Gates Essay, Research Paper

Bill Gates

Bill Gates, cofounder of the Microsoft corporation, holds 30.7 percent of its stock making him one of the richest people in the United States. He was the marketing and sales strategist behind many of Microsoft’s software deals. Their software became the industry standard in the early 1980s and has just increased in distribution as the company has grown, so much that the Federal government is suggesting that Microsoft has violated Sherman and Clayton antitrust acts.

Bill Gates’ first interest in computers began at Lakeside, a private school in Seattle that Gates attended. There he wrote his “first software program when I was thirteen years old. It was for playing tic-tac-toe”(Gates 1). It was at Lakeside that Gates met Paul Allen, who later became cofounder with Gates of Microsoft. There they became friends and “began to mess around with the computer”(Gates 2). Back in the sixties and early seventies computer time was expensive. “This is what drove me to the commercial side of the software business”(Gates 12). Gates, Allen and a few others from Lakeside got entry-level software programming jobs. One of Gates early programs that he likes to brag about was written at this time. It was a program that scheduled classes for students. “I surreptitiously added a few instructions and found myself nearly the only guy in a class full of girls”(Gates 12).

In 1972 Intel released their first microprocessor chip: the 8008. Gates attempted to write a version of BASIC (Beginner’s All-purpose Symbolic Instruction Code) for the new Intel chip, but the chip did not contain enough transistors to handle it. Gates and Allen found a way to use the 8008 and “started Traf-O-Data, a computer traffic analysis company”(Clayton 452) It worked well however, marketing their new machine proved to be impossible. “No one actually wanted to buy the machine, at least not from a couple teenagers”(Gates 14). Gates and Allen had more less successful endeavors in starting a software company. In 1974 Intel announced their new chip: the 8080. The two college students sent off letters “to all the big computer companies, offering to write them a version of BASIC for the new Intel chip. We got no takers”(Gates 15).

While at Harvard, the cool thing to do was to slack off on classes for most of the semester and try and see how well the student could do at the end. Steve Ballmer and Gates “took a tough graduate- level economics course together- Economics 2010. The professor allowed you to bet your whole grade on the final if you choose”(Gates 40). They did that, did not do anything for the class all semester, and studied and got A’s. During one of these slack off periods, Gates and Allen found a very small computer: the Altair 8800 “(’Altair’ was a destination in a Star Trek episode)”(Gates 16). It had a few switches and lights on the front that you could get to blink, but that was about all. This new chip had great potential, but there was no way to program it. After five weeks of not going to classes, not eating or sleeping regularly, their version of “BASIC was written- and the world’s first microcomputer software company was born. In time we named it ‘Microsoft’”(Gates 17).

Gates left Harvard on leave in 1975. Microsoft’s big economic break came in 1980 when “IBM- the computer industry leader- asked Gates to develop an operating system for its new personal computer”(Clayton 452). IBM usually did not use external help in software design or hardware manufacture, but they wanted to release the first personal computer in less than a year. “IBM had elected to build its PC mainly from off-the-shelf components available to anyone. This made a platform that was fundamentally open, which made it easy to copy”(Gates 47). IBM bought the microprocessors from Intel and licensed the operating system from Microsoft. Microsoft bought some work from another company in Seattle and hired its top engineer, Tim Paterson. The system became known as the Microsoft Disk Operating System, or MS-DOS.

Now because of the licensing agreement between IBM and Microsoft, IBM had no control over Microsoft’s distribution of its MS-DOS to other companies who wanted to clone the IBM machine. This decision by IBM is still under great debate. Many industry analysts argue that IBM should have waited for their own software developers to develop an operating system or that IBM should have purchased MS-DOS from Microsoft. However, from a more broad economic picture of IBM’s decision, it may have just turned out for the good of Microsoft, IBM and the average computer user. Microsoft’s “goal was not to make money directly from IBM, but to profit from licensing MS- DOS to computer companies that wanted to offer machines more or less compatible with the IBM PC”(Gates 49). By allowing Microsoft to sell MS-DOS to other companies, this made IBM’s PC the industry “de facto” standard. With other companies scrambling to compete with IBM, Microsoft licensed MS-DOS to these companies and fulfilled one of Microsoft’s goals: “to create the standard for the industry”(Jobs 50). Compaq Computer of Houston “launched [the first] clone in 1982 and attained FORTUNE 500 status a scant four years later”(Schlender 42). Hundreds of companies followed.

MS-DOS dominated the market much like VHS beat out Betamax and how early TV sales boomed. The more people bought the product, the more companies produced it and with the television, the more sets were sold, the more programming was available. This was a main reason why Apple’s Macintosh only controlled 9% of the market(Schlender 40). “The PC story would be far different if Apple had licensed its operating system software to other computer makers early on”(Cook 64). In effect, they had a monopoly on their own system and software. Their lack of competition kept prices up and software selection down. Apple has just recently licensed some Macintosh operating systems to other companies.

Microsoft has thrived on the ability to foresee and understand the computer needs of the average user. After Microsoft made their name with MS-DOS, they started work on a graphical based operating system much like Apple’s Macintosh computer. They called it Windows. Windows “swept the market”(Clayton 452). By 1993 it was selling over 1 million copies a month “and Microsoft operating systems ran nearly 90 percent of the world’s PC s”(Clayton). Microsoft had well achieved their goal of creating the standard for the industry(Jobs 50). However, because Microsoft enjoys a near monopoly, beginning in June of 1990, the “Federal Trade Commission, which shares antitrust jurisdiction with the Department of Justice, took the first crack, quietly opening an inquiry “(Cook 64). Many other software companies have “cheered”(Pain) the government and offered a deluge of help. One of the big complaints of computer manufacturers is that they “must agree to pay software royalties…for every computer they ship, regardless of whether the computer is sold with any Microsoft software.” It is “an all or nothing deal”(Rohm 92). Steve Jobs, cofounder of Apple and founder of Next, calls Microsoft the “’small orifice’ through which every other company must squeeze if it wants to participate in the PC market”(Schlender 41).

After two years of investigation, “commissioners were deadlocked on whether to file an antitrust complaint”(Cook). However, antitrust chief Anne Bingaman continued the process with a high-profile investigation. After collecting information, conducting interviews, and talking to Gates, Microsoft signed an agreement that would require Microsoft to make “minor changes in the way it licenses DOS and Windows to computer manufacturers”(Cook). Federal District Court Judge Stanley Sporkin rejected the proposed statement. Bingaman continued the case. She hired Sam Miller, a trial lawyer from San Francisco law firm of Morrison & Foerster. Miller was to head up litigation against Microsoft.

What will come of the lawsuit? If Microsoft agrees to the next settlement, it will “level the playing field”(Rohm 94) or they could end up the next AT&T. It is up to those in Washington and at Microsoft. If Microsoft looses, “instead of just DOS with its huge share of the market, if you’ve got three or four operating systems each having 25 or 30 percent of the market, you’re going to provide a lot more incentive for those people to predisclose or disclose interface operations to everybody”(Rohm 94) said a lawyer for the case. The operating system that works with all applications and other operating systems wins. That is IBM and Apple’s Taligent and OS/2’s strategy.

Right now Bill Gates is building a multi million dollar water front home outside of Seattle, equipped with all the technological luxuries that a few years ago only science fiction writers could dream up, for he and his wife, Melinda French. He has a 2.5 million dollar book deal that is selling now(Lyall 20). What is in Gates future? He loves his work at Microsoft and continues to stay involved with running the company. He has gotten with Craig McCaw and announced plans to launch a 9 billion dollar satellite-communications by 2001. He is also working with Sega, Time Warner and TCI just to name a few. As for his monopolistic image in computer circles, only time will tell.

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? Clayton, Gary E. Ph.D. Economics Principles and Practices. New York: Glencoe/McGraw-Hill 1995

? Economist, The:The World This Week. March 26, 1994 p7

? Economist, The: Business. January 22, 1994 p73

? Fortune. June 28 1993

? Gates, Bill. The Road Ahead. New York:Penguin Group 1995

? Lyall, Sarah. Technos: “Are These Books, or What? CD-ROM and the Literary Industry.” Winter 1994 p20-23

? Quittner, Joshua. The Seattle Times. Seattle, “Electronic Peek into the Future.”September 5, 1993 D1+

? Rohm, Wendy Goldman. Wired:”Oh No, Mr. Bill!” April 1994. p90+

? Schlender, Brenton R. Fortune. “Jobs and Gates Together.” Aug. 26, 1991 p50+

? Schlender, Brenton R. Fortune:”The Future of the PC.” Aug 26, 1991, p40+