Microsoft Corporation (NASDAQ: MSFT, HKSE: 4338) is an international computer technology corporation with 2005 global annual sales of US$42.64 billion and 63,564 employees in 102 countries and regions that develop, manufacture, license, and support a wide range of software products for computing devices.

Headquartered in Redmond, Washington, USA, its most popular products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software, each of which has achieved near ubiquity in the desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse as well as home entertainment products such as the Xbox, Xbox 360 and MSN TV.

Microsoft's name, originally bi-capitalized as MicroSoft or with hyphenation as Micro-Soft, is a blend of "microcomputer software", and is often abbreviated informally as MS. The company was founded in Albuquerque, New Mexico on April 4, 1975 by Bill Gates and Paul Allen to develop and sell BASIC interpreters for the Altair 8800. After the market saw a flood of IBM PC clones in the mid-1980s, Microsoft used its new position, which it gained in part due to a contract from IBM, to dominate the home computer operating system market with MS-DOS. The company later released an initial public offering (IPO) in the stock market, which netted several of its employees millions of dollars due to the ensuing rise of the stock price. The price of the stock continued its rise steadily into the early 2000s. In Microsoft Windows, the company was selling what would become the most widely used operating system in the world, which was originally an add-on for MS-DOS; Microsoft continued to push into multiple markets, such as computer hardware and television. In addition, Microsoft has historically given customer support over Usenet newsgroups and the World Wide Web, and awards Microsoft MVP status to volunteers who are deemed helpful in assisting the company's customers.

With what is generally described as a developer-centric business culture, Microsoft has become widely known for some of its internal codes of conduct for its employees. One example is the "eat your own dog food" mantra, which describes the practice of using pre-release products inside the company to test them in an environment geared towards the real world. Microsoft has been convicted of monopolistic business practices—the U.S. Justice Department, among others, has sued Microsoft for antitrust violations and software bundling. The slogan Embrace and extend is often used to describe Microsoft's strategy for entering product categories involving widely-used standards, extending those standards with proprietary capabilities, and then using those differences to disadvantage its competitors. In addition, Microsoft has been criticized for the insecurity of its software. However, Microsoft has won several awards, such as the "1993 Most Innovative Company Operating in the U.S." by Fortune Magazine, as well as maintaining a place on the Fortune 500 list of companies as of 2006.

History

1975–1985: The founding of Microsoft

Days after reading the January 1, 1975, issue of Popular Electronics that demonstrated the Altair 8800, Bill Gates called the creators of the new microcomputer, MITS (Micro Instrumentation and Telemetry Systems), offering to demonstrate an implementation of the BASIC programming language for the system. Gates had neither an interpreter nor an Altair system, yet in the eight weeks before the demo he and Allen developed the interpreter. The interpreter worked at the demo and MITS agreed to distribute Altair BASIC. Gates left Harvard University, moved to Albuquerque, New Mexico where MITS was located, and founded Microsoft there. The name Microsoft, without the hyphen, was first used in a letter from Gates to Allen on November 29, 1975, and on November 26, 1976 the name became a registered trademark. The company's first international office was founded on November 1, 1978, in Japan, entitled "ASCII Microsoft" (now called "Microsoft Japan"). On January 1, 1979, the company moved from Albuquerque to a new home in Bellevue, Washington. Steve Ballmer joined the company on June 11, 1980, and would later succeed Bill Gates as CEO. The company restructured on June 25, 1981, to become an incorporated business in its home state of Washington (with a further change of its name to "Microsoft, Inc."). As part of the restructuring, Bill Gates became president of the company and Chairman of the Board, and Paul Allen became Executive Vice President.

The first operating system the company publicly released was a variant of Unix in 1980. Acquired from AT&T through a distribution license, Microsoft dubbed it Xenix and hired Santa Cruz Operation in order to port/adapt the operating system to several platforms^[2]. This operating system was initially used by software maker 3Com (at that time) in order to provide support for the software which implemented the TCP/IP communication protocol. This Unix variant would also become home to the first version of Microsoft's word processor, Microsoft Word. Originally titled "Multi-Tool Word", Microsoft Word became notable for its concept of "What You See Is What You Get", or WYSIWYG, as well as several features including the ability to display bold text, of which it was the first application to do so. First released in the spring of 1983, free demonstration copies of the application were bundled with the November 1983 issue of PC World, making it the first program to be distributed on-disk with a magazine. ^[3]

However, the operating system that brought the company its real success was the DOS operating system. On August 12, 1981, after negotiations with Digital Research failed, IBM awarded a contract to Microsoft to provide a version of the CP/M operating system, which was set to be used in the upcoming IBM Personal Computer (PC). For this deal, Microsoft decided to purchase a CP/M clone called QDOS (Quick and Dirty Operating System) from Tim Paterson of Seattle Computer Products for US$50,000, which Microsoft renamed to PC-DOS. Due to potential copyright infringement problems with CP/M, IBM marketed both CP/M and PC-DOS for US$250 and US$40, respectively, with PC-DOS eventually becoming the standard because of its lower price. Around 1983, in collaboration with numerous companies, Microsoft created a home computer system, MSX, which contained its own version of the DOS operating system, entitled MSX-DOS; this became relatively popular in Japan and Europe. Later, after Compaq successfully cloned the IBM BIOS, the market saw a flood of IBM PC clones. Microsoft was quick to use its position to dominate the home computer operating system market. Microsoft began licensing its operating system for use on non-IBM PC clones, and called this version of the operating system MS-DOS (short for Microsoft Disk Operating System). By marketing MS-DOS aggressively to manufacturers of IBM-PC clones, Microsoft rose from a small player to one of the major software vendors in the home computer industry. Starting on May 2, 1983, with the "Microsoft Mouse", Microsoft entered markets such as computer hardware. This expansion included Microsoft Press, a book publishing division, on November 10 the same year, which debuted with two titles: "Exploring the IBM PC Home Computer" by Peter Norton, and "The Apple Macintosh Book" by Cary Lu.

1985–1991: The rise and fall of OS/2

The Republic of Ireland became home to Microsoft's first international production facility in 1985, and on November 20 Microsoft released its first retail version of Microsoft Windows, originally a graphical extension for its MS-DOS operating system. In August, Microsoft and IBM partnered in the development of a different operating system called OS/2. OS/2 was marketed in connection with a new hardware design proprietary to IBM, the PS/2.^[4] Shortly afterwards on February 16, 1986, Microsoft relocated to Redmond, Washington. Around one month later, on March 13, the company went public with an IPO, raising US$61 million at US$21.00 per share. By the end of the trading day, the price had risen to US$28.00. In 1987, Microsoft eventually released their first version of OS/2 to OEMs.^[5]

Meanwhile, Microsoft began introducing its most prominent office products. Microsoft Works, an integrated office program which combined features typically found in a word processor, spreadsheet, database and other office applications, saw its first release as an application for the Apple Macintosh towards the end of 1986. Microsoft Works would later be sold with other Microsoft products including Microsoft Word and Microsoft Bookshelf, a reference collection introduced in 1987 that was the company's first CD-ROM product. Later, on August 8, 1989, Microsoft would introduce its most successful office product, Microsoft Office. Unlike the model of Microsoft Works, Microsoft Office was a bundle of Microsoft's other office separate productivity applications, such as Microsoft Word, Microsoft Excel and so forth. While Microsoft Word and Microsoft Office were mostly developed internally, Microsoft also continued its trend of rebranding products from other companies, such as SQL Server on January 13, 1988, a relational database management system for companies that was based on technology licensed from Sybase.

In 1989, Microsoft announced at Comdex that the 1991 release of Windows 3.0 would be the last version of Windows. Over the next few years, Microsoft continued to issue statements indicating that OS/2 was the future of computing. On May 16, 1991, Bill Gates announced to Microsoft employees that the OS/2 partnership was over, and that Microsoft would henceforth focus its platform efforts on Windows and the Windows NT kernel. Some people, especially developers who had ignored Windows and committed most of their resources to OS/2, were taken by surprise, and accused Microsoft of deception. The Windows changeover was frequently referred to in the industry as "the head-fake".^[6] In the ensuing years, the popularity of OS/2 declined, and Windows quickly became the favored PC platform. 1991 also marked the founding of Microsoft Research, an organization in Microsoft for researching computer science subjects, and Microsoft Visual Basic, a popular development product for companies and individuals.

1992–1995: Domination of the corporate market

During the transition from MS-DOS to Windows, the success of Microsoft's product Microsoft Office allowed the company to gain ground on application-software competitors, such as WordPerfect and Lotus 1-2-3. Some allege that Microsoft used its inside knowledge of the DOS and Windows kernels and of undocumented Application Programming Interface features to make Office perform better than its competitors, but internal sources at Microsoft later revealed that the Office team did not have access to the Windows source code at the time, and relied on reverse engineering.^[7] Eventually, Microsoft Office became the dominant business suite, with a market share far exceeding that of its competitors. In March 1992, Microsoft released Windows 3.1 along with its first promotional campaign on TV; the software sold over three million copies in its first two months on the market. In October, Windows for Workgroups 3.1 was released with integrated networking capabilities such as peer-to-peer file and printing sharing. In November, Microsoft released the first version of their popular database software Microsoft Access. By 1993, Windows had become the most widely used GUI operating system in the world. Fortune Magazine named Microsoft as the "1993 Most Innovative Company Operating in the U.S.". The year also marked the end of a five-year legal case brought by Apple, dubbed Apple Computer, Inc. v. Microsoft Corp., in which the ruling was in Microsoft's favor. That same year, Microsoft released Windows for Workgroups 3.11, a new version of the consumer line of Windows, and Windows NT 3.1, a server-based operating system with a similar user interface to consumer versions of the operating system, but with an entirely different kernel.

As part of its strategy to broaden its business, Microsoft released Microsoft Encarta in 1994, the first encyclopedia designed to run on a computer. Microsoft also created the Microsoft Plus! product support program for its customers, a service that offered cost savings on Microsoft products. The name of that program was later used for several expansion packs for Windows. The company changed its slogan to "Where do you want to go today?" in that year, as part of an attempt to appeal to nontechnical audiences in a US$100 million advertising campaign, which some critics regarded as uninspired. DreamWorks SKG and Microsoft formed a new company, DreamWorks Interactive, to produce interactive and multimedia entertainment properties in 1995. In March, Microsoft released Microsoft Bob, a Windows 3.1 program manager replacement, which is widely considered Microsoft's most unsuccessful product; its unpopularity became the source of many jokes.

Up until 1995, Microsoft was a business-oriented company. However, with the release of a new version of its flagship software in August 1995, Microsoft Windows 95, it started a major transition towards a consumer-oriented company. Microsoft Windows 95 featured a completely new user interface, including a novel start button; more than a million copies of Microsoft Windows 95 were sold in the first four days after its release. In September, the Chinese government chose Windows to be the operating system of choice in that country, and entered into an agreement with the Company to standardize a Chinese version of the operating system. Microsoft also released the Microsoft Sidewinder 3D Pro joystick in an attempt to further expand its profile in the computer hardware market.