Microsoft

BASIC

Gates read the January 1975 issue of Popular Electronics which demonstrated the Altair 8800, and he contacted Micro Instrumentation and Telemetry Systems (MITS) to inform them that he and others were working on a BASIC interpreter for the platform. In reality, Gates and Allen did not have an Altair and had not written code for it; they merely wanted to gauge MITS's interest. MITS president Ed Roberts agreed to meet them for a demonstration, and over the course of a few weeks they developed an Altair emulator that ran on a minicomputer, and then the BASIC interpreter. The demonstration was held at MITS's offices in Albuquerque, New Mexico; it was a success and resulted in a deal with MITS to distribute the interpreter as Altair BASIC. MITS hired Allen, and Gates took a leave of absence from Harvard to work with him at MITS in November 1975. Allen named their partnership "Micro-Soft", a combination of "microcomputer" and "software", and their first office was in Albuquerque. The first employee Gates and Allen hired was their high school collaborator Ric Weiland. They dropped the hyphen within a year and officially registered the trade name "Microsoft" with the Secretary of the State of New Mexico on November 26, 1976. Gates never returned to Harvard to complete his studies.

Microsoft's Altair BASIC was popular with computer hobbyists, but Gates discovered that a pre-market copy had leaked out and was being widely copied and distributed. In February 1976, he wrote an Open Letter to Hobbyists in the MITS newsletter in which he asserted that more than 90% of the users of Microsoft Altair BASIC had not paid Microsoft for it and the Altair "hobby market" was in danger of eliminating the incentive for any professional developers to produce, distribute, and maintain high-quality software. This letter was unpopular with many computer hobbyists, but Gates persisted in his belief that software developers should be able to demand payment. Microsoft became independent of MITS in late 1976, and it continued to develop programming language software for various systems. The company moved from Albuquerque to Bellevue, Washington on January 1, 1979.

Gates said he personally reviewed and often rewrote every line of code that the company produced in its first five years. As the company grew he transitioned into a manager role, then an executive.

IBM partnership

IBM, the leading supplier of computer equipment to commercial enterprises at the time, approached Microsoft in July 1980 concerning software for its upcoming personal computer, the IBM PC. IBM first proposed that Microsoft write the BASIC interpreter. IBM's representatives also mentioned that they needed an operating system, and Gates referred them to Digital Research (DRI), makers of the widely used CP/M operating system. IBM's discussions with Digital Research went poorly, however, and they did not reach a licensing agreement. IBM representative Jack Sams mentioned the licensing difficulties during a subsequent meeting with Gates and asked if Microsoft could provide an operating system. A few weeks later, Gates and Allen proposed using 86-DOS, an operating system similar to CP/M, that Tim Paterson of Seattle Computer Products (SCP) had made for hardware similar to the PC. Microsoft made a deal with SCP to be the exclusive licensing agent of 86-DOS, and later the full owner. Microsoft employed Paterson to adapt the operating system for the PC and delivered it to IBM as PC DOS for a one-time fee of $50,000.

The contract itself only earned Microsoft a relatively small fee. It was the prestige brought to Microsoft by IBM's adoption of their operating system that would be the origin of Microsoft's transformation from a small business to the leading software company in the world. Gates had not offered to transfer the copyright on the operating system to IBM because he believed that other personal computer makers would clone IBM's PC hardware. They did, making the IBM-compatible PC, running DOS, a de facto standard. The sales of MS-DOS (the version of DOS sold to customers other than IBM) made Microsoft a major player in the industry. The press quickly identified Microsoft as being very influential on the IBM PC. PC Magazine asked if Gates was "the man behind the machine?".

Gates oversaw Microsoft's company restructuring on June 25, 1981, which re-incorporated the company in Washington state and made Gates the president and chairman of the board, with Paul Allen as vice president and vice chairman. In early 1983, Allen left the company after receiving a Hodgkin lymphoma diagnosis, effectively ending the formal business partnership between Gates and Allen, which had been strained months prior due to a contentious dispute over Microsoft equity. Later in the decade, Gates repaired his relationship with Allen and together the two donated millions to their childhood school Lakeside. They remained friends until Allen's death in October 2018.

Windows

Microsoft launched its first retail version of Microsoft Windows on November 20, 1985. In August of the following year, the company struck a deal with IBM to develop a separate operating system called OS/2. Although the two companies successfully developed the first version of the new system, the partnership deteriorated due to mounting creative differences.

Management style

Gates had primary responsibility for Microsoft's product strategy from the company's founding in 1975 until 2006. He gained a reputation for being distant from others; an industry executive complained in 1981 that "Gates is notorious for not being reachable by phone and for not returning phone calls." An Atari executive recalled that he showed Gates a game and defeated him 35 of 37 times. When they met again a month later, Gates "won or tied every game. He had studied the game until he solved it. That is a competitor".

Gates met regularly with Microsoft's senior managers and program managers, and the managers described him as being verbally combative. He also berated them for perceived holes in their business strategies or proposals that placed the company's long-term interests at risk. He interrupted presentations with such comments as "that's the stupidest thing I've ever heard" and "why don't you just give up your options and join the Peace Corps?" The target of his outburst would then have to defend the proposal in detail until Gates was fully convinced. When subordinates appeared to be procrastinating, he was known to remark sarcastically, "I'll do it over the weekend."

During Microsoft's early years, Gates was an active software developer, particularly in the company's programming language products, but his primary role in most of the company's history was as a manager and executive. He has not officially been on a development team since working on the TRS-80 Model 100, but he wrote code that shipped with the company's products as late as 1989. Jerry Pournelle wrote in 1985 when Gates announced Microsoft Excel: "Bill Gates likes the program, not because it's going to make him a lot of money (although I'm sure it will do that), but because it's a neat hack."

On June 15, 2006, Gates announced that he would transition out of his role at Microsoft to dedicate more time to philanthropy. He divided his responsibilities between two successors when he placed Ray Ozzie in charge of management and Craig Mundie in charge of long-term product strategy.

Antitrust litigation

Gates approved of many decisions that led to antitrust litigation over Microsoft's business practices. In the 1998 United States v. Microsoft case, Gates gave deposition testimony that several journalists characterized as evasive. He argued with examiner David Boies over the contextual meaning of words such as "compete", "concerned", and "we". Later in the year, when portions of the videotaped deposition were played back in court, the judge was seen laughing and shaking his head. BusinessWeek reported:

Early rounds of his deposition show him offering obfuscatory answers and saying "I don't recall" so many times that even the presiding judge had to chuckle. Worse, many of the technology chief's denials and pleas of ignorance were directly refuted by prosecutors with snippets of e-mail that Gates both sent and received.

Gates later said that he had simply resisted attempts by Boies to mischaracterize his words and actions. "Did I fence with Boies? … I plead guilty… rudeness to Boies in the first degree." Despite Gates's denials, the judge ruled that Microsoft had committed monopolization, tying and blocking competition, each in violation of the Sherman Antitrust Act.