Microsoft

A Quick Look at the History of Microsoft

From Altair BASIC to Microsoft

Microsoft’s history starts before Windows, Office, or even the IBM PC. In 1975, Bill Gates and Paul Allen developed BASIC for the Altair 8800 and reached a licensing agreement with MITS. A July 1975 letter used the name “Micro-soft,” giving the early software venture the identity that would later become Microsoft.

The business was still taking shape legally. Microsoft registered its trade name in New Mexico in November 1976, Gates and Allen signed a formal partnership agreement in February 1977, and the operation moved from Albuquerque to Bellevue, Washington, at the start of 1979.

Those dates matter because “Microsoft was founded in 1975” describes the company’s business origin, not the date the present corporation came into legal existence. Microsoft, Inc. was incorporated in Washington on June 25, 1981.

The IBM PC Deal Changes the Center of Gravity

The turning point that moved Microsoft beyond programming languages came with the IBM PC. Microsoft did not create the operating system from scratch. It licensed 86-DOS from Seattle Computer Products in 1980, later purchased the rights, adapted the software, and supplied operating-system software for IBM’s new personal computer.

The structure of the arrangement mattered. Microsoft retained rights that allowed it to license its DOS technology to other computer makers. That gave the company a way to participate in the wider IBM-compatible PC market instead of tying the operating system to one hardware customer.

IBM introduced the PC with Microsoft operating-system software in August 1981. Over the next several years, Microsoft also developed Word and Windows, extending the company from operating systems into applications and a graphical environment for DOS.

Microsoft completed its initial public offering on March 13, 1986, at $21 per share. Microsoft’s historical records say the offering raised about $61 million. In 1989, the first Microsoft Office appeared for Macintosh, grouping major productivity applications into a suite.

Windows, Office, and the Internet Pivot

Windows 3.0 arrived in May 1990, followed by Office for Windows later that year. Microsoft’s fiscal 1990 sales exceeded $1 billion, showing how far the company had grown from its programming-language beginnings.

The next platform shift was the internet. In a May 26, 1995 memo, Gates wrote, “I assign the Internet the highest level of importance.” He also identified Netscape as a new competitive threat. Microsoft released Windows 95 that August and increased its internet and browser push.

The episode illustrates a pattern that would repeat later in Microsoft’s history: the company had to respond when a new layer of computing threatened to reduce the importance of an existing platform. The response, however, also became part of a much larger legal story.

Scale Brings Antitrust Scrutiny

In 1998, the U.S. Department of Justice and state plaintiffs sued Microsoft. The appellate process upheld the core conclusion that Microsoft had unlawfully maintained its monopoly in Intel-compatible PC operating systems through exclusionary conduct aimed at middleware threats. A final judgment took effect in 2002 and imposed conduct and disclosure remedies. The judgment expired in 2011.

Microsoft also faced competition scrutiny in Europe. In 2007, the Court of First Instance substantially upheld the main substance of the European Commission’s Microsoft competition decision, extending the legal pressure beyond the U.S. case.

These cases are an important counterweight to a simple growth story. Microsoft’s platform position created scale and a large software ecosystem, but regulators and courts also found that parts of its conduct crossed competition-law boundaries.

Leadership was changing during this period as well. Steve Ballmer became CEO in January 2000 while Gates moved to the role of chief software architect. Microsoft launched Xbox in 2001, establishing a long-term position in console gaming. Gates later transitioned out of day-to-day work in July 2008 while remaining chairman and an adviser.

Cloud and Subscription Foundations Take Shape

Microsoft’s cloud transition did not begin with Satya Nadella becoming CEO. The foundations were already being laid during the Ballmer era.

Microsoft unveiled Windows Azure in October 2008, and Azure became commercially available in 2010. In June 2011, the company launched Office 365 globally, combining cloud-hosted productivity and communications services with subscription pricing.

Together, Azure and Office 365 marked changes in both technology and monetization. Microsoft was building cloud infrastructure while also moving an important part of its productivity business away from one-time packaged software and toward recurring services.

Azure and Office 365 also show that Microsoft could build recurring cloud businesses alongside Windows and Office rather than waiting for its older desktop franchises to disappear. The transition developed in parallel with the legacy business instead of replacing it all at once.

Nadella’s Appointment, Cloud Momentum, and a Mobile Setback

Microsoft’s board appointed Satya Nadella CEO on February 4, 2014. He had previously led the company’s Cloud and Enterprise group. His appointment became a major leadership turning point, but many of the cloud foundations he would build on were already in place through Azure and Office 365.

The same period also exposed a significant strategic failure. Microsoft completed its acquisition of substantially all of Nokia’s Devices and Services business in April 2014 as it tried to strengthen its phone-hardware position.

In July 2015, Microsoft announced a phone-hardware restructuring affecting up to 7,800 positions and an approximately $7.6 billion impairment related to the acquired Nokia assets, along with restructuring charges. The write-down was a measurable sign that the acquired phone business had not delivered the value expected when the transaction was made.

The impairment makes the setback clear, but it does not support a single-cause explanation for Microsoft’s broader mobile position. It does show that buying a large hardware operation was not enough, by itself, to establish a durable mobile platform.

LinkedIn and GitHub Widen Microsoft’s Platform Reach

As Microsoft broadened beyond a Windows-centered strategy, it expanded into businesses that connected it more deeply with professionals and software developers.

In 2016, Microsoft agreed to acquire LinkedIn for an announced transaction value of $26.2 billion and completed the acquisition that December. Microsoft said LinkedIn would retain its brand, culture, and independence. The deal added a large professional network and business-services platform adjacent to Microsoft’s productivity and enterprise software.

Two years later, Microsoft completed its acquisition of GitHub. The company said GitHub would keep its developer-first ethos and operate as an open platform. GitHub connected Microsoft more directly with developers working across operating systems and cloud platforms, not only within Windows.

That broader developer orientation fit the company’s growing emphasis on cloud services and cross-platform software. It was another example of Microsoft moving its platform position to a new layer rather than relying only on the products that had defined the previous era.

OpenAI and Activision Expand the Next Chapter

Microsoft and OpenAI announced a new strategic relationship in July 2019. Microsoft committed a $1 billion investment, and the companies described the arrangement at the time as an exclusive computing partnership centered on Azure AI supercomputing.

In January 2023, Microsoft announced a new multiyear, multibillion-dollar phase of the partnership. The company said it would expand AI supercomputing and deploy OpenAI models across consumer and enterprise products.

The relationship later changed. On April 27, 2026, Microsoft and OpenAI announced revised terms. Microsoft remained a major OpenAI shareholder and the primary cloud partner, while its license to OpenAI intellectual property became non-exclusive through 2032 and OpenAI gained more freedom to serve customers across other clouds.

By 2026, the relationship had moved well beyond its original structure. What began as an exclusive computing arrangement had become a broader partnership with a non-exclusive Microsoft IP license and greater OpenAI cloud flexibility.

Microsoft was also expanding its gaming business. It announced a proposed acquisition of Activision Blizzard in January 2022, valuing the transaction at $68.7 billion including Activision Blizzard’s net cash. After extensive regulatory review, Microsoft restructured the UK transaction so certain cloud-streaming rights would go to Ubisoft. The UK Competition and Markets Authority cleared the restructured transaction, and Microsoft completed the acquisition on October 13, 2023.

The U.S. Federal Trade Commission also challenged the deal, but its competitive-harm claims were allegations rather than final findings that the completed transaction violated antitrust law. The FTC closed its administrative matter in May 2025.

Microsoft’s 2026 Structure Reflects an AI-Centered Operating Model

By fiscal 2026, Microsoft reported revenue of $331.839 billion and approximately 223,000 employees. The company was still reporting results through Productivity and Business Processes, Intelligent Cloud, and More Personal Computing for that fiscal year.

On September 2, 2026, Microsoft announced a different reporting structure for fiscal 2027. The company would move to two reportable segments: Agents and Infra, and Devices and Consumer.

Agents and Infra brings together Microsoft Cloud, productivity and server licensing, and consulting and support. Devices and Consumer includes Windows, Xbox, and advertising. The change is a reporting and management reorganization of businesses that largely already existed, not the sudden creation of two new operations.

Microsoft tied the change directly to its view of the AI transition. Nadella said, “AI represents a profound shift in both technology and business.” Management’s explanation was that AI was changing what Microsoft builds and how it operates, while blurring historical product boundaries.

That makes the 2026 reorganization a useful current endpoint for the company’s history. Microsoft began by selling programming tools for a new generation of microcomputers. It then built its position in operating systems, desktop applications, enterprise software, cloud infrastructure, developer platforms, gaming, and AI. The specific products changed, but a recurring theme remained: Microsoft repeatedly tried to move its platform position to the next layer of computing.

That pattern did not produce uninterrupted success. Antitrust findings placed limits on how Microsoft used its platform position, while the Nokia impairment marked a costly mobile setback. At the same time, Azure and subscriptions showed that the company could build new business models alongside its legacy base.

As of the September 11, 2026 research cutoff, the FY27 segment design was Microsoft’s latest structural change. It shows how management currently sees the business, without establishing which AI products, partnerships, or investments will ultimately succeed.

Timeline

This timeline highlights the major verified milestones that changed Microsoft’s direction, structure, or business model.

1975

Microsoft’s commercial origin takes shape around Altair BASIC, and the “Micro-soft” name appears in a July letter.

November 1976

Microsoft registers its trade name in New Mexico.

February 3, 1977

Gates and Allen execute a formal Microsoft partnership agreement.

January 1979

Microsoft moves from Albuquerque to Bellevue, Washington.

1980–1981

Microsoft licenses and later purchases 86-DOS from Seattle Computer Products, adapts it for the IBM PC, and retains rights that support licensing to other computer makers.

June 25, 1981

Microsoft, Inc. is incorporated in Washington.

August 1981

IBM launches the PC with Microsoft operating-system software.

March 13, 1986

Microsoft completes its initial public offering at $21 per share.

1989

The first Microsoft Office is released for Macintosh.

1990

Windows 3.0 and Office for Windows are released.

May 26, 1995

Bill Gates issues the “Internet Tidal Wave” memo, elevating the internet to Microsoft’s highest strategic importance.

August 1995

Microsoft launches Windows 95.

1998

The U.S. Department of Justice and state plaintiffs sue Microsoft in the major antitrust case.

January 2000

Steve Ballmer becomes Microsoft CEO.

2001

Microsoft launches Xbox.

2002

The U.S. antitrust final judgment takes effect.

March 2004

The European Commission issues its Microsoft competition decision.

July 2008

Bill Gates leaves his day-to-day role at Microsoft.

October 2008

Microsoft unveils Windows Azure.

2010

Azure becomes commercially available.

June 2011

Microsoft launches Office 365 globally.

February 4, 2014

Satya Nadella becomes CEO.

April 2014

Microsoft completes its acquisition of substantially all of Nokia’s Devices and Services business.

July 2015

Microsoft announces a phone-hardware restructuring and an approximately $7.6 billion impairment related to the acquired Nokia assets.

December 2016

Microsoft completes its acquisition of LinkedIn.

October 2018

Microsoft completes its acquisition of GitHub.

July 2019

Microsoft and OpenAI announce a $1 billion investment and an exclusive computing partnership.

January 2023

Microsoft announces a new multiyear, multibillion-dollar phase of its OpenAI partnership.

October 13, 2023

Microsoft completes its acquisition of Activision Blizzard after restructuring the UK transaction.

April 27, 2026

Microsoft and OpenAI revise their partnership terms. Microsoft remains the primary cloud partner, while its OpenAI IP license becomes non-exclusive.

June 30, 2026

Microsoft closes fiscal 2026 with $331.839 billion in revenue.

September 2, 2026

Microsoft announces a fiscal 2027 reporting structure built around Agents and Infra, and Devices and Consumer.

FAQs

Question: Did Microsoft create MS-DOS entirely from scratch?

Answer: No. Microsoft licensed 86-DOS from Seattle Computer Products, later purchased the rights, adapted it for the IBM PC, and retained rights that supported licensing to other PC makers.

Question: Does Microsoft own OpenAI?

Answer: No. OpenAI is not a Microsoft subsidiary. As of the April 2026 revised terms, Microsoft remained a major OpenAI shareholder and primary cloud partner, with a non-exclusive license to OpenAI intellectual property through 2032.

Question: Why was Microsoft able to complete the Activision Blizzard deal after regulators challenged it?

Answer: In the UK, Microsoft restructured the transaction so certain cloud-streaming rights would go to Ubisoft. The UK Competition and Markets Authority then cleared the restructured deal. The U.S. Federal Trade Commission separately challenged the transaction, but its administrative matter was later closed in 2025.

Interviews & Firsthand Resources

The Roots of Microsoft — Bill Gates and Paul Allen

This Computer History Museum resource gives Gates and Allen’s firsthand recollections of Microsoft’s origins and the early personal-computer environment. It is useful for readers who want founder perspective beyond the condensed company chronology.

View the resource

Idea Man — Paul Allen

This Computer History Museum event features Paul Allen reflecting on the early partnership and Microsoft’s beginnings. It offers a second founder perspective on the company’s formative period.

View the resource

Microsoft at 50 — Gates, Ballmer, and Nadella

This 2025 Microsoft retrospective brings together Bill Gates, Steve Ballmer, and Satya Nadella. It gives readers firsthand leadership perspectives on Microsoft’s culture, major turning points, and AI-era direction, while remaining a company-produced retrospective rather than an independent history.

View the resource

Sources

• U.S. Securities and Exchange Commission / Microsoft: Microsoft 2026 Form 10-K, FY27 Segments and Investor Metrics
• Microsoft Learn: The History of Microsoft — 1975, 1976, 1977, 1981, 1986, 1989, 1990
• Computer History Museum: Microsoft MS-DOS Early Source Code
• Microsoft News Center / Azure: Facts About Microsoft, Bill Gates 2008 Transition, Windows Azure Announcement, Azure Overview and History, Office 365 Global Launch, Satya Nadella Named CEO, Phone Hardware Restructuring, LinkedIn Acquisition, 2019 OpenAI Partnership
• Microsoft Blog: GitHub Acquisition Completed, Microsoft and OpenAI Extend Partnership, 2026 Microsoft-OpenAI Partnership Terms, Activision Blizzard Acquisition Completed
• U.S. Department of Justice: United States v. Microsoft — Proposed Findings of Fact, Microsoft Antitrust Final Judgment Retrospective
• EUR-Lex: Microsoft Corp. v Commission Judgment
• UK Competition and Markets Authority / U.S. Federal Trade Commission: Microsoft / Activision Blizzard Merger Inquiry, Microsoft / Activision Blizzard Matter
• Microsoft News Center / Blog: Activision Blizzard Acquisition Announcement