On February 10, it was lightly raining in Cupertino, California, as a Ford from Vienna, Virginia, parked outside Apple's headquarters.
In Apple's CEO office, John Scully was discussing matters with two notable guests: Ford Brook, the executive director of Sequoia Capital, and Steve Case, the CEO of AOL.
Sequoia Capital had been an angel investor in Apple from the beginning. When Apple first sought investment, it was Sequoia Capital that stepped up to offer assistance! They had profited immensely from their investment, even after selling a substantial portion of their shares; they still retained 10% ownership and thus held a significant influence on the Apple board.
This time, Sequoia Capital intended to lead an initiative in collaboration with AOL to bolster Apple's presence in the browser market.
"The rivalry between AOL and Netscape is intense, Scully, and you know that," Ford Brook stated directly. "Just look at how high Netscape's market valuation is! Isn't Apple tempted?"
After Ford finished speaking, he smiled confidently, believing that Scully could not possibly remain indifferent to the lucrative opportunity presented by the browser market. He continued, "AOL has recruited several original members of the Netscape browser development team. I believe a new version of 'Netscape' will soon be released, but AOL hopes to secure Apple's collaboration!"
Scully smiled and asked leisurely, "How do you suggest we assist AOL?"
Ford replied, "By installing AOL's browser on Apple's desktop system!"
"But what benefit is there for Apple in this?" Scully responded with a playful expression. "You know that the Netscape browser has been very popular among netizens, and excluding it from our computers will undoubtedly affect our sales!"
At that moment, Steve Case, who had been quiet until then, interjected, "10% of the browser's shares!!!"
Scully looked at Steve Case, pondered for a moment, and countered, "20%!!!"
"Deal!!!" Steve Case agreed without hesitation, as if he hadn't fully contemplated the implications.
Ford Brook felt a pang of anxiety. Sequoia Capital had more shares in AOL than in Apple, meaning the more browser shares Steve Case offered to Apple, the greater the loss for Sequoia Capital. He signaled with his eyes to Steve, hinting that offering too much could be detrimental for their interests.
However, Steve Case had made his decision. Given the difficulty AOL faced in breaking Netscape's monopoly, he realized that securing more allies was paramount. Apple emerged as an optimal choice for their strategy.
Apple was one of the top companies in the personal computer industry, wielding substantial influence. If Apple led the way in installing AOL browsers, this move could significantly boost AOL's browser, facilitating a smoother launch!
Scully, noting Steve's decisiveness, felt taken aback, but quickly gathered himself and thought, This is favorable. "Mr. Steve is indeed impressive, and we at Apple are eager to collaborate with you!"
"Thank you. I look forward to a successful partnership!" Steve Case responded.
"Of course!" Scully laughed.
Ford Brook shook his head slightly, resigning himself to the fact that Sequoia Capital could not hinder this decision. At least they had shares in both companies.
The three men began to discuss the details of their collaboration and strategies to promote the browser.
Three days later, Apple held a press conference announcing, "Apple and AOL will join forces to create the best browser in history, the 'AL Browser'!!!"
When a reporter asked, "Is the name AL derived from the first letters of Apple and AOL?" the response was, "That's right!"
Another reporter pressed, "Will every computer Apple produces in the future come with the AL browser pre-installed?"
"Of course!" came the reply.
"Given that Netscape has already established a strong foothold, do you believe the AL browser stands a chance against it?" asked yet another reporter.
"Both Apple and AOL are formidable companies, and we are very confident!!!" Scully asserted.
Following the press conference, TV, newspapers, and radio stations widely covered the news.
As expected, the Netscape browser was negatively impacted by this announcement, leading to a $4 drop in its stock price on that day.
Henry was one of the first to learn of the specifics from Apple's press conference. Sitting in his office with his chin resting on his hands, Henry frowned slightly. The collaboration between Apple and AOL was indeed troublesome, but it made sense considering that Sequoia Capital had investments in both companies.
Microsoft had not yet engaged in the browser war, but now Apple was stepping into the fray!
While Apple had already fallen significantly behind Microsoft, Henry was afraid of Microsoft but not as intimidated by Apple. The Microsoft operating system had dominated the market in 1995, leaving little room for competitors. It was insulting that Scully, once seen as a competent leader, had let Apple deteriorate from its former dominance in a market once led by Jobs.
With the rising prominence of compatible PCs, Apple was struggling to maintain its relevance.
Aware that he could not remain idle while Apple sought to undermine him, Henry decided to seek out allies of his own. If they could turn to Apple for support, surely he could reach out to others as well.
Henry dispatched a team to lobby Microsoft, IBM, HP, and Compaq, while he himself planned to visit Dell. Although Dell had only been founded in 1984 and was still establishing its identity in the business, Henry recognized its potential for future growth. In 1988, Dell would prepare to go public, and if the Nicholas Group could secure a stake in Dell, it would forge a beneficial alliance for both parties.
With that thought in mind, Henry called Michael Dell to arrange a meeting. As soon as Michael Dell learned that it was the chairman of the Nicholas Group who wanted to meet, he immediately agreed and said he would rush to San Jose to see Henry.
The difference in status was palpable! It was akin to receiving a call from Jack Ma, inviting you to meet—would you not feel excitement?
Although Dell was growing rapidly, it paled in comparison to the Nicholas Group. It was impossible for Dell to remain ignorant of the Nicholas Group's prominence within the industry, especially given that the Netscape browser alone had achieved a market value of $3.98 billion!
Three days later, Michael Dell arrived at the Nicholas Group headquarters.
At just 23 years old, Michael Dell was a young entrepreneur making waves in the industry. However, when he met Henry, he was momentarily taken aback, as the employees of the Nicholas Group had introduced Henry as their chairman.
"Is it strange to see me?" Henry inquired.
"No... I just didn't expect Mr. Williams to be so young. It caught me off guard for a moment!" Michael replied.
"Ha! You're quite young yourself," Henry said with a smile as he gestured for him to take a seat. After Helen served coffee, Henry got straight to the point, "You must be curious about why I wanted to meet with you. To put it plainly, I am interested in having the Nicholas Group take a stake in Dell. How do you feel about that?"
Michael Dell's expression shifted as he contemplated the offer. After a pause, he asked, "Are you looking to acquire a controlling stake or something less?"
"What if the Nicholas Group requires a majority stake?" Henry pressed.
"If that's the case, then it would be difficult... Dell will never relinquish control!" Michael stated firmly.
Henry chuckled, recognizing Michael Dell's ambition and possessiveness. It was no wonder Dell later opted for privatization. Considering that during its early privatization, Dell held 75% of its shares, it was a staggering shareholding for a company with a multibillion-dollar market value!
However, Henry's interest in investing in Dell was a strategic response to the joint efforts of Apple and AOL, with his ultimate focus still on Apple. He valued Apple for its "soft and hard" capabilities—its talented personnel and invaluable patents, which are crucial for any tech-based company's success.
"Alright, then how about 20%? The Nicholas Group wishes to invest, and should we ever decide to sell shares, we can arrange for you to have the right of first refusal for any preferred shares!"
Upon hearing this, Michael Dell's expression softened, and after a moment of contemplation, he responded, "Okay. How much do you plan to invest? Dell has achieved remarkable growth in just over three years, so if the conditions are too demanding, I won't agree."
Henry grinned, "Of course. However, our analysis indicates that while Dell's sales exceeded $100 million last year, your profitability was relatively low at only $20 million! Therefore, we value Dell's total market cap at around $250 million."
Dell specialized in selling assembled computers which, compared to branded alternatives, were much cheaper but yielded lower profit margins. Nevertheless, the company had flourished from an efficient turnover model. Once they received recognition, those assembled machines could rebrand as established products from a prominent tech company.
Michael frowned at Henry's estimate. He found it inadequate, replying, "A valuation of $250 million is too low. Dell's sales are set to increase this year and our profits will exceed last year's figures!"
"Then let's settle at $300 million! Surely you understand that if the Nicholas Group is a shareholder in Dell, our backing will elevate Dell to new heights. With our marketing and promotions, Dell is bound to grow several times faster than before!!!" Henry argued.
After further contemplation, Michael nodded and said, "Alright, I can agree to that valuation!"
"Now, are you interested in the Netscape browser?" Henry inquired.
"You mean the Netscape browser?" Michael confirmed.
"That's right. The Nicholas Group intends to divest 1.5% of its shares in the Netscape browser in exchange for your own shares. How does that sound?"
Michael frowned again, considering whether it would be more advantageous to take cash or Netscape shares. Given the volatility surrounding the Netscape browser's stock price—having previously dropped from $4.95 billion to below $4 billion—he recognized the risk.
Before he could respond, the phone rang. Henry excused himself and answered.
"Chairman, IBM, Hewlett-Packard, and Compaq have all agreed to pre-install our Netscape browser and will not include the AL browser! You can turn on the TV and watch CBS news for the joint statements released by these three companies!!!"
After hanging up, Henry turned to Michael Dell and said, "Mr. Dell, allow me to show you something."
Henry switched on the TV, tuned to CBS News, and displayed the report.
The reporter announced, "Welcome to CBS News. Today, we bring you breaking news: despite the imminent release of the AL browser by Apple and AOL, three major computer companies—IBM, Hewlett-Packard, and Compaq—have issued statements that they will exclusively continue utilizing the Netscape browser. Stanford University computer professor Fred Bruce believes Netscape's market position remains strong and unshakeable…"
After watching the report, Michael's eyes sparkled with excitement. He turned to Henry and said, "Mr. Williams, your company is incredible! I agree to exchange shares!"
"Ha! It's only natural!" Henry replied, a triumphant smile spreading across his face.
IBM, Hewlett-Packard, and Compaq continuing to support the Netscape browser came as no surprise to Henry. After all, Netscape had already captured the market and remained very popular among users. Why would any computer manufacturer opt for the AL browser when they could feature the well-established Netscape option? The AL browser from AOL and Apple was still unproven, and with Apple also selling computers, it only made sense that competitors would refrain from aligning with them.