New Business Venture Opportunity and Analysis
Case In Point: Bill Gates, Paul Allen and Microsoft
In 1973, after graduating from Lakeside High School in Seattle, Bill Gates went on to Harvard Business School. It was at Lakeside where Gates and his eighth-grade buddy, Paul Allen discovered computing and developed an interest in writing software. In January 1975 Allen came to Harvard to share with Gates the latest issue of Popular Electronics magazine and shouted, “It’s about to begin!” Featured on the cover was the Altair 8800.
A company based in Albuquerque, NM called MITS (Micro Instrumentation Telemetry Systems) introduced a $500 computer kit called the Altair 8800 that was built around the Intel 8080 microprocessor. Edward Roberts, Altair’s designer said, “The idea that you could have your own computer and do whatever you wanted to with it, whenever you wanted to, was fantastic.”
In his junior year, Gates then 19, left Harvard for Albuquerque to devote his energies to Micro-soft, a company he had begun in 1975 with Allen to sell software they were creating at that time. By the end of the year the start-up had three employees and $16,000 in revenues. By 1980 Microsoft had dropped the hyphen, moved to Seattle and was a 40 person plus venture earning about $7.5 million.
In the fall of 1981, IBM introduced its personal computer with Microsoft’s 16-bit operating system, MS-DOS 1.0. In 1985 Microsoft’s revenues were just over $140 million. The next year they went public at $21 per share. The Office Suite of software was introduced in 1989 and in 1995 Microsoft launched Windows 95. By 2002 the company had $28.4 billion in revenues and just over 50,500 employees in 78 countries and regions around the world. Leveraging the commoditization of the PC and Intel chips, Gates and Allen saw an opportunity in a time of disarray.
In his book The Road Ahead Gates writes, “People often ask me to explain Microsoft’s success, they want to know the secret. From the beginning, we set off down a road that was headed in the right direction.”