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Microsoft Corporation is the largest private-sector computer software producer in the world. Currently headquartered in Redmond, Washington (a suburb of Seattle), the company was founded in 1975 by Bill Gates and Paul Allen to develop and sell BASIC interpreters under the company name Micro-soft. Original headquarters were in Albuquerque, New Mexico. Steve Ballmer is the current Chief Executive Officer of the company (2003). Its official site is http://www.microsoft.com/.

Microsoft is notable for a number of reasons:

 • it is the largest software company in the world
 • it is one of the most dramatic examples of network externality in economics
 • it exercises a de-facto monopoly in PC operating systems and office software
 • it has made its founders among the richest men in the world

History of Microsoft
Formed in 1975, Microsoft (an acronym for MICROcomputer SOFTware) started to sell their BASIC interpreter at a time when hobbyists, who also wrote small BASIC interpreters, freely gave away the source code of their creations. However, because they were one of the few commercial vendors of BASIC interpreters, many home computer manufacturers chose Microsoft BASIC for their systems. As the popularity of Microsoft's BASIC grew, manufacturers adopted Microsoft BASIC's syntax and other features to maintain compatibility with existing Microsoft BASIC implementations. Because of this feedback loop, Microsoft BASIC became a de facto standard, and the company cornered the market. Later, they tried (unsuccessfully) to extend their grip on the home computer market by designing the MSX home computer standard.

In 1983, leveraging a prior contract with IBM to produce the IBM PC's BASIC interpreter, Microsoft contracted with IBM to provide an operating system for that machine as well. Microsoft then bought the rights to use Tim Patterson's QDOS (Quick and Dirty Operating System) on the PC and released it via IBM as Microsoft DOS. MS-DOS was very successful.

Software running on PC hardware was not necessarily technically better than the mainframe software that it replaced, but it had two advantages that mainframe software could not beat: it offered more freedom to the end-user, at lower cost. Microsoft's success rode on the PC boom.

Microsoft developed a wide variety of software products including:

 • operating systems
 • compilers and interpreters for programming languages
 • word processors, spreadsheets and other office software
 • Internet applications, e.g. a web browser and email client

Some of these products were successful, and some were not. A pattern emerged: although early revisions of Microsoft software were often seen as buggy, feature-poor, and inferior to their competitors, later revisions improved rapidly and the software grew in popularity. By the turn of the millennium, many of Microsoft's software products dominated the market in their respective categories.

Microsoft has devoted huge amounts of effort to marketing and usability engineering in developing their products, as well as to the integration of their software products with one another in an attempt to create a seamless and consistent computing environment for the user.

Microsoft has attempted to leverage the powerful Windows brand into many other markets, with products such as Windows CE for PDAs and their "Windows powered" Smartphone products.

Microsoft produces a wide range of software products.

Microsoft's current signature products are the various graphical operating systems produced under the name Windows. There have been many versions, the most current being Windows XP. Windows comes pre-installed on almost all IBM compatible personal computers sold.

The company's older flagship operating system was MS-DOS, which used a command line interface. Early versions of Windows required the use of MS-DOS code. This requirement was eliminated in Windows NT and its descendants, which include Windows 2000 and Windows XP.

Microsoft Office is the company's line of office software. It includes Word (a word processor), Excel (a spreadsheet), and PowerPoint (presentation software). Microsoft also produces Microsoft Office for Apple Macintosh computers.

Internet Explorer is the company's web browser. It is the most widely used web browser in the world, and has been included as the default browser with all versions of Windows since Windows 95. It is also available for the Apple Macintosh. Microsoft invested $400 million in the company in 1997 to make Internet Expolorer the default web browser on every Apple Macintosh. There is the possibility of this changing with Apple Computer's new 'Safari' browser.

Network Services
In the mid-1990s, Microsoft began to expand its product line into the networked computer world. It launched its online service MSN (Microsoft Network) on August 24, 1995, which was a direct competitor to AOL. MSN became an umbrella service for all of Microsoft's online services.

In 1996, Microsoft and United States broadcasting company NBC created MSNBC, a combined 24-hour news television channel and online news service.

At the end of 1997, Microsoft acquired Hotmail, the original and most popular webmail service. It was rebranded MSN Hotmail and was used as a platform to boost Passport, a universal login service.

MSN Messenger, an instant messaging client, was introduced in 1999 to compete with the popular AOL Instant Messenger (AIM).

By 2002, several of Microsoft's networking- and Internet-related products had become the subject of intense criticism following several high-profile security lapses. Malicious programmers increasingly exploited weaknesses in Microsoft software by creating and distributing worms, viruses, and Trojan horses designed to spread across the Internet and waste computing resources or destroy data. These exploits frequently targeted Microsoft's Outlook and Outlook Express e-mail programs, Internet Information Server (IIS) Web server, and SQL database server software. Microsoft contends that its dominant position in several Internet-related software categories naturally subjects the company's products to more attacks, because the products themselves are so widespread. Critics counter that these attacks also target Microsoft products that do not hold commanding market shares, and suggest that this is because Microsoft products in general are structurally less secure than those of the company's competitors.

In several cases, Microsoft's practice of designing and configuring software to make it easier to use and less intimidating to novices has facilitated the spread of these viruses and worms. For example, Windows operating systems released since 1995 hide file extensions by default, which can help malicious programmers trick unwitting e-mail recipients into opening dangerous file attachments that masquerade as harmless files with innocuous extensions. (Recent versions of Outlook and Outlook Express disable dangerous file types upon receipt, so that users cannot open them.) Critics charge that this focus on usability and automation has come at the expense of important security considerations.

In January 2002, Gates announced the Trustworthy Computing initiative, which he described as a long-term, companywide initiative to find and fix security and privacy vulnerabilities in all of Microsoft's products. The initiative prompted the company to reevaluate and redesign several of its practices and processes, and has significantly delayed the release of Windows Server 2003, the successor to the Windows 2000 Server family of operating systems. Reaction to the Trustworthy Computing initiative has been mixed, with observers lauding Microsoft's increased focus on security but charging that the company still has a lot of work to do.

Microsoft vs. Free Software
Microsoft acknowledges that one major potential competitor is free software, as exemplified by Linux. Microsoft has targeted free software and open source software with its Embrace, extend and extinguish strategy as revealed in the Halloween documents.

In establishing its monopoly over desktop computing, Microsoft has risked losing the advantages of low cost and greater freedom that drove the PC boom and created its success. It is hard to see how Microsoft can compete with free software on purchase price alone. Many users who believe that Microsoft does not value their freedom of choice have found the prospect of free and open standards offered by free software.

Traditional Microsoft tactics of buying the competition, or of spreading FUD about the longevity of competing products, have not been effective against free software, where the product cannot be bought and controlled, and when software can outlive the companies that made it.

Microsoft CEO Steve Ballmer has stated that Linux is a "tough competitive force. . . . It's non-traditional, it's free and it's cheap. We have to educate people why what they pay for [our offerings] is more than offset by the value we deliver. We used to be the cheap guys. We were cheaper than Novell, cheaper than Oracle. We can't do that with this one." (Reported in CRN.com, June 17, 2002).

Ballmer addressed Fusion 2002, a Microsoft partner conference, saying: "We have prided ourselves on always being the cheapest guy on the block--we were going to be higher volume and lower priced than anybody else out there, whether it was Novell, Lotus or anybody else. One issue we have now, a unique competitor, is Linux. We haven't figured out how to be lower priced than Linux. For us as a company, we're going through a whole new world of thinking." (Reported in VARbusiness, July 15 2002).

Microsoft has reacted to the sale of low-cost PCs based on the Linux operating system by stating that it will not reduce the price of its Windows operating system. Some observers have stated that this refusal to compete on price is characteristic monopoly behavior.

External Links
Microsoft web site: http://www.microsoft.com/
Microsoft Security Advisor: http://www.microsoft.com/security
Microsoft Network (MSN): http://www.msn.com/
Microsoft Xbox: http://www.xbox.com/

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Microsoft".

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