Microsoft at 50: Incredible Rise, 15 Lost Years, and Stunning Comeback - 4 Charts

As Microsoft celebrates its 50th birthday this week, I find myself reflecting on the incredible journey I've witnessed as both a writer and an early adopter of their technologies. I've been covering Microsoft for over three decades and using their products for a decade before that. The memories flood back, and it's a trip down a fascinating lane of tech history.

It's easy to get caught up in the numbers when discussing Microsoft—revenue, profits, employee counts, and stock prices. You're sure to see plenty of charts and timelines this week. But for me, those figures are just markers, small flags that highlight the company's ebbs and flows. Microsoft has truly transformed the world, and that's what stands out the most.

Microsoft plans to celebrate its 50th anniversary on April 4, 2025, though that date is somewhat arbitrary. The company's early days were anything but organized. They produced a series of history videos in 2009, starting from 1975, but the opening episode didn't mention April 4. Interestingly, the series abruptly ended with 1999, leaving the last decade uncharted. They promised a more in-depth look at the 2000s but never followed through. I guess life got in the way.

Microsoft's Wealth Creation

Microsoft's early years turned many into billionaires, almost-billionaires, and multi-millionaires. If you had invested $1000 in Microsoft's IPO in 1986, it would be worth $5 million today. Even if you bought shares after a 70% rise on the first day, you'd still have $1.4 million. Imagine the wealth accumulated by employees who received stock as part of their compensation and stayed with the company for decades. The numbers are staggering.

But let's not just talk about money. Microsoft's cultural impact and its role in reshaping the global economy through its software are equally significant.

Four Eras of Microsoft

Microsoft's history can be divided into four distinct eras: as a startup and then three as a public company, each led by a different CEO—Bill Gates, Steve Ballmer, and Satya Nadella. It's tempting to attribute the company's successes and failures solely to these leaders, but that's an oversimplification.

1975-1985: Preparing for Takeoff

When Bill Gates and Paul Allen decided to commercialize their Altair BASIC program for the MITS Altair 8080, they were catering to a niche market of enthusiasts. At the time, the Homebrew Computer Club, which included Steve Wozniak and Steve Jobs, was just getting started. By the end of 1975, Micro-Soft (as it was then known) had sales of about $16,000, which is around $96,000 in today's dollars—not bad for two college dropouts and their first employee.

The next few years were tough, but by the end of the decade, Microsoft was generating over $100 million annually. They had moved to Seattle and grown to over 1,000 employees. The real game-changer was the 1981 launch of the IBM PC, which propelled Microsoft's growth. Their early products were programming languages for hobbyists, but the IBM deal was the booster rocket that turned them into a global powerhouse.

Every IBM PC came with PC-DOS, which Microsoft adapted from 86-DOS, a clone of Digital Research's CP/M. The deal with IBM allowed Microsoft to license MS-DOS to other manufacturers, like Compaq and Leading Edge. I remember buying a Leading Edge Model D in 1986, which cost over $2000 but had a 30MB hard drive—that's not a typo. It was a fraction of what an IBM-branded machine would have cost.

During this period, Microsoft also released Word and Excel, which supplemented the revenue from MS-DOS. It's fascinating to note that Microsoft made significant money selling these applications to early Macintosh users. Excel for the Mac came out in 1985, a year before its PC version. I recall a friend raving about it at a backyard dinner party in 1986, calling it "life-changing."

Software prices back then were jaw-dropping. WordPerfect cost $495, Microsoft Word for MS-DOS was $395, Lotus 1-2-3 was $495, and dBase III+ was $695. Even Microsoft Pascal was $195, while Borland's Turbo Pascal was a steal at $69.95. If you wanted the top three applications of the era, you'd be shelling out nearly $1700, which is about $4500 in today's money. It was an exciting time to be alive.

1986-1999: The 'Rocket Ship' Years

Microsoft's IPO in March 1986 was a big deal, raising $61 million (about $163 million today). The demand was enormous, and the company's growth was staggering. By the end of 1987, Bill Gates was a billionaire, thanks to the skyrocketing stock price fueled by MS-DOS and PC-DOS licensing revenue and the growing Microsoft Office suite.

By 1990, Microsoft noted in its annual report that the PC market had grown from 1 million users in 1980 to 50 million in 1990, with over 90% using Microsoft's operating systems and applications. That year, they also founded their corporate consulting group, cementing their status as a preferred provider for big corporations.

While Apple's Macintosh was a modest success, Microsoft was turning Windows into an unstoppable force. Windows 3.1 in 1991 and Windows 95 created cultural events. I wrote about the history of Windows a decade ago, detailing its milestones. Despite the early releases seeming outdated now, they enabled businesses to get work done, which was crucial.

In 1988, Apple sued Microsoft and Hewlett-Packard for copyright infringement, alleging theft of the Macintosh's "look and feel." The case dragged on for six years, with Apple winning only on the trash can icon, leading to the Recycle Bin on Windows PCs.

Internet Explorer, hastily released as an add-on for Windows 95, quickly grew its market share from 0 to 86%, taking it from Netscape Navigator. But Microsoft's size attracted antitrust scrutiny. A 1994 consent decree with the US Department of Justice was followed by a 1998 antitrust lawsuit, impacting the company's growth.

2000-2014: The Lost Years

With Steve Ballmer taking over in 2000, Microsoft's momentum shifted. A colleague who had been a Microsoft partner for over a decade predicted a stagnant decade for the company, and the stock chart proved him right. If you bought Microsoft stock at the start of fiscal year 2000 and held it for 15 years, you'd see a loss.

Even the success of Windows XP was overshadowed by the 9/11 attacks, which subdued its launch party. The next 15 years were filled with challenges. The antitrust lawsuit loss, the scaling back of Longhorn into Windows Vista, and the disastrous Windows 8 all contributed to a tough period.

Microsoft's attempt to crack the mobile market with Windows Mobile and the ill-fated acquisition of Nokia's devices and services business for $7.2 billion in 2013, which resulted in a $7.6 billion writedown, were significant setbacks. It was a challenging end to Ballmer's tenure.

2015-2025: To the Cloud!

By New Year's Day 2015, Satya Nadella had been CEO for less than a year. The company's market cap had grown from $269 billion to $2.9 trillion. While Ballmer deserves credit for promoting Nadella and investing in cloud services like Azure and Microsoft 365, Nadella's focus on cloud and cutting unprofitable businesses has been transformative.

Windows Phone was phased out, Internet Explorer was largely discontinued, and Xbox continues to thrive. Windows and Office are still profitable, but the real growth comes from cloud services. The pandemic boosted the PC business temporarily, but the future seems to lie in the cloud and smartphones.

Microsoft's Future: AI and Beyond

The future of Microsoft seems to be tied to AI, with Copilot being integrated into every product. From Clippy to Cortana, Microsoft's journey with AI assistants has been interesting. Their partnership with OpenAI, which began with a $1 billion investment in 2019 and has grown to over $12 billion, is a significant part of this strategy. They're also investing $80 billion in data centers to support these AI workloads.

These are massive bets, and the future is unpredictable. I asked Microsoft's Copilot for Windows about the company's future, and it offered a cautiously optimistic view, highlighting the company's transformation into a cloud-first entity and its focus on AI, productivity, and gaming.

But as I've learned from watching Microsoft for decades, nothing is certain. The only safe bet is that there are no safe bets in technology.