Earlier this month Apple made headlines when its stock hit $207.39, making it the first company with a market valuation over $1 trillion. For the past 15 years or so this has seemed almost inevitable as “the fruit” revolutionized the music industry and the smartphone market, launched the ap market, and made everyone want a tablet. But not so long ago, Apple was teetering on the edge of bankruptcy.
In 1997, Apple was not doing so well. Products were flopping and the company lacked direction. Co-founder Steve Jobs had been ousted from the company in 1985, but was brought back on to see if he could turn things around. He claims he didn’t realize how bad things really were until he started digging in after his return, but later revealed that the company was about 90 days away from declaring bankruptcy.
What saved the company was not, however, a Chapter 11 restructuring, but a lifeline from a rival in the highly competitive tech industry. Jobs made a deal with Microsoft founder Bill Gates that saved the company.
Microsoft purchased $150 million worth of non-voting Apple shares and promised to hold on to them for at least three years. Microsoft also agreed to develop and support Office products on Mac systems. These pieces of the deal were both important because they gave Apple an immediate cash infusion and made Macs more desired by professionals who relied on the Office Suite.
In exchange, Apple made Internet Explorer the default browser on its machines. Both companies agreed to drop a lawsuit over the look and feel of their competing operating systems and settle various patent disputes.
Apple employees were not thrilled with the deal when it was announced, but Jobs rebuked them, saying, “If we want to move forward and see Apple healthy and prospering again … we have to let go of this notion that for Apple to win, Microsoft has to lose.”
The take-away from this story is that there are often alternatives to bankruptcy for fundamentally good companies that know where and when to ask for help. And sometimes that help comes from unexpected places. A large chuck of our firm’s business is helping clients who are at the point where they need to make some drastic moves to shore up their financial situation, or file for bankruptcy.
Over the years, we have assisted countless businesses through the minefield of the business workout. We have strong relationships with the lenders and attorneys whose cooperation and patience are a necessary component of any successful workout. Our track record has also given us credibility with commercial lenders, whose yes or no vote on a workout proposal typically means the difference between an opportunity to recover and a bankruptcy filing.