History

Microsoft was founded in Albuquerque, New Mexico in 1975 by Bill Gates and Paul Allen, under the company name Micro-soft, to develop and sell BASIC interpreters (initially for the MITS Altair 8800, whose manufacturer was already in Albuquerque). The name "Micro-soft" (short for microcomputer software) was used by Bill Gates in a letter to Paul Allen for the first time on November 29, 1975. "Microsoft" became a registered trademark on November 26, 1976. Microsoft's second (programming language) product was its Fortran compiler for CP/M, released in August 1977. The third was the MS COBOL compiler (for MS-DOS), released in April 1978.

As the popularity of Microsoft BASIC grew, other manufacturers adopted its syntax to maintain compatibility with existing Microsoft BASIC implementations. Because of this, Microsoft BASIC became a de facto standard and the product dominated its market.

In late 1980, International Business Machines needed an operating system for its new home computer, the IBM PC. Microsoft licensed Quick and Dirty Operating System, from Tim Paterson's Seattle Computer Products in order to sell it to IBM as the standard operating system for the IBM PC. Microsoft subsequently purchased all rights to QDOS for $50,000, and renamed it MS-DOS (for Microsoft Disk Operating System). It was released as IBM PC-DOS 1.0 with the introduction of the PC in 1981. In contracting with IBM, however, Microsoft had retained the rights to license the software to other computer vendors as MS-DOS. The early 1980s saw a flood of IBM PC clones, and Microsoft was quick to leverage its position to dominate the operating system market.

Software running on PC hardware was not necessarily technically better than the mainframe software that it replaced, but it was much less expensive. Microsoft's success rode on the PC boom.

In many cases, early versions of Microsoft software were buggy and inferior to their competition, but later versions improved rapidly and eventually overwhelmed their competitors by offering more features for a lower price. The best example of this is probably that of WordPerfect, which in the early 1990s appeared to have an unassailable dominance over the PC word processor market but eventually found itself in a distant second place.

Microsoft's focus on software usability was a large factor in its early successes. Some key aspects of this were:

• A common user interface: all Microsoft applications used the same menu commands, shortcuts, and procedures for similar tasks. This reduced the barrier to learning and using new software.

• Backward compatibility: Microsoft made sure that older code and data would work on newer systems. In contrast, until about 1986, some major manufacturers of hardware-software combinations would periodically introduce new machines with new operating systems giving little or no compatibility with the previous ones. A common Microsoft demo was to show old Visicalc software running on the latest version of Windows.

• Interconnectedness: generally, and especially in Microsoft Office, data prepared with one Microsoft application can be brought into other Microsoft applications. A common example is creating a diagram in Excel and pasting it into a Word document.

Microsoft has devoted large amounts of money and effort to developing, integrating, and marketing its products and services. By the turn of the millennium, many of Microsoft's software products dominated their markets.