Microsoft 40 Years Today
Written by Sue Gee   
Saturday, 04 April 2015

Microsoft was founded on April 4th, 1975. Today the company, reputedly the third most valuable in the world, turns 40.

Celebrations were in order at Redmond to mark the occasion of the company's 40th anniversary with all three of Microsoft chiefs, co-founder Bill Gates, Steve Ballmer who succeeded him as CEO 2000 and Satya Nadella who took over the reins in February 2014, being present. 



To signal the event to Microsoft's other employees - there are now quarter of a million of them - Bill Gates sent an email.  This wasn't intended for global publication but was leaked via Twitter. It starts: 

Tomorrow is a special day: Microsoft's 40th anniversary.

Early on, Paul Allen and I set the goal of a computer on every desk and in every home. It was a bold idea and a lot of people thought we were out of our minds to imagine it was possible. It is amazing to think about how far computing has come since then, and we can all be proud of the role Microsoft played in that revolution.

The email then turns to contemplate the future but the opportunity to review the history is too good to miss.

Microsoft was founded in Albuquerque, New Mexico on April 4, 1975 by Bill Gates, then 19, and Paul Allen, who was 22. It was Allen who came up with the company name from the combination of the words microprocessor and software.




In fact Microsoft was the second company founded by Gates and Allen. The pair of them had met in the computer room of the school they both attended, Lakeside School in Seattle and they soon started to make money from their hobby.  They were paid to debug the operating system of the local PDP-10 timeshare, to computerize the school timetabling and they built a microprocessor based machine to work out traffic census data and offered a data-processing service to their local authorities and this led to their first company, Traf-o-data.




Their entrepreneurial experience meant that Gates and Allen were quick to seize the opportunity that presented itself - the announcement of the Altair on  the cover of the January 1975 issue of Popular Computing. Not only did they realize that this was the future they acted on the instinct.

Bill phoned Ed Roberts whose Albuquerque-based company Micro Instrumentation and Telemetry Systems (MITS) produced the Altair kits and claimed to already have a version of BASIC, the language written by  for the 8080 microprocessor and that he was ready to do business. The only part of the claim that was true was the part about being ready to do business. To produce the Basic, Paul Allen first had to write an 8080 simulator for the college PDP-10 - using a book bought from the corner bookshop, written by Adam Osborne, that gave the full 8080 instruction set! Bill Gates coded the interpreter and as he had already written a Basic interpreter for the PDP-10 he didn't have to look up the theory and was free to concentrate on the difficult task of squeezing the language into 4KBytes with enough space left over to run a program. 

The Altair was followed by a rash of other home microcomputers but MITS wasn't keen to license BASIC to its competitors and Gates became very angry at the way his beloved Basic was being pirated by all and sundry. In the end most of Microsoft's early revenues came not from selling individual copies of Basic to enthusiasts but from making custom ROMs for the huge number of home computers that were being produced. ROMs are much more difficult to pirate and so a steady flow of cash became available and Microsoft just grew and grew. It moved to a new home in Bellvue Washington in 1979.



Microsoft's success was largely due to choosing the right projects and not trying to do everything itself. It entered the operating system business with Xenix, its own version of Unix but rather than do the conversion in-house it subcontracted to SCO, a small west coast firm. 

When the Apple II became a success and there was little code for its 6502 processor Microsoft designed a plug-in Z80 card for it and licensed CP/M.

Microsoft's contract to write MS-DOS was probably the single most important event in turning the small company of the late 70s into the massive behemoth it has now become.

IBM, then still thought of as International Business machines, was the old, biggest and most profitable of all the computer companies, but it was incapable of moving at the fast pace required to join in the microcomputer revolution. Instead it set up a separate business unit which decided in turn to outsource the software as well as the hardware for the emerging IBM PC, codenamed Project Chess

When asked to write the PCDOS operating system, Microsoft did even more outsourcing. It bought outright an operating system from Seattle Computer Products that would save a year in development time.

Although IBM was under the impression that it had sole rights to PCDOS, in fact Microsoft retained the right to sell a version called MS-DOS At the very start there was a perception that MS-DOS was some how not quite PCDOS - but this soon faded as cheap PC clones became available all running MS-DOS. And so it was that MS-DOS came to dominate in the clone marketing wars of the early 80's.



It was, however, Windows that would become Microsoft's flagship operating system and again the story could have turned out differently. 

IBM attempted to gain a stranglehold on the market by reinventing the PC but this time with proprietary hardware it also wanted some proprietary software, OS/2,  but strangely it still asked Microsoft to develop it in partnership. IBM had a bigger share and its OS/2 was going to be different from Microsoft’s OS/2. 




As things turned out both the PS/2 and OS/2 failed and Microsoft’s Windows became the number one operating system. Gates claims to have tried to interest IBM in Windows but his attempts fell on deaf ears.

“In May 1990, the last weeks before the release of Windows 3.0, we tried to reach an agreement with IBM for it to license Windows to use on its own personal computers. We told IBM that we thought that although OS/2 would work over time, for the moment Windows was going to be a success and OS/2 would find its niche slowly.”

Although the split with IBM caused them to produce their own version of OS/2 to compete with Windows, Microsoft made money on every copy of OS/2 IBM sold! When OS/2 had to be Windows compatible to stand a chance of survival Microsoft moved the goal posts by releasing Windows 3.1 and removing real mode support.

MS-DOS and Windows 3.1 are ingrained in the memory of anyone who used a desktop PC in the 20th century. And they have just had a mini-revival. MS-DOS Mobile launched as Microsoft's 2015 April Fools is an app you can actually download on your Windows Phone 8/8.1!



More Information

Microsoft at 40: Read Bill Gates' anniversary email to employees

Related Articles

Bill Gates - Before he was famous

30 years ago - Microsoft signs contract with IBM to create MS-DOS


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Last Updated ( Saturday, 04 April 2015 )