“Bill Gates and his empire command fear, respect and curiosity in the world he helped create. Microsoft dominates the software world like no other company in a major consumer industry” (Electric 1). Exactly how did Bill Gates and his partner Paul Allen get their company to such a tremendous height? The history of Microsoft is a very fascinating past full of enterprise and excitement.
The Dawning of a great company
Bill Gates and Paul Allen are the co-founders of Microsoft. The start of their great success started in high school on a computer terminal. All their free time and money was spent working on that terminal. The development that really inaugurated everything, in the business sense was when they found an article in 1971, in a business magazine about Intel’s 4004 chip (Billionaires 70). Soon they both talked about the chip and decided that the microprocessor can only get enhanced. Later in the year Intel came out with a newer chip called the 8008. Bill and Paul then went out and bought their own 8008 for $360 (Billionaires 70). They thought plan in which Gates and Allen would use this chip to make a computer to do traffic – volume – count analysis. Gates and Allen then set up their first “company” called Traf-O-Data (Billionaires 70).
“In 1973 the duo landed their first authentic jobs, helping TRW in Vancouver, Washington, to use minicomputers for the management and distribution of power from hydroelectric dams” (Billionaires 70). Gates’ parents wanted him to go to Harvard instead of going into business with Allen. Inevitably, Gates convinced his friend to move to Boston so they could work together, and Allen could get a job programming. It was a magazine article that would ultimately change their lives. A cover story in Popular Electronics describing the MITS Altair 8800. “World’s First Minicomputer Kit to Rival Commercial Models” (Billionaires 71). When Bill and Paul designed the Traf-O-Data machine they wrote a version of BASIC that they might be able to adapt to the Altair. By April Gates and Allen had finished the language and convinced MITS to sell it (Billionaires 71). Allen was offered a job by MITS and both of them went to work in a small office for MITS. “Soon after, Microsoft was born” (Billionaires 71).
The Birth of Microsoft
In the beginning the management skills of Paul Allen and Bill Gates was somewhat loose. Both men took part every single decision that had to be made (Billionaires 71). They were both very cautious entrepreneurs. If there was any difference in their roles in the company, Allen was the one always pushing for new technology, and Gates was more interested in doing negotiations, contracts, and business deals (Billionaires 71). They acquired knowledge as their company slowly grew. Microsoft’s basic business scheme was to charge a price so low that computer makers could not do it for less internally (Billionaires 72). Texas Instruments gave Microsoft one of their largest contracts where Texas Instruments bid $99,000 providing programming languages for a home computer TI was going to produce. Allen and Gates picked that price because they did not want to go into six figures (Billionaires 72). They later found out that TI would have paid much more. When Microsoft started selling to Japanese companies they were so overpromised that it was ridiculous
Sometimes the business would get a little frightening. In their very first talk to MITS they set it up so the MITS would sell BASIC to their customers. MITS decided later not to sell it because there were so many pirated copies of BASIC floating around that they did not see why they should charge their customers for it. This seemed to Microsoft that MITS was prompted piracy. Gates and Allen eventually went into arbitration to determine if MITS was complying with the contract (Billionaires 72). While they were in arbitration, they were running out of money because MITS was withholding their payments trying to starve Microsoft to death. The arbitrator took nine months to come to a decision. When it was all over MITS was “ripped apart” (Billionaires 72). That case really scared Allen and Gates. They were worried that they were going to run out of money and have to settle outside of court. “But, through it all, [they] never borrowed money” (Billionaires 72).
The Block Buster of the Century
“On January 1, 1979, Gates and Allen uprooted the business to the soggy Seattle suburb of Bellevue, where it took root” (Billionaires 72). Microsoft started to expand and flourish. In the next year Microsoft reached 35 employees. Gates and Allen hired their first manager, Steve Ballmer. “Ballmer’s arrival marked a turning point” (Billionaires 72). After the company reached a head count of 30 people Gates and Allen could not keep up with reviewing everyone and staying involved.
1980, “was the year that IBM came to call, looking for programming languages for a secret PC project” (Billionaires 72). Also in this year Paul Allen made a deal for an operating system called Q-DOS (Billionaires 72). When IBM went to Microsoft they were just talking about buying BASIC for their new PCs. Then they mentioned licensing FORTRAN and COBOL also. Microsoft called all it’s head executive together, Gates, Allen, Steve Ballmer, and their partner in Japan, Kay Nishi. They decided to offer IBM everything they had, even though Microsoft had not made everything yet (Billionaires 76). Their biggest problem was whether or not they should commit to doing an operating system for IBM. Allen had been dealing with Seattle Computer about Q-DOS and decided that he could get it to run for IBM (Billionaires 76). They decided to go for it. Then things got just a little “tense” for a couple of days. Microsoft had already sold Q-DOS to IBM, but had not yet finished the deal to buy it from Seattle Computer (Billionaires 76). Microsoft was worried that Seattle Computer would find out that IBM was their main customer and that is why Allen wanted to buy it (Billionaires 76). Allen ended up buying Q-DOS for only $50,000 (Billionaires 76). The contract with IBM said that Microsoft got to do much of the work with the design of the new PC and all the software. They were not paid that much, but it did not matter. Microsoft new that copies of the IBM would be coming out. The “clone phenomenon” was already witnessed with the MITS machine. If Microsoft could make software that would also work in the clones they could sell an enormous amount of software.
“It seemed like a really great opportunity. IBM was talking about having Sears and ComputerLand sell their machines. They’d been talking with Intel about getting a really good price on the microprocessor. IBM was so hard core about it, [Gates and Allen] knew their PC might even leapfrog the Apple II, which was the coolest computer at the time” (Billionaires 76).
Gates and Allen, and some employees from IBM spent day and night working on the design for the PC. Paul and Bill decided every little aspect about the PC: the keyboard layout, how the cassette port worked, how the sound port worked, how the graphics port worked (Billionaires 76). When it was finished Microsoft had the groundwork for a gigantic gain in sales and profits.
Microsoft: Today and Tomorrow
“For most of Microsoft’s lucrative history it has grown between 30% and 40% a year” (Electric 2). Today Microsoft is doing better than it ever has, with net profits of over $2 billion, and a 40% sales increase over $8 billion last year. Just to keep running and break even Microsoft must sell over $15 million of product a day (Billionaires 86). Microsoft has some of the best programmers in the country working for them (Electric 2). More than 2,000 Microsoft employees have become millionaires in its history. Some critics think that Microsoft has been too successful (Electric 2). Even if Microsoft is just now reaching its peak, it will definitely continue to thrive in the future, no matter what happens. IBM reached its peak with the onset of the PC, but is still a huge and prosperous company today. Microsoft will continue similar to IBM even if Gates’ company suddenly slows down (Electric 2).
Microsoft through the eyes of Bill Gates and Paul Allen has risen to the greatest empire the computer industry has ever seen. Bill Gates and Paul Allen have lived their dreams to own a successful computer company. They have come a long way from their high school years from working on computer terminals, starting their first company, to owning the most powerful country that the computer industry depends on so much. Bill Gates and Paul Allen have gone down in history for the creation of Microsoft