Microsoft

Microsoft Corporation

• Founders: William H. Gates III and Paul Allen
• Distinction: Created the systems that drive nearly all the world’s PCs.
• Primary products: Computer software and Internet services.
• Annual sales: $22.956 billion.
• Number of employees: 31,400.
• Major competitors: America Online, Oracle, Sun Microsystems.
• Chairman and Chief Software Architect: William H. Gates III; President and CEO: Steven A. Ballmer.
• Headquarters: Redmond, Wash.
• Year founded: 1975.
• Web site: www.microsoft.com.


You may love them or hate them, but there’s no denying them: Microsoft is currently the world’s most powerful company. Founded 25 years ago by two boyhood friends, the corporation grew up with the personal computer. Microsoft is neither the largest on Earth nor the most valuable. It doesn’t set the pace for technical innovations or employee relations. It isn’t sexy like a dotcom, seductive like a sports franchise, or alluring like an entertainment concern. What it is, though, is the purveyor of the software that runs 90 percent of all PCs—and that gives it a dominance that no other company, inside its industry or out, can match.

Starting in 1975, when Bill Gates and Paul Allen translated an existing mainframe computer programming language into one that could be used with the very first PC, the company they christened with a combination of the words “microcomputer” and “software” has been uncannily successful. It soared from $16,000 in revenues in its first year to $7.5 million in its fifth. It went global, forged product line, and was earning nearly $150 million annually by its 10th anniversary. Then, it went public—making Gates the youngest billionaire in U.S. history, and eventually the richest person in the world—while consistently tallying an astounding 25 cents in profit on every dollar it earned.
But with those accomplishments, Microsoft also has been unceasingly controversial. It has been faulted for taking innovations developed by others and turning them to its own commercial advantage. For leveraging its enormous power to stifle competition and force consumers into costly upgrades. For missing the onset of the Internet boom and then trying to bludgeon its way into the fray. For all these things and for making much more money and lasting far longer than anyone in its field, the company had been in the critical crosshairs since its beginning.
And then, in mid-1998, the U.S. Department of Justice and a coalition of 20 state attorneys general officially accused it of violating antitrust laws—a charge that ultimately led to an order that the company be split in two. With the case in lengthy legal limbo, however, Microsoft adamantly dug in its heels to retain the tremendous power it had amassed.

Paul Allen saw the future in 1975 when he picked up a copy of Popular Mechanics with the MITS Altair on its cover. Allen, then working at Honeywell, instantly understood that this primitive device would completely change the way computers were used. He showed the magazine to long-time friend Bill Gates, a fellow Seattle native and Harvard sophomore. Gates wrote his first computer program and started his first computer-related business when barely in his teens. Gates grew equally excited with the possibilities, and the two immediately began working round-the-clock to adapt the popular BASIC programming language used on large computers for this new personal-sized machine. Allen flew to MITS headquarters in Albuquerque to demonstrate their effort as soon as it was completed, and it so impressed the company they offered him a job. He also began actively promoting the new Altair BASIC, which attracted the attention of hobbyists who had longed for such an innovation. Gates got caught up in the enthusiasm as well, and dropped out of Harvard to follow his friend to New Mexico. There, the two struck up an informal partnership they called Micro-soft—with a hyphen to emphasize the corporate origins—and began refining their creation. That first year, it took in $16,005.
The two opened offices in Albuquerque and licensed their program to several large firms, including General Electric and NCR. Both were attracted by the Altair buzz. They hired employees to meet ensuing demand, and in 1977 formalized the company’s existence. Gates also began speaking out against hobbyists who were pirating their product, incurring the wrath of those who believed that such programs
The company responded in 1986 by going public and moving into a new fourbuilding campus in Redmond, Wash. Gates, its largest individual shareholder, became a billionaire at age 31. But as his wealth grew and the company’s power increased, so did the complaints against it. Rivals regularly accused Microsoft of being underhanded schemers out to profit from every computer sale in the world. Supporters also were growing in number as Microsoft enlarged its reach, however, and they vigorously applauded the improved products that made their computers more effective and efficient.
The late 1980s saw rapidly continuing advances from Microsoft. They introduced a “bundled” suite of applications called Office, CD-ROM products such as the Bookshelf reference collection. And as international operations tallied more than half of all sales Microsoft became the industry’s top software vender. Apple sued for copyright infringement. The folks in Redmond seemed unconcerned and expanded their headquarters to accomodate even more employees.
The biggest breakthrough of all came in 1990 when the most refined update yet of the graphical operating system, dubbed Windows 3.0, was released. Microsoft believed it would change the world of personal computing forever, and launched it with a $100 million advertising campaign. The effort appeared justified when unit sales hit 100,000 within two weeks, making the company the first in its industry to surpass $1 billion in sales. The impressive landmark was reached as Microsoft was celebrating its 15th anniversary. It also arrived just a little before the federal government revealed that it was investigating the company for possible antitrust violations. Supreme Court declared a lengthy appeals process must be undertaken before any resolution was determined.
Observers predicted the decision on whether Microsoft would be dismantled was thus years away. And Gates, the world’s richest person and head of its most powerful company, hunkered down to make his firm even more earth-shaking as the 21st century unfolded.