Microsoft. The American Economy: A Historical Encyclopedia

Computer and software company that started the personal
computer revolution.
In 1978 Bill Gates and Paul Allen, inspired by an article in
Popular Electronics, developed the first BASIC computer language program for the Altair 8800, the first personal computer developed with 256 bytes of RAM and using an 8-inch
floppy disk drive. They established their company, Microsoft, in 1978. Within three years the sales for the company
exceeded $1 million. Gates and Allen set a goal of putting a
personal computer (PC) in every home and office and decided that the way to achieve this goal was to create affordable, efficient software (programs that allow those who are
not computer programmers to use the computer with minimal training). By the beginning of the 1980s, Americans
began to see the first advances in software technology with
the development of word processors. By 1981 Microsoft had
developed an affordable PC that used the disk operating system (DOS). Development of additional software packages
that included operating programs, language programs to
create and build applications, and games made Microsoft a
billion-dollar company. The introduction of Microsoft Office 95 (an integrated software that contains word processing
and spreadsheet capabilities) increased sales once again, and
by the mid-1990s there were more than 25 million PCs in
homes and offices. Microsoft unveiled Internet Explorer, a
program designed for access to and navigation of the Internet, in 1997. By 2000, more than 25 million people owned or
used PCs and used the Internet. Microsoft continues to introduce new software and hardware products as communications technology continues its rapid change: Windows
software for mobile phones; computer game systems such as
XBox and a variety of XBox games; business software such as
integrated card services, analytical and reporting software,

and retail management software; and programs for the development of websites and other visual media.
The federal government has charged Microsoft with engaging in monopolistic practices, basing the charge primarily
on the way the company “bundles” its software with hardware systems so that computers are sold with Microsoft programs instead of the competition’s software. The case was settled in 2002 and the Supreme Court approved the settlement;
Microsoft appointed a compliance officer to oversee the requirements of the Court. Microsoft’s competitors doubt that
the settlement will produce any substantial changes because
Microsoft has already achieved market dominance, and
breaking it into smaller companies will not reduce its net
sales and control of market share.
Microsoft has had a tremendous influence on the U.S.
economy. In addition to employing more than 50,000 workers, the company has provided investors with consistent dividends. The use of computers has streamlined business operation and expanded communications capabilities. This, in
turn, has expanded business practices and increased company profitability. The explosion of the technology industry
can be directly related to the rise of Microsoft as well.
—Cynthia Clark Northrup
References
Liebowitz, Stan J., and Stephen E. Margolis. Winners, Losers,
and Microsoft.
Oakland, CA: Independent Institute, 1999.
Microsoft. www.microsoft.com; accessed February 9, 2003.

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