Why did Apple purchase NeXT for $429M?

It took NeXT about 10 years to become profitable on $50M in revenues. This amounted to $1M in profits, for a 2% profit margin in '95. However, in '96, they were valued at $429M by Apple. It makes absolutely no sense to me that this company is worth this much money. What was the logic in buying a company with $50M in REVENUES for $429M?
My working theory is that this purchasing price was viewed as being the amount to bring back Steve Jobs. Apple probably knew that they were spending too much money, but this is the amount that it would have costed to bring back Steve Jobs as CEO one day. This is my opinion of course.
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1995
NeXT announce their financial results for 1994 on 21 February: $50 million in revenues; a net profit of $1 million.
NeXTSTEP 3.3 ships in February. NeXTSTEP 3.3 for Sparc ships in March.
NeXT acquire the Objective-C copyright from Stepstone in April.
NetInfo and Portable Distributed Objects 2.0 ship in April.
1996
NeXT announce Distributed OLE 3.5, EOF 1.1, and WebObjects on 30 January.
Apple buy NeXT for $429 million on 20 December.
Reply to
2.7182818284590...
On Feb 29, 9:06 pm, "2.7182818284590..." wrote:
Using the time value of money on a 10 year horizon I calculated this figure to be 449M
Reply to
shortT
2.7182818284590... wrote
\> It took NeXT about 10 years to become profitable on $50M in revenues.
They obviously believed that it would do a lot better than that in the future.
Thats what any investment is about, what it will do in the future.
Yes, that was clearly part of it. Apple was in some pretty deep shit at the time and it is clear that bringing Jobs back did fix that problem.
You can make the case that that was peanuts in the benefit they got from having Jobs back.
Thats never something anyone can calculate in that situation.
Or even caculate the value of Jobs return to Apple either.
Reply to
Rod Speed
On Feb 29, 6:06 pm, "2.7182818284590..." wrote:
Apple didn't have a viable operating system going forward. NeXT had a multi-user, multi-tasking operating system with an advanced GUI based on PostScript.
NeXT had a problem that it had abandoned hardware production and couldn't make a profit by pricing its OS at an affordable level.
-- Ron
Reply to
Ron Peterson
Tevanian was probably a better acquisition for Apple than Jobs.
The Mach operating system made it possible to move between platforms and porting to Intel worked, but NeXT users lost the use of some third party software.
Objective C is more elegant than C++, but somehow hasn't attracted a following other than for Apple.
-- Ron
Reply to
Ron Peterson
Nope, it wasnt the OS that drove the ipod, ipad or iphone.
The iphone didnt even have multitasking until 4
Those were what saved Apple, not the Mac.
Reply to
Rod Speed
"Saving" Apple didn't require turning it into a $500 billion company. I think it's reasonable to say it was saved from a declining future long before the iPad or iPhone.
Also, people exaggerate how much trouble Apple was in at its low point. They always had a huge amount of cash for their size, so debt was not a problem. The problem was remaining viable and coming up with future products in a Wintel world.
Reply to
Jared
Jared wrote
multi-user, multi-tasking operating system
Thats very arguable indeed given that everyone else was going down the tubes. Even HP has given up on PCs in the most generic sense of the term now.
The Mac was dying and it was only a matter of time before it was gone too if it hadnt been for the ipods, iphones and ipads.
No it is not. The Mac never had much of a future by then.
Others have noticed what happened to Commodore, Compaq, HP, Lenovo, etc etc etc.
Debt only works if the operation has a future. Without the ipods, iphones, ipads, Apple didnt.
And thats why they needed the ipods, iphones and ipads. The Macs were never gunna save their bacon.
Reply to
Rod Speed
multi-user, multi-tasking operating system
I'm taking issue with your grouping those products all together.
The first iPod came out circa 2001. If you said the iPod saved them, that's reasonable. The iPad (2010) and the iPhone (2007) didn't save them, because an eternity (in the tech industry) had passed since the iPod and iTunes came out and Apple had become a giant already.
Apple matched its tech-bubble high around the end of 2004; its growth after that goes beyond merely becoming a viable company.
Reply to
Jared
Jared wrote
multi-user, multi-tasking operating system
Even HP has given up on PCs in the most
I was only doing that in the sense of what saved Apple.
Sure, but the ipod alone couldnt have saved Apple, that market was always going to saturate and more and more wouldnt bother to have a separate ipod once their cellphone could do what it did music wise.
Thats very arguable indeed.
Sure, but if they had instead chosen to just stick with the Mac, they would have gone down the tubes like Commodore, Compaq, Lenovo etc etc etc did eventually.
Reply to
Rod Speed
Wrong.
The Apple eMac (education Mac) in 2002 was the first big seller after Jobs took the reigns. People lined up to buy the colorful all in one desktop. It was when Jobs came back to Apple.
multi-user, multi-tasking operating system
ipads, Apple didnt.
gunna save their bacon.
Reply to
-DirtBag
You're thinking of the iMac and 1998.
The eMac was not colorful. I don't know the exact sales figures, but I'm sure they were small in comparison to the iMac.
Reply to
Jared
iMac thats the one.
There was a laptop too that was colorful. It flopped I think.
With the Imac, Colorful all in one and it Seems like every dorm room had one. Thanks for the correction.
-Dirt
Reply to
DirtBag

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