All Things Tech Since 2010

A History of Microsoft

A History of Microsoft

Jul 11, 2012

Microsoft was among the first software companies founded at the dawn of the personal computer revolution and remains one of the industry’s most influential players today. Through a combination of solid products, bold business decisions and luck, Microsoft rose from humble beginnings in Albuquerque, New Mexico to become one of history’s most successful businesses.

This article is a brief history of one of the most important companies in the history of technology.

Beginning: 1975-1979

“…we’d never had the chip, just the book from Intel. If we had made any mistake in terms of how the instructions worked, the thing never would have run.”

Bill Gates on writing BASIC for the Altair 8800, 1993

Popular Electronics Altair 8800 1975

For many, the January 1975 issue of “Popular Electronics” heralded the beginning of the computer revolution.

Microsoft was founded in 1975 by Bill Gates and Paul Allen, two passionate computer hobbyists who had become friends as children in Seattle. At the time, Gates was attending Harvard University and Allen had recently dropped out of Washington State University to work for Honeywell. Intel released the 8080 microprocessor in 1974 and both men understood that the chip had the potential to make computers sufficiently small and affordable to move out of data centers and into small businesses and homes.

The January 1975 issue of “Popular Electronics” featured a cover photo that caught the attention of Gates and Allen. The photo was of the Altair 8800, a computer utilizing the Intel 8080 microprocessor and designed by calculator company MITS. The Altair 8800 was the first commercially available microcomputer. Gates and Allen both believed it would be the first of a new generation of affordable computers and that the new industry would not wait for Gates to finish his education. Gates left Harvard and the two formed Microsoft to write software for the Altair 8800.

The Altair 8800 was hardly a computer in the modern sense of the word; it lacked a keyboard, monitor and printer. It also had no operating system or software of any kind. Gates and Allen realized that without a programming language, few people would be able to make the computer do anything useful. Microsoft’s first project was to adapt the BASIC programming language for the Altair 8800 and license it to MITS. By mid-1975, Microsoft was formally established as a company and its BASIC interpreter was made available through MITS as an add-on product for the Altair 8800.

Microsoft’s early business centered primarily on adapting programming languages for the Altair 8800 and other computers – such as the groundbreaking Apple II – that began to appear on the market in the late 1970s. By 1979, Microsoft’s success had caused the company to outgrow its original home in Albuquerque, New Mexico. Microsoft relocated to a new headquarters in Bellevue, Washington to make room for the explosive growth that few could have predicted was soon to come.

Microsoft Original Employees 1978-2008

The original Microsoft employees in 1978 and in 2008, 30 years later. Bob Wallace, who passed away in 2002, was missing from the 30-year anniversary photo.

MS-DOS: 1980-1984

“Our restricting IBM’s ability to compete with us in licensing MS-DOS to other computer makers was the key point of the negotiation.”

Bill Gates on licensing MS-DOS to IBM, 1994

Original IBM PC 5150

The original IBM PC, via Wikipedia.

In 1980, IBM had near-total control of the computer industry. IBM designed room-filling mainframe computers for business, education and military use and sold them for millions of dollars. However, the Apple II – the first mass-produced personal computer – was selling thousands of units and becoming too popular to ignore. IBM began developing a personal computer of its own.

The IBM PC would need an operating system. IBM based the computer on the Intel 8088 microprocessor. At that time, the CP/M operating system by Digital Research was the preeminent operating system for the Intel 8088 platform, and IBM approached Digital Research with the intention of licensing it. The two companies were unable to come to terms, so IBM turned its attention to Microsoft.

Microsoft had no operating system to sell IBM, but Gates and Allen worried that if they were unable to produce one, IBM would not license the company’s programming language interpreters and other products. They located an operating system called QDOS – a clone of CP/M written by Tim Paterson of Seattle Computer Products – and purchased it outright for $50,000 in a deal that would earn Microsoft billions of dollars over the following years. Microsoft adapted the operating system for the IBM PC, renamed it MS-DOS and licensed it to IBM with the provision that they could also license it to other companies.

Microsoft Campus Entrance Sign Redmond

The sign at the entrance to the Microsoft corporate campus in Redmond, Washington.

IBM designed the IBM PC using components available to the general public. The sole proprietary component was the firmware that enabled the computer’s components to work together, called the BIOS. Gates and Allen believed that other companies would reverse-engineer the BIOS and release computers compatible with the IBM PC. Their belief came to fruition with the release of the Compaq Portable – the first IBM-compatible “clone” – in 1983. Many other clones soon followed, and Microsoft’s non-exclusive deal with IBM allowed them to license MS-DOS to every clone manufacturer.

During the early 1980s, Microsoft made two key personnel changes. Steve Ballmer, Bill Gates’ former Harvard classmate, joined the company in 1980 to give the youthful company business guidance. Paul Allen left Microsoft in 1982 after being diagnosed with Hodgkin’s lymphoma. The disease was treated successfully.

Windows: 1984-1994

“Apple bet their company on it, and that is why we got so involved in building applications for the Macintosh early on. We thought they were right. And we really bet our success on it as well.”

Bill Gates on the Macintosh, 1993

Xerox Alto

The Xerox Alto inspired the development of Windows and the Macintosh.

After seeing the Xerox Alto, a prototypical computer with an operating system that used a graphical user interface rather than a text parser, Apple’s executives shifted talent away from the Apple II and toward the development of an operating system with a GUI. This resulted in the development of the Lisa in 1983 and the Macintosh in 1984. Microsoft was one of the key companies creating software for the Macintosh, giving them access to the computer during the early stages of its development. Realizing that the Macintosh and computers like it would soon make MS-DOS look extremely outdated, Microsoft began work on a graphical operating environment of its own and released Windows 1.0 in 1985. Early Windows versions were graphical shells for MS-DOS and did not function as true standalone operating systems. However, applications such as Word for Windows and Excel made Windows popular with businesses.

During this time, Microsoft also worked with IBM on the development of a new operating system called OS/2. OS/2 was intended to replace MS-DOS and run on proprietary IBM hardware. Because IBM still controlled a large portion of the computer industry, Microsoft felt it was wise to collaborate with IBM on OS/2 in spite of the division of resources and conflict of interest it caused. However, Windows was Microsoft’s priority, and by 1990 it became apparent that the two companies could no longer work together effectively. As IBM’s influence over the industry dwindled, Microsoft’s grew to what some believed were monopolistic proportions.

Windows 9x: 1995-2000

“I don’t own dollars. I own Microsoft stock. So it’s only through multiplication that you convert what I own into some scary number.”

Bill Gates on his net worth, 1994

Bill Gates Jay Leno Windows 95 Launch

Bill Gates and Jay Leno at the launch party for Windows 95, via YouTube.

Windows 95 was the first version of Windows marketed to home computer users that functioned as a full operating system. Microsoft poured millions of dollars into research for Windows 95 in an attempt to make it easier to use than previous Windows versions. One of the primary features of Windows 95 was the addition of the Start button, which opened a menu containing shortcuts to applications and common tasks. Windows 95 was compatible with most MS-DOS software, and its release marked the beginning of the end for the legacy operating system. Microsoft ceased development of MS-DOS before the end of the twentieth century.

During the 1990s, the World Wide Web became open to the public. People who had never owned computers before began purchasing them by the millions, eager to experience the “information superhighway.” Microsoft realized that the landscape of the Internet was changing so rapidly that a startup company with a good idea could quickly render the company irrelevant and that Internet appliances and Web-based applications could one day make conventional personal computers and operating systems obsolete.

First Version of Internet Explorer

Microsoft Internet Explorer, version 1.0.

Microsoft’s answer to the Internet tidal wave was the Internet Explorer Web browser. Internet Explorer began as an optional add-on for Windows 95 and was an integral component of Windows 98. Because Windows 98 included Internet Explorer, many new computer users never bothered to consider alternative browsers. Competitors such as Netscape began to lose market share, and Microsoft’s dominance of the Web browser industry allowed them to exert control over the development of Web standards. This culminated in the filing of an antitrust suit against Microsoft by the United States government in 1998.

The antitrust suit against Microsoft alleged that the company used its dominance of the operating system industry to push Internet Explorer on users and that Microsoft negotiated anti-competitive licensing deals with computer manufacturers that rivals were unable to match. The final settlement in the case forced Microsoft to cease “predatory behavior” against other companies and to open the Windows Application Programming Interface up to other developers.

Perhaps in an attempt to curb negative publicity, Bill Gates stepped down as Microsoft CEO in 2000. As the wealthiest person in the world, Gates had become a target for negative sentiment against Microsoft and its business practices. Steve Ballmer was appointed Gates’ replacement as CEO, while Gates remained chairman and took on the new title of Chief Software Architect. Gates’ new role would be product-centric, while Ballmer would manage Microsoft’s business dealings.

Windows XP and Vista: 2001-2008

“We dialed up security in Vista, but we had to break backwards compatibility to make it secure. […] If we have to break backwards compatibility each time, we may as well get out of the operating systems business.”

Steve Ballmer on the slow adoption of Windows Vista, 2008

Prior to the release of Windows XP in 2001, the consumer and business versions of Windows were separate products with different feature sets. Windows 95, 98 and Millennium Edition contained both 16- and 32-bit code and remained dependant on the MS-DOS code base for compatibility with legacy software. Windows NT and 2000 contained 32-bit code only and had no dependency on MS-DOS. Windows XP was the first consumer version of Windows based on the Windows NT code base. It also included a “Compatibility Mode” feature that allowed many programs written for previous Windows versions to run without problems.

Windows XP was an unusually long-lived product; Microsoft did not replace it until after the release of Windows Vista in 2007. Even then, Windows XP remained available as a retail product until 2008 and was pre-installed on low-cost portable computers until 2010. Although Windows Vista included many improvements over Windows XP, it also had higher system requirements. Some users were dissatisfied with Vista’s performance on their computers. In addition, Vista contained a new security feature called User Account Control, which prompted for confirmation from the user before performing certain tasks. Using the default settings, UAC displayed confirmation prompts several times during common activities such as software installation, causing annoyance.

Bill Gates left his day-to-day role at Microsoft in 2008 to focus on his work with the Bill and Melinda Gates Foundation. The non-profit foundation’s activities include polio and tuberculosis vaccination, HIV/AIDS research, improving water and sanitation services in underprivileged nations and increasing worldwide rice crop yields. Gates remains chairman of the Microsoft board of directors.

Steve Ballmer and Bill Gates

Steve Ballmer and Bill Gates discuss Microsoft’s leadership transition plans at a press conference in 2006.

Post-PC Era: 2009-

“They’ve sold certainly more than I’d like them to sell, let me just be clear about that.”

Steve Ballmer on the success of Apple’s iPad, 2010

Microsoft released Windows 7 in 2009, marketing it as being easier to use than previous Windows versions. Windows 7 introduced a new feature called Libraries, which automatically maintains catalogs of various types of content including music, videos and pictures without moving the associated files from their original folders. Windows 7 also featured the first major change to the taskbar since the release of Windows 95. The Windows 7 taskbar was made larger and associated all open windows with their host applications automatically.

In 2010, Apple’s iPad changed the landscape of the industry and appeared to pose the first real threat to Microsoft’s dominance of the personal computer platform since the 1980s. The iPad was a small touch-controlled tablet with a base price under $500. With a library of thousands of free and inexpensive applications, the iPad could fill many of the personal computer’s roles. Apple co-founder and CEO Steve Jobs touted the launch of the iPad as the beginning of the “post-PC era,” saying that conventional computers would soon become niche tools rather than mainstream products.

Microsoft is currently in the process of developing Windows 8. Windows 8 will feature support for ARM processors, allowing manufacturers to develop small Windows-based tablets similar to the iPad. In addition, Windows 8 will include a new interface – named Metro – designed for touch-screen input. It will also have the ability to fall back to the classic Windows interface for legacy software support. Microsoft CEO Steve Ballmer has called Windows 8 Microsoft’s “riskiest product yet.”

Windows 8 Metro Desktop

The “Metro” desktop represents a radically different direction for Microsoft.

Images courtesy of Microsoft.