William H. (Bill) Gates - Steering Microsoft's Growth As A Software Manufacturer

STEERING MICROSOFT'S GROWTH AS A SOFTWARE MANUFACTURER

Gates oversaw the release of several flagship products in 1983. Along with the Microsoft Mouse—a device that enabled users to manipulate a cursor by "pointing and clicking" rather than using various keys on a keyboard—the firm shipped its first version of Microsoft Word, a word processing program that eventually would compete with Novell Inc.'s popular WordPerfect program. Although Word initially received a lukewarm reception in North America, sales in European markets were brisk. In November, Gates unveiled his firm's new Windows operating system, the success of which would be key in Microsoft's eventual dominance of the PC industry. Although it was based on the MS-DOS operating system, Windows looked nothing like the text-based platform. Rather, Windows employed a graphical user interface (GUI), much like the one used by Apple Computers on its Macintosh computers. More than 500,000 copies of Windows were sold within a month of its release. Also that year, Gates fostered European growth by creating subsidiaries in France and Germany, and total sales grew to $70 million.

In 1984, as U.S. computer users became more receptive to Word, Microsoft began selling roughly 20,000 copies of the word processor per month. The firm also created a version of Word for Macintosh machines. Windows continued to grow in popularity as well, with more than 200 computer makers holding MS-DOS licenses. Gates established Microsoft's first overseas manufacturing facility, in Ireland, in 1985. That year, Gates also began allowing the distribution of Windows to retailers. He began talking with Compaq, Digital Equipment, Hewlett-Packard, Texas Instruments, and other major IBM competitors, hoping to loosen IBM's hold on PC standards development. In response, IBM began forging alliances with Micro-soft's competitors. Despite the deteriorating relations between Microsoft and IBM, Gates persuaded IBM to use an upgraded version of the Windows platform, which he promised would resolve several complaints users had about the system, on its next line of PCs.

Gates moved his growing firm to Redmond, Washington, in February of 1986. He completed Microsoft's initial public offering one month later, selling shares for $21 apiece and raising $61 million in fresh capital. In less than one year, when shares began selling for more than $84 each, Gates found himself a billionaire at the age of 31. Product releases in the late 1980s included Microsoft Word 3.0, which quickly became the top seller at Microsoft, and a Windows-based spreadsheet program called Excel. In 1988, Apple Computers brought charges against Microsoft, asserting that Gates and his cohorts had cribbed the "look and feel" of the Macintosh operating system when developing Windows. Apple demanded that Microsoft either pull Windows off the shelves or pay royalties of some sort. Gates, who had grown Microsoft into the top manufacturer of PC software in North America, with more than 4,000 employees, had no intention of meeting either request. By then, more than 2 million copies of Windows 3.0 had been sold worldwide, and annual sales had reached almost $800 million.

Revenues at Microsoft reached the $1 billion mark in 1990, and roughly 90 percent of worldwide PCs used either MS-DOS or Windows as a platform. As Gates's relationship with IBM worsened, IBM began looking to develop ties with other PC industry leaders. For example, IBM inked a deal with Apple to jointly develop a more user-friendly operating system that would increase compatibility between IBM and Apple computers. IBM also began to market Novell's Netware. Gates initiated his firm's foray into desktop publishing software in 1992, the same year Microsoft released its first televised commercial. The legal dispute with Apple was resolved in Microsoft's favor, despite Windows' similarity to Macintosh. Apple filed an immediate appeal, which eventually made its way to the U.S. Supreme Court, which rejected the case.

Gates's dominance of the PC industry continued to grow, and Microsoft's market valuation reached a whopping $25 billion by 1993. Multimedia efforts paid off when Microsoft's Encarta CD-ROM earned the distinction of consumer disc product of the year. Gates also oversaw his firm's diversification into network servers, which culminated in the launch of Windows NT, a platform for the network servers increasingly used by large enterprises. Gates had been working on Windows NT since 1990. According to David Kirkpatrick in a May 1997 issue of Fortune, the development of NT was part of a long-term goal of Gates, Allen, and other technology gurus: "shunting the world's biggest computing tasks from mainframes to cheaper, smaller machines." This move began during 1970s, when minicomputers began handling tasks previously completed by mainframe machines. The development of UNIX by AT&T Corp.'s Bell Labs spawned the client/server era, during which time UNIX-based networks began handling database applications. In the early 1980s, Gates was unsuccessful in his attempts to forge an alliance with Bell Labs to work together on the development and standardization of UNIX. By the end of the decade, Gates had decided that Microsoft would develop its own network server platform, one that would closely resemble Windows and have the ability to run Windows applications. Like most of Microsoft's earliest versions of its products, the first release of NT needed quite a bit of tweaking. In fact, it wasn't until the launch of Windows 2000 that NT had evolved into the system Gates had envisioned.

While Gates's decision to push Microsoft into as many new PC-related industries as possible had allowed his company's brand to become one of the most recognized in the world by the mid-1990s, it also compounded the firm's legal troubles. Several competitors filed complaints against Microsoft, alleging that the firm repeatedly used anticompetitive tactics to gain market share. As a result, the U.S. Department of Justice began scrutinizing Microsoft. Hoping to bring the investigation to an end once and for all, Microsoft offered to alter its marketing practices in 1994. Although the Justice Department accepted the firm's offer, those who had raised the original complaints insisted that the settlement ignored several of Microsoft's monopolistic activities. U.S. District Judge Stanley Sporkin began reviewing the settlement, eventually finding that the Justice Department's settlement with Microsoft was incomplete. Microsoft and the Justice Department both filed appeals, which resulted in the restoration of the initial settlement by the U.S. Court of Appeals.

Work began in the mid-1990s on Windows 95, an upgrade to Microsoft's operating system that would completely alter the look of most desktop machines. In September of 1994, upstart Netscape Communications Corp.'s Web browser, which served as a GUI for the Internet much in the same way Windows served as a GUI for PCs, caught Gates's attention. As a result, he licensed technology from Spyglass and ordered the quick development of a product that would compete with Netscape's Navigator. Gates also unveiled Microsoft's BackOffice, a Windows NT suite that combined various server applications. In early 1995, Gates saw his plans to acquire Intuit Inc. for $2.1 billion quashed by the Justice Department, which raised various antitrust concerns regarding the deal.