PART 8: The Triumph of Windows: 1985 - 1993 - Bill Gates
January 1985, Windows is now about 2 years late. Neil Konzen, Microsoft's Mac wizard, is brought in to get it moving. Further delaying the product is Gates' insistence that Windows also have a keyboard interface (keyboard equivalents to the Mouse). Microsoft ships a beta version in July, 1985, and on 20 November 1985 Windows 1.0 finally shipped.
June 1985 Joint Development agreement signed with IBM. This new agreement superceded the old 1980 agreement and got IBM out of its liability if the DOS source code was disclosed to customers. Gates is unable to get the IBM people to look seriously at Windows.
In early 1985 Apple is doing poorly. Mac sales were 20,000 per month which was far below the forecast of 80,000 per month. Gates writes a letter on 25 June 1985 urging Apple to license its Mac technology so the clone makers could get into making Macs. Gates offered to help convince Compaq, Sony, TI, etc., to make Macs and thereby cause the Mac market to become huge. Apple did not license its technology but did sign an ambiguous agreement with Microsoft that November allowing Microsoft to go ahead with Windows.
Microsoft stock finally goes public on 13 March 1986 with the initial public offering. Gates worth $311,000,000 the first day it was issued.
In December 1986 Gates buys out Seattle Computer's DOS license for $925,000 after Seattle Computer takes Gates to court for trying to deny them the right to sell their DOS license! Gates also buys out Tim Paterson's DOS license for $1,000,000, buys into his business, and gives him a generous job contract (he later makes $20,000,000 when he sells out his share of his business).
Meanwhile Microsoft and lumbering IBM move ahead with what becomes OS/2. At first IBM's aim is to cut Microsoft out by developing a common interface for all of its computers from mainframes to PCs (SAA = Systems Applications Architecture). Gates and Ballmer then scramble to convince IBM to also use Windows as an interface.
This "compromise" eventually evolved into Presentation Manager but the result was that Microsoft managed to live to fight again another day.
The 1986-1988 period saw Microsoft constantly scrambling to protect its interests vis a vis IBM during their "joint" effort to develop OS/2 (it started out as CP- DOS). Ballmer and Gates would do anything to keep the relationship alive (BOGU) for fear of being crushed by IBM. Microsoft's code writers were contemptuous of IBM and it's coding culture. In the increasingly irrelevant world of IBM, the classical languages were COBOL, PL/1, and BAL (Basic Assembly Language), NOT C!
In addition, IBM wrote "clunky" code that was top- heavy with lines of documentation to make the software "easy to service."
Finally, in December 1987 OS/2 1.0 without Presentation Manager was released. Not until October 1988 is OS/2 1.1 with PM released with a resounding thud. In 1988 only about 4% of 286 and 16% of 386 users purchased OS/2 while Gates was selling Windows at the rate of 50,000 copies per month.
In March 1987 Bill Gates becomes a Billionaire at age 31 and by the 3rd Quarter of 1987, Microsoft passes Lotus to become the largest PC software vendor (1987 revenue, $345,900,000).
In October 1987 Windows 2.0 is released and Compaq and Microsoft developed Windows 386 to run on Compaq's line of 80386 machines.Borland, Ashton-Tate, and Lotus refuse to develop for Windows fearing that, in the words of Philippe Kahn: "People are afraid Microsoft is going to take control of the operating system."By this time Microsoft's competitors are complaining loudly (and correctly) about Microsoft's undocumented calls in DOS & Windows that gave its applications division an advantage over its competitors.
Microsoft's legal difficulties multiplied greatly when Apple filed its "Look and Feel" lawsuit in March 1988. One year later Apple wins a preliminary skirmish when a judge rules that Microsoft could only use the visual displays in the very first version of Windows - not those in Windows 2.
When Microsoft's stock nose-dived, Steve Ballmer bet $46,200,000 on the company by purchasing 945,000 shares of Microsoft stock. This purchase would later make Ballmer a Billionaire.
On 31 October 1988 Bill Gates in one of his best decisions hired David Cutler and his development team away from DEC. Cutler had developed VMS and he and his group were "smart guys" - just the sort of people Gates loved to hire.
Gates had a vision from early on to develop, from scratch, a completely new operating system that would run on all the major Microprocessors and would, in effect, bring the powerful features of high-end Unix to the PC masses. With Cutler he had the leader and core group of programmers to make that vision a reality.
By late 1989 the development of what was to become OS/2 2.0 (32-bit flat) was bogged down in the usual IBM "bureaucratic sclerosis". Many of the major software houses were developing for OS/2 and had placed heavy bets that it would be the operating system for the "high- end" PC.
Microsoft was still promoting Windows and was focusing most of its Applications software development on Windows. Consequently, Microsoft's Applications competitors were getting very nervous about OS/2 because if Windows became the standard then Microsoft would eventually dominate the Applications market as well as the operating systems market.
IBM felt that OS/2 should be the "high-end" operating system while Windows would be the "low-end" operating system. At the November 1989 Comdex in Las Vegas the open break between IBM and Microsoft occurred. Neither company was prepared to unambiguously endorse the other's operating system.
In May 1990 Windows 3.0 is released and is an instant mega-hit. In the first year 4,000,000 copies of Windows 3.0 were sold - more than all the Mac machines produced since 1984.
Microsoft's dominance of the operating systems market is now assured pending the resolution of the Apple favor in April, 1992 although aspects dragged on until 1997).
That fall IBM and Microsoft part company permanently. IBM retains control of the development of OS/2 1.X and 2.0 while Microsoft is responsible for OS/ 2 3.0. OS/2 3.0 is, in effect, the NT project.
In January 1991 Microsoft unveils WIN32 (essentially a library of C subroutine calls) which will be the foundation of all of its future operating systems. The features that Microsoft built into WIN32 were essentially those that IBM had "reserved" for the "high-end" operating system.
By mid-1992 Microsoft's capitalization was greater than Boeing and General Motors. At age 36 Bill Gates is the richest man in the United States. Microsoft is now unstoppable.
July 1993, Windows NT 3.1 is released and gets highly favorable reviews. The future of operating systems according to Bill Gates is now clear. Windows/DOS and Windows NT are to be eventually merged into one product running on all personal computers.
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