February 5, 2021
Companies Owned by Microsoft
It’s hard to remember a time when Microsoft wasn’t one of the most valuable companies in the world, but it wasn’t always the case. Before it had brands like Xbox, GitHub, and LinkedIn, the company was known primarily for PC operating systems. It wasn’t until the mid-1980s that things began to really change for the company. Nearly 35 years after Microsoft went public, the Knowledge Hub looks back at the history and brands that make up Microsoft.
Like all great origin stories, Microsoft started off with a humble beginning. Eventual founders Paul Allen and Bill Gates were in Boston working on software projects, when they read about the “Altair 8800 personal computer” in a magazine. At the time, Bill Gates was a pre-law student at Harvard University and Paul Allen was a programmer at Honeywell.
The pair knew early on that the rapidly dropping price of personal computers meant software sales could finally be profitable. Gates contacted MITS (Micro Instrumentation and Telemetry Systems), the maker of Altair, and offered to demonstrate a new interpreter programming language he and Allen had written for their computer. The only problem was, they hadn’t created it yet and they didn’t have an Altair system to develop or test one.
In just eight weeks, Gates and Allen finished their proposed program and pitched it to MITS in Albuquerque. Leading up to the pitch, the team had nearly forgotten to create a bootstrap program to start the software. In a remarkable photo finish, Allen wrote the bootstrap program during the flight to New Mexico. After their meeting, MITS agreed to distribute and market their software as Altair BASIC.
The success of Altair BASIC convinced Allen and Gates to create their own software company in 1975. The new company, dubbed “Micro-soft”, was a play on the words “microprocessor” and “software.” Like many other startups of its time, Microsoft was launched in a modest garage before moving to a proper headquarters in Bellevue, Washington several years later.
Microsoft’s big break came when it developed an operating system called MS-DOS for IBM’s first computer, which debuted in 1981. Microsoft licensed the operating system to IBM, but retained all rights to the software. This meant, for every IBM computer sold, a royalty was paid to Microsoft. Microsoft also retained the right to license MS-DOS to other computer manufacturers. IBM’s PC was the first personal computer to gain widespread adoption, largely due to its brand recognition and massive marketing campaign. IBM’s PC helped Microsoft make a fortune and established the company as the biggest software developer in the world by the late 80s.
In 1983, Paul Allen left Microsoft after being diagnosed with Hodgkin’s lymphoma, although he remained on the board of directors until 2000.
Two years later in 1985, Microsoft released a revolutionary new graphical interface for MS-DOS, called Windows. This operating system introduced many modern browsing features we enjoy today like multitasking, scroll bars, and drop-down menus. The affordability and usability of Windows helped usher in a new wave of PC users.
The next version of Windows, coined Windows 95, released with even more desktop features like the taskbar and “Start” button. Fans across the country lined up at stores at midnight to score a copy of the new operating system. In its first five weeks, Windows 95 sold 7 million copies worldwide.
Microsoft has become one of the world’s biggest technology companies due to the foundational work of Allen and Gates. Earlier this year, Microsoft reported revenue of $143 billion USD for its fiscal 2020 year. But more astonishingly, Microsoft’s stock market capitalization is valued at $1.64 trillion USD. That’s TRILLION with a “T.”
To put this figure into perspective, if Microsoft was a country its market cap would be higher than the GDP of countries like Russia, Australia, or South Korea.
Although Paul Allen and Bill Gates co-founded Microsoft, the company has been publicly traded since 1986. As of recent public filings, Microsoft reports that their principal shareholders are The Vanguard Group, Inc. and BlackRock, Inc., owning 8.17% and 6.8% of Microsoft, respectively. Bill Gates still owns an estimated 1.3% shares of the company, valued at $16 billion.
Over the years, Microsoft has expanded its business beyond just software sales. In the last two decades, it has developed brands and acquired companies in several industries including: social media, computer hardware, and gaming. The following are some of the most important brands at Microsoft.
Microsoft’s Office suite set the gold standard for productivity applications when it first released in 1990. The first iteration of Office shipped with just three apps - Microsoft Word, Microsoft Excel, and Microsoft PowerPoint. Office 365 now features 30+ apps and services. Thanks to its ease of use, Office has become the default tool for millions of businesses small and large.
MSN, an abbreviation of “Microsoft Network,” launched in 1995 alongside Windows 95, as a dial-up internet service provider. After the death of dial-up, MSN would eventually become an online web portal for news, entertainment, and Windows applications.
When Xbox launched in 2001, it faced steep competition from Nintendo and Sony, both of which were established gaming console companies. The gamble to take Microsoft into at-home gaming would pay off though, as Xbox’s focus on shooters and Xbox Live online play catapulted them to second place in console sales. A more powerful gaming console, the Xbox 360 was launched in 2005, followed by the Xbox One in 2013. Xbox’s latest console release is the Xbox Series X, which was released in November 2020.
Prior to launching Bing in 2009, Microsoft had over a decade of experience developing search engines. In 1998, it developed their first search engine with MSN Search and in 2006 it launched Live Search. However, both search engines consistently trailed behind Google and Yahoo! for the duration of their run. Microsoft hoped to change this dynamic with the rebrand of Live Search, as Bing. The release of Bing brought about several improvements to search engines. The tool features several benefits over Google, including advanced image search, instant search bar results, and Bing Rewards, which gives users points to redeem prizes for searching the web with Bing.
In 2010, Microsoft launched its own cloud computing platform called Azure. Azure provides on-demand computing power and data storage and frees up businesses from having to purchase and manage their own data center. Instead, they can host databases, directories, web servers, file storage, virtual machines, and much more directly from the cloud.
In 2011, Microsoft closed a deal to acquire Skype for $8.5 billion USD. Skype is a video telecommunications application that allows you to host video calls and voice chats between friends, family, or coworkers, on whatever device you choose. In March of 2020, Microsoft revealed that Skype powers over 40 million calls a day.
2012 marked the release of the Surface tablet and Microsoft’s first foray into computer hardware. The Surface was positioned as a tablet-based Windows experience, complete with Office Suite, a portable design and a keyboard cover for daily tasks. Today, the Surface line has expanded to also include laptops, desktops, headphones and a phone-tablet hybrid called “Surface Duo.”
Microsoft paid $26.2 billion for social media powerhouse LinkedIn in late 2016. LinkedIn is the largest online professional network and is used to find jobs, internships, connect, and strengthen professional relationships.
In 2018, Microsoft acquired GitHub for $7.5 billion in stock. GitHub is a leading software development platform and is a popular resource for app developers and programmers. The platform is even used by tech giants Google and Apple. GitHub boasts a community of 50 million developers and 100 million code repositories, making it the largest global host of source code.
In September 2020, Microsoft shocked the gaming world when it bought ZeniMax Studios, the parent company of Bethesda Softworks. This $7.5 billion USD deal gives the Xbox brand access to some of gaming’s most revered series and characters. Xbox now owns the Dishonored, Doom, Fallout, and Elder Scrolls franchises. This is in addition to ownership of Halo, Gears of War, MineCraft, Forza, and Age of Empires. In total, Microsoft now owns 23 first-party gaming studios.
During the summer of 2020, and prior to the acquisition of ZeniMax, it was rumored that Microsoft was shopping gaming giant SEGA. SEGA would provide access to an audience that Microsoft has failed to reach effectively - Japan. Historically, Japanese-based companies, Sony and Nintendo, have dominated Xbox in console sales for the Asia market. It was even reported that Microsoft was open to rebranding the next Xbox console as “SEGA Series X” in Japan to capitalize on the established brand. Despite the rumors, in September, Microsoft denied interest in acquiring SEGA.
After the White House threatened to ban TikTok, it was heavily speculated that Microsoft would acquire TikTok’s U.S. operations . However, this did not come to fruition as Oracle was chosen instead. Microsoft looked to improve upon the security vulnerabilities and disinformation tactics inherent to TikTok by taking over the computer code and algorithm that powers the app.
Will Microsoft continue to grow over the years, or will it finally hit a wall? Whatever direction Microsoft chooses to take next, it’s safe to assume they’ll continue to innovate and take risks. After all, it’s what got them to where they are today. They’ve shown us that with a little competition and an ambitious drive, there’s no limit to what a business can accomplish.