Microsoft turns 35: Best, worst, most notable moments

The year is 1975. Gerald Ford is in the White House, South Vietnam falls, Muhammad Ali defeats Joe Frazier in the “Thrilla in Manila” world championship boxing match, the late-night comedy show NBC’s Saturday Night (later called Saturday Night Live) debuts, One Flew Over the Cuckoo’s Nest sweeps the Oscars, and Captain & Tennille’s “Love Will Keep Us Together” and Glenn Campbell’s “Rhinestone Cowboy” top the music charts.

And in Albuquerque, N.M., Harvard dropout Bill Gates and his high school friend Paul Allen set up a tiny business to write software for a new microcomputer called the Altair 8800. Their first product is the Altair BASIC language. At some point during that year, the company is called Micro-soft, and then MicroSoft, before it is ultimately named Microsoft.

From those modest beginnings, that company went on to help give birth to an entire industry, change the way we live and work, and become one of the largest software companies on the planet, creating countless millionaires — and several billionaires — along the way.

As Microsoft celebrates its 35th anniversary, I’ve decided to take an idiosyncratic and opinionated look at the best, worst and most notable moments, technologies, products, decisions and people in the company’s history. A lot has happened in that time, so if you think I’ve left anything out or disagree with my choices, share your thoughts in the article comments.

Now, step into the Wayback Machine and read on.

Savviest business deal

In November 1980, Microsoft signed an agreement with IBM to provide an operating system for the still-secret IBM Personal Computer, to be released in 1981. The operating system would ultimately be called PC-DOS, a rebranding of Microsoft’s MS-DOS.

Microsoft didn’t actually write MS-DOS; instead it paid to have Seattle Computer rewrite its own QDOS (Quick-and-Dirty Operating System) for the purpose, without telling Seattle Computer to whom the operating system would be sold. (Microsoft signed the contract with Seattle Computer one day after signing the contract with IBM.)

QDOS was largely based on the CP/M operating system, owned by Digital Research. Ironically, IBM had originally turned to Digital Research for an operating system for the IBM PC, but the two companies’ negotiations broke down. Too bad for Digital Research; Microsoft went on to use its relationship with IBM as a springboard to develop its worldwide dominance in business operating systems.

Smartest acquisition

In July 1987, Microsoft bought Forethought Inc. for $14 million in cash. Forethought had developed a presentation program for the Macintosh, initially called Presenter, which it renamed PowerPoint for trademark reasons. PowerPoint later became one of the core programs of Microsoft Office, which for many years has been the dominant office productivity suite.

Prickliest partnership

In August 1985, Microsoft and IBM signed a deal to partner in the development of an advanced operating system called OS/2. The operating system never achieved the widespread popularity of DOS — or, later on, Windows — and became a bone of contention between Microsoft and IBM.

Microsoft devoted most of its development resources to Windows and Windows NT, rather than OS/2, and ultimately abandoned OS/2 to IBM, which eventually abandoned it as well.

Most surprising investment

In August 1997, longtime Microsoft rival Apple Computer was teetering on the brink of disaster and in desperate need of cash. Microsoft rode to the rescue, buying $150 million in nonvoting Apple stock. As part of the deal, Microsoft agreed to continue to develop Microsoft Office for the Mac, and Apple agreed to bundle Internet Explorer with the Mac OS operating system as the default browser.

Both parts of the agreement have since fallen by the wayside: IE for the Mac is gone, and although Microsoft continues to update Office for the Mac (usually some time after the Windows version is updated), it isn’t required to do so.

Most prophetic memo

In February 1976, Gates issued a public letter berating people who were freely distributing tapes of the version of BASIC he and Paul Allen wrote for the Altair, without paying Microsoft for them. Here are excerpts from Gates’ “An Open Letter to Hobbyists,” sent to the Homebrew Computer Club:

The amount of royalties we have received from sales to hobbyists makes the time spent of Altair BASIC worth less than $2 an hour.

As the majority of hobbyists must be aware, most of you steal your software…. Who cares if the people who work on it get paid?

Who can afford to do professional work for nothing? What hobbyist can put 3 man years into programming, finding all bugs, documenting his product and distribute for free?

Although the term open source hadn’t been coined at the time, this letter set the stage for Gates’ career-long battle with open-source and free software advocates.

Most beloved OS

Two operating systems stand out in Microsoft’s long history as having more than their share of fans: MS-DOS 5 and Windows XP. Released in 1991, MS-DOS 5 was stable, fixed the worst problems of its notoriously buggy predecessor, MS-DOS 4, and for the first time broke the 640K memory barrier for DOS, allowing memory beyond that to be used for programs, drivers and so-called Terminate and Stay Resident (TSR) programs.

With 2001’s Windows XP, Microsoft finally merged its consumer and business lines of Windows, essentially building a consumer-oriented operating system on top of the stable Windows NT kernel. It also finally stopped using DOS as the base operating system, making Windows XP far more stable and reliable than previous versions of Windows.

Some people believe XP was too much of a success, because Microsoft has had a hard time getting people to give it up for newer Windows versions.

Which is the most beloved? I’ll give the nod to Windows XP. MS-DOS 5, as good as it was, ultimately led to a dead end — it was the best operating system in a line that eventually died out. Windows XP, in contrast, lives on not only on many people’s computers, but in the heart of Windows 7, which still retains its predecessor’s merged business and consumer lines.

Most reviled OS

Here you’ve got to choose among an unholy trifecta of MS-DOS 4, Windows Me and Windows Vista. Released in 1988, MS-DOS 4 was notoriously buggy, and many applications refused to run on it. Users commonly reverted to MS-DOS 3.3 or jumped ship to Digital Research’s DR-DOS 3.41 to avoid MS-DOS 4, Microsoft’s first serious misstep in operating systems. Windows Me, released in 2000, was buggy as well, and plagued by installation problems and a plethora of hardware and software incompatibilities.

But I give the “most reviled” crown to 2006’s Windows Vista, which proved to be far more of a fiasco than Windows Me or MS-DOS 4. The five-year gap between the release of XP and Vista was the longest gap between versions of Windows ever, so people had high expectations for Vista. Unfortunately, it was bedeviled by hardware incompatibilities at launch, it wouldn’t run on older hardware, and many people disliked its resource-hungry user interface.

Making matters worse, many PCs that were tagged as “Vista Capable” couldn’t run the full version of the operating system — a situation that led to a class-action lawsuit against Microsoft.

Best follow-up OS

Again we’ve got a toss-up here, between DOS 5, which fixed DOS 4’s many problems, and Windows 7, which cured Vista’s. I’ll choose Windows 7, which is the OS that many people believe Windows Vista should have been. It is faster than Vista, does not have the same hardware incompatibilities, dumps some useless applications, and delivers some nice tweaks, including an innovative, much-improved taskbar.

The proof is in the pudding: Both businesses and consumers are finally beginning to let go of nine-year-old XP and make the jump to Windows 7.

Furthest-reaching OS

In July 1993, Microsoft launched Windows NT. Designed for businesses rather than consumers, NT was constructed from the ground up, not built on top of DOS as previous versions of Windows had been. More stable and more secure than Windows 3.1, NT was the first completely 32-bit version of Windows. Its first release

Excel fun fact

When Excel was first developed, Microsoft already had a spreadsheet called MultiPlan, but it was not selling well on the MS-DOS platform. The company decided it needed a much better offering to compete against Lotus 1-2-3, the best-selling spreadsheet program at the time.

Thus, Excel was originally code-named “Odyssey” because it was intended to eat Lotus. (In Homer’s The Odyssey, Odysseus’ crew members ate the narcotic lotus plant in the Land of the Lotus.)

Microsoft’s bundling of Word, Excel and PowerPoint into the Office suite emphasized the company’s commitment to business desktop computing. It proved to be a huge success, ultimately leading to the downfall of onetime market-leading applications Lotus 1-2-3 (spreadsheet), WordPerfect (word processor) and Harvard Graphics (presentation program) — and to a near-monopoly for Microsoft Office in the business world.

Sneakiest software bundling

I’ll give the award for sneakiest software bundling, hands-down, to Windows Genuine Advantage (WGA), Microsoft’s antipiracy software. WGA warns people when they do not have a paid-for and registered version of Windows, and certain updates can’t be installed unless WGA is installed and has verified that the copy of Windows is genuine.

In mid-2006, Microsoft began sending WGA to users’ computers along with security updates via Windows Update; the company even labeled the WGA download as “high-priority.” Unbeknownst to users, though, the update had nothing to do with security or stability — it was WGA, sneaking onto their hard disks.

As Computerworld‘s own Scot Finnie wrote in July of 2006, “Microsoft is preying upon people’s ignorance — and their strong desire to install security updates. It’s clearly wrong for Microsoft to use its security updating channel to install software that has no security benefit, and no benefit at all to its customers.”

Users were frustrated enough that a lawsuit was filed, although the suit was recently dismissed in federal court.

Worst server glitch

As if users weren’t annoyed enough about Windows Genuine Advantage, from Aug. 24 to 25, 2007, the antipiracy validation system accused thousands of paying Windows XP and Vista customers of being software pirates. According to Microsoft, the WGA servers went on the fritz, and users were tagged as running non-genuine versions of Windows. Even worse, Vista systems were stripped of important features, such as the Aero interface. The meltdown lasted for 19 hours.

Most embarrassing product glitch

When you use formulas in Excel, you expect them to do the math correctly — after all, what is a spreadsheet for? But in September 2007, an Excel 2007 bug had Microsoft execs red-faced with embarrassment because of an apparent inability to do simple multiplication. In some specific cases, if a formula resulted in the number 65,535 or 65,536, Excel would instead display the result 100,000.

The problem, according to Microsoft, was not that Excel flunked math; it was a display issue. Excel actually performed and stored the calculation properly, the company claimed, but displayed the wrong results. Microsoft fixed the bug, and Excel has known its multiplication tables — and how to display them — ever since.

Smallest annual revenue

In 1975, its first year in business, Microsoft recorded a total income of $16,005, all from the BASIC program it wrote for the MITS Altair 8800 computer. The total did not include US$14,405 that Microsoft was still owed for the final quarter of 1975.

Largest annual revenue

In its 2008 fiscal year, Microsoft raked in US$60.42 billion in revenue, a whopping 18 per cent increase over what it had earned the previous year.

Worst year-over-year performance

Microsoft has turned a profit every year since its founding, and it enjoyed year-over-year increases in revenue and profits every year … until 2009. For its 2009 fiscal year, which ended June 30, 2009, the company reported revenue of US$58.44 billion, a three per cent decline from fiscal year 2008. Its operating income was US$20.36 billion, down nine per cent from 2008; net income was US$14.57 billion, down 18 per cent; and earnings per share was YS$1.62, down 13 per cent.

Most annoying productivity tool

In November 1996, Microsoft launched Office 97, which featured the Office Assistant, an animated character in the form of a paper clip nicknamed Clippy. (There were other characters as well, but Clippy was the default and the most annoying.)

The Office Assistant was supposed to help people get work done more easily by popping onto the screen and offering tips from the application’s Help system related to the task being performed. It was intrusive, intensely annoying and widely reviled.

Even people within Microsoft hated Clippy. Steven Sinofsky, now president of the Windows and Windows Live Division, wrote this in his blog: “the Office Assistant was famously named TFC during development. The ‘C’ stood for clown. I will let your active imagination figure out what the TF stood for.”

In fact, Microsoft used the widespread hatred of Clippy to its advantage by launching an anti-Clippy Web site as a way to promote Office 97’s successor, Office XP, because Office XP had the Office Assistant turned off by default. The site received some 22 million page views, according to USA Today, and allowed users to do things such as shoot rubber bands at the hated animated character.

Best productivity booster

In March 2006, Microsoft released Office 2007, which featured a brand new interface. Gone were the familiar menus and toolbars, replaced by the Ribbon, which put the most commonly used commands on a series of tabbed panels.

Although some people hate the Ribbon, many users (including some Computerworld editors) find it easier to use than the old interface once they’ve gotten used to it. Microsoft claims that research shows that the ribbon is a productivity booster — so much so that the company has decided to incorporate elements of it throughout its entire product line, including the Windows operating system itself.

Most inexplicable advertising campaign

Microsoft has spent untold millions of dollars on advertising through the years, but one campaign stands out above them all for its sheer incomprehensibility — the series of ads in which the odd couple of Bill Gates and Jerry Seinfeld do mundane things such as search for cheap shoes at a bargain basement discount store and annoy a family for no apparent reason.

Launched in September 2008, these ads were widely criticized in the advertising and tech worlds. They lasted only a brief time; Microsoft was smart enough to can them quickly.

Most effective advertising campaign

Microsoft clearly learned from the Seinfeld ad fiasco, because the company in early 2009 followed that campaign with what may have been its most effective series of ads — the Laptop Hunter commercials. The ads portrayed attractive, personable young people searching for laptops and buying Windows-based machines because they found them to be more powerful and less expensive than Macs.

The ads hit Apple where it hurt, on price, at a time when the economy was tanking. The image-measuring firm BrandIndex found that the campaign raised Microsoft’s ranking of value perception among 18-to-34-year-olds from zero to 46.2 in a few months, while Apple’s plummeted from 70 to 12.4 in the same time period. (The highest possible value was 100.)

Most underwhelming product launch

Windows 1.0’s release registered as barely a blip on the computing world’s radar. Begun in 1981 and initially dubbed “Interface Manager,” Microsoft’s first graphical operating system was announced in 1983 but not released until 1985. It didn’t run as a stand-alone operating system; instead, users had to launch it from within DOS. And by the

Worst interface

Go to any list of the worst software ever written, and 1995’s Microsoft Bob will be on it. Designed for Windows 3.1 and later Windows 95, it was supposed to be a user-friendly interface to help non-techies use computers. Instead, it was so cloyingly cute that, in comparison, photos of big-eyed puppies appear to be deep and meaningful. (As Harry McCracken wrote in a PC World review, “It seems to be aimed at a six-year-old who has personal finances to manage.”)

Bob was also confusing to navigate; sucked up system resources, reducing computers to a crawl; and was widely derided in the general and tech press. Users stayed away in droves.

Microsoft Bob was overseen for a time by Melinda French, who was Bill Gates’ girlfriend at the time and later became his wife.

Smartest market targeting

Microsoft’s earliest products were for individual users, rather than for IT departments, but the company knew that ultimately it would have to sell products aimed at enterprises if it wanted to thrive. On June 11, 1996, the company launched Microsoft Exchange Server, which was originally written to handle Microsoft’s internal e-mail. (Previously the company used a Xenix-based e-mail system.)

Exchange Server was first released as Version 4.0, apparently to continue the numbering convention of the earlier Microsoft Mail product, which was at Version 3.5. Exchange has since expanded to include other communications functions such as mobile device syncing and e-mail/voice-mail consolidation, and it has become a cornerstone of corporate IT departments.

Best hire

Love him or loathe him, there is no doubt that Steve Ballmer’s hard-driving, relentless style and laser focus through the years have helped Microsoft become the world’s most successful software company.

Ballmer, who knew Gates from their Harvard days, came to Microsoft in June 1980 as one of the young company’s few employees with real-world business experience. He had worked for Procter & Gamble after graduation and had attended Stanford Business School for one year before joining Microsoft.

Worst waste of visionary talent

Ray Ozzie is one of the technology industry’s true visionaries. He worked on the first spreadsheet, VisiCalc, and developed the Lotus Symphony office suite. And that was only the prelude: He launched Iris Associates, which developed the software that would become Lotus Notes, and later Groove Networks, which developed the collaboration software Groove Virtual Office (now called Microsoft Office Groove).

In April of 2005, Microsoft bought Groove and Ozzie became Microsoft’s chief technical officer. In June 2006, he was promoted to chief software architect, a title previously held by Bill Gates.

Many industry watchers had high hopes for Ozzie’s influence at Microsoft, but he has done little to change the company’s direction, software or culture, particularly when it comes to his specialty, collaboration. Beyond adding Groove to the Office suite, Microsoft has done little to develop it, sell it or make it central to the company’s strategy. The upcoming version of Office for the Web doesn’t even have basic synchronization features, and the “Live” brand is a mess, consisting of an odd mishmash of downloadable software and Web-based services, with no real connection between them.

Why hasn’t Ozzie made his mark? Some people (including yours truly) postulate that there’s a dog-eat-dog culture at Microsoft, with too many people protecting too much turf, and he’s never managed to adapt.

Weirdest company spokesperson

Most companies like their public faces to be sober, measured and thoughtful — but then, most companies don’t have Steve Ballmer at the helm. Although he’s been a boon for the company overall, Ballmer has also been prone to public fits of behavior that at times appear to channel Pee Wee Herman on acid.

The most well-known of these is the infamous “Monkey Boy dance” in which, center stage at a conference, Ballmer danced, howled, screamed and generally acted the madman to show his enthusiasm for Microsoft. Another YouTube favorite is the “Developers” video, which captured him soaked with sweat, screaming “Developers, developers, developers, developers…” until his voice gave out.

Best company spokesperson

Bill Gates — his geekiness and intelligence eventually won over the press, and he became a near-ubiquitous magazine cover boy before his retirement in June 2008.

Worst PR disaster

In February 2008, extremely embarrassing internal documents were released in what’s known as the Vista “junk PC” lawsuit. The class-action suit against Microsoft charged that the company misled consumers into buying Windows XP computers that were marked “Windows Vista Capable” — even though those PCs couldn’t run the most important features of the then-new operating system.

Over several months, internal Microsoft documents became part of the suit, including one from an unnamed employee, who wrote in an e-mail, “Even a piece of junk will qualify” to be called Windows Vista-capable. And in another e-mail message, Mike Nash, who is now a corporate vice-president for Windows product strategy, wrote, “I PERSONALLY got burnt…. Are we seeing this from a lot of customers?… I now have a US$2,100 e-mail machine.”

Jim Allchin, who at the time of the Vista-capable PC push was the co-president of Microsoft’s Platforms and Services Division, wrote in an e-mail, “We really botched this…. You guys have to do a better job with our customers.”

Later e-mails revealed that Microsoft may have launched the marketing scheme in order to help Intel sell low-end chips that were not capable of running the full version of Vista.

Most stunning court decision

On April 3, 2000, a U.S. federal court ordered that Microsoft be split up. As a result of an antitrust suit filed in 1998 by the U.S. Justice Department, Judge Thomas Penfield Jackson ordered that Microsoft be broken up into two companies: one that would develop and sell operating systems, and another that would handle other types of software.

This followed Jackson’s Nov. 5, 1999, findings of fact in which he declared Microsoft a monopoly that used its power to attempt to destroy perceived threats from competing companies, including Netscape, Apple, Sun, Lotus and others. The court’s breakup order ultimately did not stand.

Most favorable court decision

This one’s a toss-up between two very big decisions. First up is a US$5.5 billion suit filed in 1988 by Apple against Microsoft and Hewlett-Packard alleging that Windows violated the “look and feel” of the Mac operating system. Over the years, the lawsuit was whittled down by a variety of courts, and on June 1, 1993, Federal District Judge Vaughn Walker issued a summary judgment against Apple and in Microsoft’s favor.

That was certainly a significant decision, but it ultimately would not have affected the way in which Microsoft did business — Microsoft could have simply paid Apple royalties and continued on its merry way. An even more important decision for Microsoft happened on June 28, 2001, when the D.C. Circuit Court of Appeals overturned Judge Thomas Penfield Jackson’s 2000 order to break up Microsoft.

Despite the overturning of Jackson’s ruling, his findings of fact remained intact, and the case against Microsoft continued dragging on through the courts until 2002.

Biggest relief

On Nov. 1, 2002, the Department of Justice and Microsoft settled the antitrust case against Microsoft. The complex agreement required that Microsoft share its application programming interfaces (API) with other companies and take a variety of other steps to curb anticompetitive behavior. However, Microsoft was allowed to stay intact as a single company.

Worst moment in international relations

On Feb. 27, 2008, the European Union slapped a record fine

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