April 4, 1975: Microsoft is founded

Contents

According to Bill Gates, the company has traded as "Microsoft" without a hyphen since its official founding on April 4, 1975, but the old spelling of the partnership with Paul Allen "Micro-Soft" persisted for a while. To mark the 50th anniversary of the company's foundation, we first take a look back at the exciting early days, which a recently published autobiography by Bill Gates sheds light on. Even then, it was clear how important legal disputes were in the development of the company. And even then, Microsoft was not everyone's favorite.

Computing time thieves

In November 1974, Paul Allen, who was very interested in technology, read an article in Popular Electronics magazine announcing a mini-computer kit called the "Popular Electronics/MITS Altair 8800". While the magazine's editorial spoke enthusiastically about the "home computer" finally being here, Allen knew that the microcomputer revolution was dawning, which he had spent many hours discussing with his friend Bill Gates. Allen and Gates decided to develop a Basic for this computer and obtained the necessary manuals for the processor Altair was using, the Intel 8080.

The plan was for Allen to develop an emulator of the processor on a DEC PDP-10, while Gates would write the Basic. While both were excitedly discussing their project in the Harvard University dining hall, a student named Monte Davidoff joined them. He offered to develop the floating-point arithmetic – without which you couldn't write a decent moon landing game in Basic, as Gates writes in his recently published memoirs.

The project benefited greatly from the fact that Allen and Gates had a very good knowledge of the PDP-10 and its tools, having worked for months as bugfinders at the Computer Center Corporation in Seattle. CCC, also known as C-Cubed, had bought a PDP-10 and wanted to rent computing time on the computer to companies in the area. To do this, the DEC software had to be sufficiently stable. CCC manager Monique Rona hired Bill Gates, her son's classmate, and he brought in Paul Allen from the Lakeside School Programming Group.

In addition to debugging, both were able to work on their programs to their heart's content without time limits. At Harvard, Gates in turn had an unlimited user account on such a machine, which he shared with Allen and Davidoff on the Basic project. When this prohibited use was discovered, Gates was threatened with de-registration, which was averted by his father. The lawyer Bill Gates Senior wanted to see the usage regulations, which did not even exist. Expelled from the Harvard computer, however, the three boys had to buy computing time from a Boston timeshare provider in order to continue developing Basic.

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Share haggling

When the project was almost finished, Paul Allen wrote to MITS, the company that sold the Altair 8800 kit. "We are interested in selling this software to hobbyists through you. It can be supplied on cassette or floppy disks to users of your ALTAIR microcomputer. We think we can get 50 dollars per copy from you, while you can sell the copy for 75 to 100 dollars." Ed Roberts, the founder of MITS, invited Allen to Albuquerque to demonstrate the Basic. While still on the plane, Allen wrote a program that could load Basic into memory and run it. The demonstration worked and Allen was hired as "Director of Software Development" at MITS on March 3, 1975.

Meanwhile, Bill Gates was thinking about the partnership and how things could continue after signing the contract with MITS. He wrote to Allen: "Micro-Soft can be successful because it is able to develop and write good software and because it is able to take people like Monte, teach them, choose a project for them, provide resources, and manage them. The financial, legal and management decisions involved are very difficult, as I'm sure you know. I think my contribution to these tasks entitles me to more than 50 percent of Microsoft."

Gates and Allen initially agreed on a 60 to 40 percent stake in Microsoft when the partnership was formalized on April 4, 1975. Later, Gates even increased it to 64 percent to 36 percent, much to Allen's annoyance. "That's the difference between being the son of a lawyer and the son of a librarian," Allen noted bitterly in his autobiography "Idea Man". In 1980, Gates was to use the additional 4 percent to bring Steve Ballmer to the top of Microsoft.

Hobbyist horror

The young partnership got off to a bad start. In the first year of its existence, Microsoft only earned a total of 16,005 US dollars, of which just 3000 dollars came from MITS. This particularly infuriated Bill Gates, as there were significantly more copies of Microsoft's Basic on the road, as he learned at various hobbyist club meetings when he and Paul Allen drove around the country in the MITS mobile.

Back in his dormitory at Harvard, Bill Gates sat down at the typewriter and wrote an open letter to the hobbyists on MITS stationery in February 1976, the brusque tone of which made him instantly famous. In his memoirs, Gates explains the tone with the autism that a therapist called in by his parents had diagnosed in him. The hobbyists questioned Gates' claim that he had invested 40,000 dollars in the development of Basic and were annoyed by the demand to exclude software copiers who continued to sell Altair Basic from all events.

In any case, the open letter had no effect, quite the opposite. The young company Microsoft was then on the verge of bankruptcy until one of its very first employees lent it 70,000 dollars: Bob Greenberg, one of the heirs of the Coleco company, had his share paid out and put it into Microsoft. He would later be more than compensated for this with the company's Cabbage Patch Kids. Greenberg won first prize in a quiz at the Albuquerque radio station, a photo shoot, because he could name all the presidents of the USA who had been shot. This is how the legendary hairy photo of all Microsoft employees in Albuquerque was taken in 1978, in which Ric Weiland, who was working on Applesoft Basic, and "mom" Miriam Lubow were missing.

Courtroom opening

In his memoirs, Gates recalls another reason for the partnership's poor business performance: MITS was in takeover talks at the time with Pertec, a major manufacturer of hard disk drives and tape drives. Pertec's lawyers wanted to use threats and payment stops to prevent Microsoft from selling its Basic to other interested companies such as Texas Instruments or NCR or porting it to other processors.

They went to court in Albuquerque, where MITS and Pertec claimed to have the exclusive worldwide distribution rights for Microsoft's Basic. Microsoft's lawyer – by Bill Gates Sr. –, however, referred to the passage in the license agreement according to which MITS undertakes to "use its best efforts to license, promote and market the program." The judge agreed with Microsoft and called MITS/Pertec's behavior an act of corporate piracy "which is not permitted by the wording or any reasonable interpretation of the contract".

Immediately after the verdict was announced, Microsoft sold Basic licenses to Commodore and Tandy as well as to Apple under the name Applesoft Basic. The company, now with 13 employees including Gates and Allen, was in safe waters. The small company, now independent of MITS, moved to Seattle, the home of Gates and Allen, where it developed magnificently over the next 40 years, as you can read in the link.

But from around 2010 onwards, the alarm signs began to grow. Bill Gates had disappeared as operational leader, and under his unfortunate successor Steve Ballmer, the company got bogged down in hardware projects such as the music gadget Zune and the Windows Phone, including the takeover of the core business of the dying company Nokia. The climax was probably reached when Steve Ballmer asked all managers at an annual party to crush their iPhones – and carried out this kind of exorcism on an open stage.

Reboot Nadella

It is worth looking at this scene from the perspective of Ballmer's successor Satya Nadella, as described in his autobiography "Hit Refresh". Under Nadella's extraordinarily successful direction, the company said goodbye to its competitive phobia, even embraced Linux and moved into the cloud, to which companies around the world were immediately dragged for free with Microsoft 365.

Nadella achieved his personal "hit" in 2019 with an early major investment in the start-up OpenAI, followed by the reinstatement of company founder Sam Altman, who had been fired by his supervisory board. Under his leadership, Microsoft wants to use AI to unearth data treasures around the world and make them usable. As Nadella's biographical motto so beautifully states: "The business of business is improving the state of the world."

(mki)