King of the castle
Saturday, June 9th, 1984BUSINESS EQUIPMENT DIGEST, 1984
Seattle-based Microsoft is one of the largest software houses in the world with a $100 million turnover. Its close connections with IBM are unique in the computer industry and has given Bill Gates, the founder of Microsoft, an opportunity to draw some conclusions about them. Gerry O’Kane talks to Bill Gates, Chairman of Microsoft.
SITTING tapping feet, hands clasped under arms while swinging backwards and forwards, does not sound like a description of a successful man. Yet Bill Gates is.
Gates is the Chairman of Microsoft, one of the world’s largest software houses, most noted for providing IBM with the operating system for its personal computer. Only 29 years old, his company in the 1984 fiscal year, turned in net revenues amounting to $100 million, a 50 per cent increase on 1983’s total.
It started in 1974 when he and Paul Allen produced the first BASIC Interpreter for a microcomputer which was used by Apple, Commodore and Pet in the new and growing market. Basic remains the standard language for eight-bit machines like the BBC Micro.
It was six years later that he and his partner made the next technological and business leap. It went hand in hand with probably the most important development in the world of personal and minicomputers which came about with IBM’s move into the PC market.
IBM approached Gates in July 1980 but only with tentative marketing discussions about a ‘new personal computer’. One of their prime concerns was finishing development in about one year. So they decided to use software already existing and industry standard parts, like the Intel chip. Since Microsoft was already the most successful and popular designers of high-level languages, it was an obvious choice.
As the relationship between the two firms became more stable, IBM settled on producing a 16-bit machine using the 8086 chip partly, having been advised to go in this direction by Gates. They also decided to incorporate disk drives. Here was a problem because they needed an operating system up and running in a year. ‘We said “you’d better go and see Digital Research”,’ explained Gates.
However CPM wasn’t going to be available for IBM. Apart from refusing to supply Microsoft with the source code to help machine design, Gary Kildall, the company’s president, spent several hours flying above the desert while IBM executives sweated below in 105 degrees awaiting a meeting and some sort of agreement. Enough was enough, particularly for IBM and shirts open and ties loosened, they returned to Microsoft.
‘We had heard of a guy in Seattle who had designed his own 8086 operating system. He was called Tim Patterson, so we bought it and modified it,’ said Gates. At this time, as it remains, the IBM contract was based on royalties. In actual fact IBM does not own a source code for any PC machine and each time a new DOS is developed it means a new contract.
Gates seems to have a mixed attitude to working with IBM. ‘They are the most honest and straightforward company we deal with,’ he said. Nevertheless he did admit that dealing with a large company could be frustrating and only personal contacts could help clarify IBM’s often ‘mysterious’ policies. Comparing ACT to IBM as business partners, he felt more relaxed with ACT, ‘I mean, the legal niceties are less critical.’
The fruits of success also included Apple. In 1980/81 one of Microsoft’s rare excursions into hardware provided the Softcard that allows CPM compatible software to be run on an Apple using a Z80 processor. Gates pointed out that they still sell 3,000 boards per month.
Since then there were rumours that the firm had been involved with Apple’s failed Lisa computer since they were the first to produce ‘Windows’ after Lisa’s decline. (Windows allows users to look at unrelated packages simultaneously and like Lisa uses graphic representations of a packages functions — icons.)
Gates denies this. ‘Look most technology, about 95 per cent, comes from Xerox, well now most of them work for me.’ Charles Simoyne, for example, was an early experimenter on Windows.
The latest involvement with Apple has been very close. Steve Jobs, the chairman and founder of Apple and Bill Gates first began discussions on the project that had been conceived at Apple in July 1981. By January 1982 work had begun at Microsoft code-named Sand. By 1984 they had designed Word, Microsoft File, Clipart, Multiplan and Basic for the Mac.
One of the most interesting aspects of this powerful software house has been its approach to the market. Gates admits the future, in terms of projects, has already been planned with IBM but he likes to believe that his company is not dependent upon them. In a report about the 1984 fiscal year net revenues, it said ‘Significantly, no single customer accounted for more than ten per cent of the total revenue.’
Gates accepts this as a deliberate policy, ‘We are creating a long-term company which is a leader in software … we have proven we succeed in many different areas.’ This stance must mean there is no emphasis on one market and with the recent move into providing MSX, a new standard for home computers, this seems to be true. Undoubtedly with a justified mistrust of large corporations and the fickle attitudes of the consumer, breadth of base is the safest policy. ‘It is an important indication of a company’s strength that not all the revenue comes from one company,’ he added.
Interview with Bill Gates, Microsoft