Originally Posted by Stourque View Post

That dividend could have been one of Microsoft's biggest profit centres.

You're being sarcastic, I presume?

post #30 of 52
Quote:
Originally Posted by pazuzu View Post

Yet you didn't still sell did you? The fact it it was rock bottom. No where to go- but up. It's called a long term investment.

 

It's true, I didn't sell and it was a great long term investment for me, as an individual.

 

But software and CE companies aren't in business to invest in other software and CE companies (Berkshire Hathaway they aren't.) What kind of confidence should stockholders have in Apple if they started buying up Google or Amazon stock as an investment?

Much like the Monday morning quarterbacking that's the basis of this silly article, it makes no sense for a company to hold large blocks of their competitor's stock as a "long term  investment." (Apple owned ARM shares because they they helped to create the company. Just as they hold Filemaker now. They weren't investing in a rival.)

post #31 of 52
Quote:
Originally Posted by StruckPaper View Post

Most share buybacks are equally "great" investment, especially in the long term.

Not at all.

By selling that $150 M, they got enough to buy back $150 M worth of MS stock. That would be worth about $300 M today.

If they had held onto it until today, they could have bought back $11 B worth of MS stock.

You think those are equally good?
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post #32 of 52
Quote:
Originally Posted by DESuserIGN View Post

Quote:
Originally Posted by pazuzu View Post

Yet you didn't still sell did you? The fact it it was rock bottom. No where to go- but up. It's called a long term investment.

It's true, I didn't sell and it was a great long term investment for me, as an individual.

But software and CE companies aren't in business to invest in other software and CE companies (Berkshire Hathaway they aren't.) What kind of confidence should stockholders have in Apple if they started buying up Google or Amazon stock as an investment?
Much like the Monday morning quarterbacking that's the basis of this silly article, it makes no sense for a company to hold large blocks of their competitor's stock as a "long term  investment." (Apple owned ARM shares because they they helped to create the company. Just as they hold Filemaker now. They weren't investing in a rival.)

It is a silly article... And overlooked one of the major reasons MS invested in Apple and continued support for Word and Excel on the Mac... It helped call off the monopoly dogs of the DOJ.
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post #33 of 52
Quote:
Originally Posted by AppleInsider View Post

After taking over as Microsoft's chief executive in 2000, Steve Ballmer presided over the liquidation of Apple's stock his company had acquired three years earlier in its $150 million investment in Apple. In retrospect, that was a fantastically bad idea.



Apple's Steve Jobs divests ARM, settles with Microsoft



Apple's own 1990 investment in its joint partnership with Acorn to build the ARM Architecture for mobile processors resulted in a two part windfall for Steve Jobs seven years later: a valuable stake in the "Windows" of mobile chip platforms and a wide supply of high performance, highly efficient components perfectly suited for powering iPods and other coming inventions.

Jobs had returned to Apple's helm in 1997 to turn around the company he founded twenty years earlier but had been exiled from for just over a decade. While he had nothing to do with Apple's original ARM investment brokered under John Sculley, Jobs was greatly aided in turning around Apple by the $1.1 billion he recouped from selling off that stake at its peak after ARM Holdings' Initial Public Offering in 1998.

ARM
Source: Google Finance


Just prior to that, Jobs had let go of Apple's $1.2 billion lawsuit pursuing patent claims and code theft damages against Microsoft. In exchange, the two companies agreed to an amicable cross-licensing deal and a show of support involving Internet Explorer and Office for Macintosh and a $150 million investment by Microsoft in Apple that would be held for at least three years.

Microsoft's Steve Ballmer divests AAPL



As Jobs unloaded Apple's ARM holdings, Microsoft was also itching to dump its show investment of $150 million worth of Apple preferred shares. In 2000 the non-voting stock was converted into 18.2 million common shares at $8.25 per share, and were subsequently sold off between August 2000 (the earliest date allowed) and 2003.

Apple split its stock in June 2000, right before Microsoft's conversion. The stock also split again in 2005. Additionally, the market crashed in 2000, causing Apple's shares to plummet from a split-corrected peak of around $30 to a new baseline that hovered around $10 over the next three years before beginning to take off in 2004, just after Microsoft bailed.

2000s MSFT AAPL
Source: Google Finance


That means Microsoft's liquidation of Apple shares, initiated in the first year of Ballmer's new role as Microsoft's chief executive, provided it with about $182 million, a return on its investment of about 20 percent. Had Microsoft held its Apple shares, they would today be worth around $9.1 billion.

Opportunities cost



Additionally, with the dividends Apple began paying last year, Microsoft would also be earning over $222 million annually in mad cash just holding those shares. That's enough to buy every one of Microsoft's 99,139 employees worldwide a nicely equipped 13" Retina Display MacBook Pro and a new iPad, every year.

If Ballmer were as magically prescient as Jobs appeared to be in unloading Apple's ARM shares at just the right time to cover Apple's embarrassing losses with an external windfall priced at its peak, Ballmer might have instead retained and then sold Microsoft's Apple shares last year.

That would have similarly covered Microsoft's $6.2 billion "impairment charge" related to its beleaguered acquisition of Quantive, back when those 18.2 million Apple shares would have been worth $11.5 billion, or alternatively, at their peak in last September, when they would have reached above $12.7 billion.

Baller would have had more than enough left over to also hide this year's $900 million "inventory adjustment" related to Surface RT, Microsoft's beleaguered iPad contender.

Microsoft's blunder in throwing away its Apple shares at their lowest point of the 2000s certainly isn't the only example of Microsoft's investments gone wrong under the Ballmer administration, however.

i'm delighted to see the word "beleaguered" used in conjunction with with Microsoft! My how times have changed!!

post #34 of 52
Not really the right way to look at this. Unless MSFT had a strategic reason (they didn't) to continue to hold equity in AAPL then they were right to sell it. Sure, financially it would've paid off, but by selling the stake you can argue they freed up cash to return to their shareholders. Those MSFT shareholders could then make the decision whether they personally would invest in AAPL or not (many likely did).
post #35 of 52
Quote:
Originally Posted by jragosta View Post


Not at all.

By selling that $150 M, they got enough to buy back $150 M worth of MS stock. That would be worth about $300 M today.

If they had held onto it until today, they could have bought back $11 B worth of MS stock.

You think those are equally good?

Actually, pretty much. See if you can figure that out.

post #36 of 52
Steve Jobs sold 1.5 million shares in 1997. How much would that be worth today?
http://news.cnet.com/2100-1023-202239.html

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post #37 of 52
Quote:
Originally Posted by jd_in_sb View Post

Steve Jobs sold 1.5 million shares in 1997. How much would that be worth today?
http://news.cnet.com/2100-1023-202239.html

 Your point being with this comment. Please show us how this is similar to the article or you just taking some reference and without reading the article and understanding situation and comparing. Need to be more clever than that!

post #38 of 52
Quote:
Originally Posted by StruckPaper View Post

Actually, pretty much. See if you can figure that out.

OK. You give me $11 B and I'll give you $500 M back and we'll call it an even trade.
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post #39 of 52
Quote:
Originally Posted by Just_Me View Post

 

 

Current Apple vs Microsoft score

16012.87 vs 31993.25

 

 

Not being an investor, I have no idea what your chart is presenting...

post #40 of 52
Quote:
Originally Posted by melgross View Post

Well honestly, no one could have predicted where Apple would be going over the next decade or so. I certainly didn't, and I've had Apple shares during the 1990's. I didn't buy back in until the middle od 2004.

On the other hand, Apple really needed that money from ARM share sales. Too bad, because if Apple still owned their one third, it would be worth $6.5 billion today, and Apple would have a lot of control over where the ARM industry is going.

We can't predict the future.

 

Quote:
Originally Posted by jd_in_sb View Post

Steve Jobs sold 1.5 million shares in 1997. How much would that be worth today?
http://news.cnet.com/2100-1023-202239.html

Well, Apple used the money they acquired then to drag themselves out of a rut.  Not an easy thing to do, and with that 1 billion dollars (with a b) they wound up assessing, they made it back into the mainstream.  What does that mean?  Now, they have enough billions (with a b) to buy out ARM completely, with many 10s of billions left to spare.  So, not a bad deal in hindsight.

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