A Rise and Fall from Grace

MICROSOFT CORPORATION (1975 - 2000)

By Rakhi Abraham

1975	1976	1977	1978	1980	1981	1982	1983	1985	1987
1989	1991	1992	1993	1994	1995	1997	1998	1999	2000

 

Worldwide the name Microsoft Corporation and that of its founder Bill Gates have become the stuff of legends from the software industry. As of today, Microsoft is the world's largest organisation measured in terms of its market value.

Worldwide the name Microsoft Corporation and that of its founder Bill Gates have become the stuff of legends from the software industry. As of today, Microsoft is the world's largest organisation measured in terms of its market value.

It provides the operating system for about 80 percent of the world's computers besides its highly popular applications software and Internet content.

In January1999, Microsoft replaced fellow U.S. group General Electric as the world's most valuable business in the FT500, the Financial Time's annual ranking of companies around the globe.

Yet on April 19th 1999, the company faced its worst ever troubles when an U.S. court ruled that Microsoft had violated US anti-trust laws by engaging in predatory tactics that discouraged technological competition.

Two weeks later, the U.S. government ordered the break up of the company into two separate business units.

With this ruling Microsoft faces a daunting future, in which it could be hived off into smaller companies and hence suffers a reduction in global clout and standing.

The soaring path to glory and this fall from grace can be traced with a quick overview of the organisation's history.

1975

The story begins when Paul Allen, an employee of Honeywell corporation and his teenage friend Bill Gates, a sophomore at Harvard, decides to adapt a new computer language called Basic for the Altair 8800, the first personal computer in the U.S.
Their product Altair Basic is first marketed by Altair's owner MITS but later on becomes the property of Micro-soft, an informal partnership between Allen and Gates.                                                                                   



1976

T he informal partnership between Allen and Gates is formalised and the trade name "Microsoft" is registered in New Mexico, U.S.                      

he basic foundation of the company is laid and Microsoft ships its second computer language Fortran along with its offering Basic on a single copy basis.                                                                                          

he organisation announces its third language product, Microsoft Cobol-80, and establishes its first overseas venture in Japan. By the year-end sales exceed $1 million dollars and Microsoft has a Basic compiler for virtually every microcomputer in the market                                                 .

icrosoft introduces Pascal and develops XENIX OS - a portable operating system for 16 bit microprocessors incorporating existing Microsoft software. The company also releases its first hardware product, the Microsoft Softcard.                                                                                      

icrosoft achieves its biggest breakthrough when it develops The Microsoft Disk Operating System (MS-DOS) for IBM's personal computer.
Riding the wave of the increased acceptance of the IBM p.c., the sales of Microsoft touches $16 million and employees grow to 128.
The organisation reorganises itself into a privately held corporation Microsoft Inc. with Bill Gates as President and Paul Allen as Executive Vice-president.
                                                                                                    

S-DOS goes global and licenses the product to over 50 hardware manufacturers. It also enters the area of business computing with Multi-plan - an electronic spreadsheet program.
                                                                                                    

wo new products emerge that alter the public perception of Microsoft as a language company - Microsoft Word and Microsoft Windows. Word is significant for its WYSIWYGT design (What you see is what you get), and Windows for providing a graphical interface for users of MS DOS. The Microsoft Mouse built around the idea of controlling the P.C. with point and click command is also introduced.
                                                                                                    

indows makes its revolutionary debut and the P.C. goes graphical for the first time. And the company also wins an Export award from the Washington's Governor.                                                                 

icrosoft and IBM jointly release Operating System/2. And the organisation release Microsoft Excel for its first application for Windows operating system and explores consumer markets with its first CD-ROM product. It acquires the organisation that manufactures Power point - a presentation software.
                                                                                                    

worldwide phenomenon is underway. Personal computers users begin adopting Windows in large numbers and in just one-year Microsoft ships 4 million copies of Windows to 24 countries in 12 languages.
Hardware manufacturers include Windows as standard equipment on their computers as part of the Windows - ready to run program. Microsoft's hardware group also benefits by selling 6 million units of the Microsoft Mouse. Microsoft announces its return to its language roots with Microsoft Visual Basic, which win an award for technical excellence from P.C. magazine.
                                                                                                    

merger with Intuit - developer of personal finance packages is blocked by the U.S. justice department. Microsoft agrees to change contracts with P.C. makers, and eliminate restrictions on other software makers, thus gaining a temporary respite from the investigations.                                       

                                                                                                   

icrosoft is polled as the most admired company in the most admired industry in the U.S.A. Forays into new areas of Internet and Cable-T.V. continues and in April, Microsoft signs an agreement to acquire Web TV networks for 42 million dollars. The latter offers a complete system that provided consumers access to the Internet via cable television.
In June, Microsoft made an investment of $1 billion in COMCAST, the fourth largest Cable television operator in the U.S. This was to enhance Comcast's deployment of high speed data and video services via its cable-delivery network.
In another strategic alliance , Steve Jobs of Apple and Bill Gates lays out a broad product and development agreement between Apple and Microsoft. The Agreement included the production of future versions of Microsoft Office, Internet Explorer and other tools for the Macintosh, the bundling of Internet Explorer with Mac OS, and a whopping $150 million investment in Apple by Microsoft.
The release of Microsoft's Internet Explorer 4.0 is done with great fanfare in September 1997. It is received with critical acclaim and great consumer demand.

But the excitement is short lived as the Justice department started action against Microsoft in October accusing it of forcing computer makers to use its Internet browser as a condition for using its Windows operating software.

                                                                                                   

1998

M icrosoft's Board of Directors approves a 2 for1 split of its common shares. Microsoft also realigns its product groups to respond to changing market needs.
Microsoft's exchange server outsold Lotus Notes, making it the fastest growing server product in history.

anti-trust troubles: In May that year the Justice department and 20 states files suit against Microsoft alleging that it used its monopoly to block potential competition from Netscape Communication's internet browser. Microsoft denies the charges claiming that incorporating a browser in its Window's Operating system was to benefit consumers and that there was vigorous competition in the market.

1999

T he trial had begun and in November, Microsoft suffers a substantial legal defeat when the Judge rules that Microsoft engaged "in a concerted series of actions " to suppress competition to protect its monopoly thus harming customers". Mediation talks continue in secrecy.

2000

January:
Bill Gates steps down as C.E.O giving way to Steve Ballmer and assumes the role of "chief software architect".

February:
Microsoft launches Windows2000 after more than a year of delay. It is available in 60 countries in over 16 languages. It is advertised as the infrastructure choice for building Internet based E-commerce applications.

April:
Microsoft announces a revenue of $5.6 billion for the quarter - an increase of 23 percent over the same quarter the previous year. It announces that Windows 2000 shipments had exceeded $1.5 million mark.

Amidst all this good news comes the bad news.

April 10th:
The sitting judge rules that Microsoft had violated Anti-trust rules by discouraging competition.

April 28th:
The U.S. government orders that Microsoft is to be split into two groups - one selling operating systems (Windows) and the other selling applications software. Microsoft remains defiant and say it will contest in an appeals court.

A protracted battle lies ahead.

Whether Microsoft actually violated anti-trust rules remain widely debated. Microsoft's operating system controls roughly 90 percent of the market.

One way, it offers the advantage of standardisation - which means application programs are being written more for Microsoft's operating systems.

On the other as the judge pointed out that this dominance in the market grows in turn with more people choosing a Microsoft operating system because there are more software products in the market for it. The dominance also feeds through to the PC manufacturers who decide to install Microsoft O/S because it is likely to be the bestseller.

W hat Microsoft is accused of is to try restrict the competition.

I t has licensed its operating system more cheaply to computer makers such as Dell and Compaq which exclusively installed its system. As a result IBM claims it lost out on sales.

Another key element in the case is how Internet explorer pushed away Netscape Navigator from the market.

M icrosoft counters saying that it faces a great deal of competition and this has motivated its actions. The consumer has gained as they received a free internet browser when previously it had been charged for. The growth of the Internet and mergers between rivals such as AOL and Netscape (and Time-Warner) means Microsoft does not have a monopoly position.

Some argue that the question posed by the trial is whether anti-trust laws can cope with technological competition. Today's competition is not between identical products sparring over price. It involves rival technologies struggling for superiority. For eg. Cable T.V. competes with Satellite T.V. For most, technology standards are vital. Without them mass markets are impossible. Sometimes, standards arise by voluntary agreements among firms. Sometimes they result from the triumph of one firm. The check on this dominance-they argue- is a threat to new technology itself.

T he commitment to release innovative products should keep micro-soft corporation in good stead in the future. Recent decisions have seen it investing in a lot of new markets- cable, internet, broadband etc. These activities are intended not to cut into Windows2000 initiative but to help accelerate adoption of their technology. As Steve Ballmer put it '" Most of what we do is to support and encourage people to do things on our platform".

Microsoft's U.S.P. lies in its ability to offer a wide range of products and services designed to empower people through great software- any time, any place and on any device. Microsoft has spelt out its recipe of past and future success- its vision of technology and its values. Its most important value is customers-responding to their needs by delivering new and improved products. This value should see it going strong in the coming decades whether it survives anti-trust or not.
                                                                                                    

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