Microsoft's 1986 IPO
dfarq.homeip.net
dfarq.homeip.net
I got involved in IT as a profession in 1995 and even then Lotus 1-2-3 and Wordperfect were going pretty well, so the idea stated in the article that :-
"a monopoly in operating systems and office suites was inevitable before 1990 was over."
seems a little overdone.
My memory of what really tipped it for Microsoft in the office suite market (at least in the UK) was that they started giving away a full office suite with every new PC. So even though competitors might have better functionality, it was a tough sell to get past the price of "free".
Definitely in the SMEs I worked in this was the reason that Office became the defacto option for office applications.
IMHO, the big boost for Microsoft was when they adopted the Lotus 1-2-3 and Wordperfect file formats. Now there was a product that costs less (free, with a new PC), and was compatible with all the existing docs/data. Game over.
https://m.youtube.com/watch?v=Dv0PxINy2ds
People lined up for it.
Add that to the Microsoft first mover advantage and it was doomed to fail.
Win95 worked well on such a machine, and even worked tolerably on machines with 4 MB RAM, which were still around. It lacked the nice true multitasking, because it was basically running on a DOS extender, like most large DOS games. But you could run win32 programs, win16 programs, DOS programs, and have TCP/IP and thus access the Internet all at the same time. It was a killer combination. Also, it had a really thought-out GUI, a big upgrade compared to Win 3.1. (Far from the coolness of OS/2 WPS, but...)
The desktop really reminded me of HP/Apollo's VUE (which later got turned into CDE when Sun and IBM joined the project). Especially due to the large "dock".
Did it run DOOM and Quake? I think that's what decided what OS was gonna succeed.
Back then, pretty much everybody in my country just pirated the software, so the cost was not a consideration at all.
I only wish it were not so buggy when handling large documents.
Do you mean Microsoft Works[1]? Or were they more commonly shipping the full version of MS Office with new PCs in the UK?
I almost forgot about Works.
That was the word processor for those of us without a lot of money in those days.
The company I worked for at the time were pretty cost conscious so there was no way they would buy additional Wordperfect or Lotus 1-2-3 licenses on top of that, even though some of the staff much preferred those products.
AppleWorks came out in 1984 for the Apple //e. Microsoft Office came out for the Mac in 1989.
Isolating the definiton of "PC" to the IBM lineage makes it a lot easier to contextualize the historical development of home computing. Example: my TRS-80 is a microcomputer, but it is not a PC. This is a sentence that younger generations can grok. If I say "my TRS-80 is a PC but not an IBM PC-compatible" their eyes glaze over.
The definition of PC is IBM PC. That's why Visual Workstation is not a PC, Apollo DN3500 was not a PC, etc.
In common parlance it has come to mean “a computer running a Microsoft operating system”. Most people these days would consider an Arm based computer running Windows a “PC”.
Wordperfect and Word 5 were still close to tied.
Word 6.0 is where Microsoft finally pulled away.
The 90's were exciting times.
So many epic battles playing out on the covers of PC Magazine and other computing magazines of the day.
Borland Delphi vs Visual Basic
Word vs Wordperfect
Windows vs OS/2
Lotus vs Excel
Explorer vs Netscape
Oracle vs SQL Server
And many non-Microsoft battles.
Microsoft wasn't the clear winner in most battles until the mid-90s.
The current AI wars seem to be somewhat similar.
Until Windows 95, many people were already using Windows, but never exclusively, all serious work was still done using MS-DOS programs and Windows was regarded more as a toy. This has changed with Windows 95, which was the first Windows version that you could use for doing everything you needed on the computer.
The advantage of Microsoft was that the other companies were not able to keep up with it in issuing new versions of their programs for Windows. The Windows versions of Lotus 1-2-3 and Wordperfect have never been as good as their MS-DOS ancestors.
To achieve this, Microsoft has not hesitated to cheat, i.e. the MS Office developers were aware of the next Windows API versions a long time before competitors, so they had much more time to update their programs and the MS Office suite also made frequent use of undocumented Windows APIs that competitors could not use, unless they discovered them by reverse engineering.
This retrocomputing stackexchange answer doesn't list any - https://retrocomputing.stackexchange.com/questions/25955/did...
Keep in mind also that the Windows kernel system calls were never accessible directly, like in Linux or the like, but as an external developer you were at the mercy of the user libraries provided by Microsoft. If the documented user libraries did not cover all the features actually implemented by the operating system, there was no way to use them without reverse engineering.
This is now pretty much ancient history and later such APIs have been documented by Microsoft, e.g. in the "Windows Protocols Specifications", mostly as a consequence of lawsuits and investigations by the European Union and FTC.
However when that happened, around 2000, the damage had already been done and the competition had been eliminated.
The dominance of Microsoft in office suites that has been achieved during the transition from MS-DOS to Windows 95, than Windows 98, has succeeded in good part because of the great increase in the number of computer users during this time.
For newbies, the MS Office suite took very well advantage of the new features enabled by a GUI and MS Office was very easy to use, while the Windows versions of the older MS-DOS programs, like Lotus 1-2-3 and WordPerfect were much less polished than MS Office, while simultaneously losing their previous keyboard-based user interface, which for experienced users had been much faster at accomplishing any task than any Microsoft GUI.
So the MS Office GUI alternatives were neither easier to use nor faster, therefore not even their former users had any reason to stick with them, while all the newbies were naturally attracted to MS Office.
Moreover, starting with Windows 95, Microsoft has convinced somehow all the hardware peripheral add-on-cards to stop documenting their products, but instead of that deliver them together with only Windows device drivers.
Since that time, the non-Microsoft operating systems had to rely mostly on reverse-engineering for being able to run on modern hardware. Many years later, the situation has improved somewhat, but only for certain classes of peripherals, like network interface cards, where the vendors typically also provide Linux drivers now.
This has hit also the old MS-DOS programs like Lotus 1-2-3, which had tons of drivers for various kinds of now obsolete Super-VGA video cards, so on new computers with Windows 95 or later they had to run in some less performant video mode that was supported directly or through emulation on modern graphic cards, unlike the Windows programs that could take full advantage of the hardware. This has contributed to the obsolescence of the better MS-DOS programs, because even if Windows 95 could run them in Virtual 8086 mode they did not work as well as on the older computers for which the MS-DOS programs had drivers that took advantage of enhanced features.
Consistency in UX and integration between app in the office suite were other touted advantages.
While the article touches on it here, Microsoft was able to avoid venture capital because it was highly profitable from its very early days. They turned their first profit in 1975, the same year they were founded.
It seems like more companies spend longer amounts of time being unprofitable and growing. How much of that is a zero interest rate phenomenon or the new normal?
Bill Gates had access to advanced technologies in high school only 0.001% of other students would have.
Bill Gates had direct access to people only 0.001% of his peers would(and I’m no doubt being generous to Bill Gates here).
Bill Gates was a smart kid no doubt, but his environment accounts for most of his success.
They cold-called the New Mexico company to push their non-existent BASIC interpreter. Bill took a leave of absence from Harvard and the microcomputer software business took off with the help of Harvard's computer resources.
see https://archive.org/details/197501PopularElectronics/page/n2...
You don't sink the shots that you never shoot - Bill Gates saw an opportunity and took a big shot from downtown.
But that was in 1975. He's made more shots than not since then.
It's easy to "take a big shot" when you have all the support in the world.
Environment matters a tremendous amount. In common scientific terms, there is almost nothing that is not environment. DNA, development, parenting, personality can all be framed as environmentally derived.
Sometimes these factors come together to give people huge advantages, both in situation and support, but also talent, knowledge, and personality.
I think the lesson we should take away from this is the importance of good environmental influences in producing good outcomes.
I wouldn’t argue that Bill Gates was a good outcome.
The world needs more Bill Joys.
- Microsoft IPOed in 11years, profitable and at a ~$800M valuation. They hit a ~$1T valuation in 2000. During the 90s, their stock roughly doubled each year, for a 1000x growth.
- Amazon IPOed in ~3 years, unprofitable and at ~$300M valuation. Their stock has 2200x since then.
- Google IPOed in ~6 years, proftiable and at a $25B valuation. Their stock has ~80x since then.
- Facebook IPOed in ~8 years, profitable and at $100B valuation. Their stock has 20x since then.
I think the ZIRP era led many companies to avoid going public, either because of access to easy money or because their financial didn't need to be disciplined enough. The high levels of pre-IPO funding also has led to many/most of them underperforming in the public markets.
https://a16z.com/where-have-all-the-ipos-gone/
Regulatory compliance like Sarbanes Oxley is another huge factor. And VC's having large capital pools make it easy for companies to stay private vastly longer without needing to raise funding from the public.
It's very unfortunate for the public markets, as basic only VC's and PE get access to high growth young companies. Now most of the growth is squeezed out by the VC's and the public gets just the tail end of mature companies.
A lack of IPOs makes the startup life much less attractive than sitting around at a post-IPO company, which also means a harder time growing the startups the VCs are investing in
You would be surprised how many true believers there are out there
Harder to charge 2 & 20 on public equities.
I guess it also likely not helpful to the VCs to have the public market having real opinions about the valuation that the fees are presumably based on, unless the company is a clear runaway success
Microsoft reached a valuation of $1 trillion on April 25, 2019.
I might have confused it with some "inflation adjusted market cap" I read somewhere.
I am unable to resolve this sentence with the list that follows that has Microsoft IPOing significantly later in their life than the three others listed. Microsoft IPO'ed later compared to Amazon, Google, and Facebook.
27 years later, stock price hit its high of $260.10 in 2024 Dec.
2167x.
That's a mighty impressive run by Steve Jobs and Tim Cook.
Of course history went another way but it was pretty close. And really, Steve Jobs wouldn't have been the leader he was without NeXT and Pixar. It was unfair how he got fired by Pepsi guy (Edit: That was John Sculley, I had forgotten his name) but he wasn't ready to lead Apple the size it was at that time. Things just came together at just the right moment.
iMac and iPod were good products but iPod was stumbling along as a Mac-only product. Letting PC users use iPods opened the cash floodgates and let the iPhone get developed.
the SEC's class dividing rules were ignorable when companies were IPOing at low marketcaps
people don't want to only buy companies after all the growth is seemingly done at 50bn-100bn+ marketcaps, while not having access to private markets or low liquidity in private markets
so they pursue things outside of the SEC's protection
VCs in the Microsoft IPO era would proudly display a tombstone for a $50mm IPO raise. It was a very different time.
Google was the first tech company to really test the bounds and power of Investment banks in the IPO process — they went with some sort of auction type mechanism (if I recall correctly), intended to keep bankers from making “too much” on the IPO, and were roundly snubbed by the sell side arms of those same bankers, resulting in a very low flotation. Which worked out fine for them.
By the time Zuck IPOed, he had enough power and we had enough tech history that he was able to run a MAJOR IPO and retain complete control of the company. And, from a financial perspective, very well deserved.
In each of these four eras, the perceived (and actual I guess) size of the addressable market for a tech company was roughly an order of magnitude larger than the prior, and combined with wealthier VCs from prior rounds, and more pattern recognition about business models, we see more of the value being captured early, out of the public markets.
These days that's all gone out the window, but you can see why back then companies that did go public were more likely to succeed
It was Netscape's IPO that did that.
Microsoft and Intel's stocks were a big deal in the 90's. But they were solid businesses.
To my memory, the idea of getting rich overnight simply by being tied to the Internet started with the Netscape IPO.
Another major moment marking a ‘new market dynamic’ was Microsoft buying Hotmail in 1997 for roughly $400mm? Pretty much unheard of pricing for a web company.
Microsoft’s success was as much to do with them being a programming languages company first. DOS, Windows 3.1, and even Windows 95 shipped with an interpreter and compiler for their BASIC and C, respectively. This empowered developers to use and write code for the OS out-of-the-box.
But neither Windows nor DOS shipped with a C compiler; it's not a Unix. DOS shipped with an IDE for BASIC, and compilers were available but not free. The more accessible option was Turbo Pascal (and then Delphi 1), Visual Basic was also popular but more costly.
GCC appeared in 1987 but only worked acceptably under Unix-like OSes.
Also qbasic was not the same as quickbasic, and it had a limit on the LOC and other limitations.
I do not know about earlier versions of Windows.
It was more of a toy.
> If you’re thinking of trying your hand at being the next Bill Gates, keep that in mind.
Keep what in mind? Sure so try to build a company now w/o VC money and potentially complete with others who have taken that money? Microsoft obviously had an advantage of a completely new industry AND literaly very little VC money (and in vastly tighter amounts) funding competitors.
> [summarized] Amazon didn’t turn a profit until 2003
That was 100% by design. Why make profits when you can grow? Profits are taxed. Reinvesting in growth is generally not taxed, and you are rewarded by the market as it projects out how long your growth could continue and reflects that in your stock price.
To be fair, the idea that you might buy a stock for something other than its likely dividend and that this wouldn’t just be a momentum trade is an idea that was finally cemented somewhere in the dotcom 1/dotcom 2 era. Still.
> The reason Microsoft had to go public in 1986 was because Bill Gates had been using stock to attract talent. Microsoft projected that by sometime in 1987, they would have 500 shareholders, which would require Microsoft to register with the Securities and Exchange Commission, effectively turning them into a publicly traded company, but without the benefits of going public in the conventional way.
> Backed into this corner, Gates agreed in late 1985 to pursue an IPO.
The limit has been raised to 2,000 shareholders. The company isn't required to go public, but the company does have to file its financial data with the SEC.