TechStuff listener Rob asked "What has Microsoft been up to since you recorded The Microsoft Story Part 2 in 2013?" We find out.
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Get in touch with technology with tech Stuff from how stuff works dot com. Hey there, and welcome to tech Stuff. I'm your host, Jonathan Strickland. I'm an executive producer with How Stuff Works, and I love all things tech, and today we're going to revisit an old friend of ours. You see tech Stuff listener Rob. That's that's not the old friend. He's just he's a listener. He's a friend, not an old friend. He asked me a while back if I could do a follow up episode or two about Microsoft, which of course is the world's largest software company. The last episode I recorded on tech Stuff about Microsoft specifically was The Microsoft Story, Part two, and that published back on July tenth, two thirteen. That was back when Lauren Vogelbaum was co host of tech Stuff, and the show has changed a lot since then, as has the company Microsoft. Today, I tend to go into much greater detail, uh whenever I do a story about a company than I used to do back in those days. So rather than just pick up where I would have left off back in I thought it would be valuable to give a quick overview of the company leading up to and then pick up in real detail from there. So I'm gonna give kind of a high level look at the history of Microsoft. It's not the same level of UH coverage I would give if I were doing this all for the first time, but it's more than just the the the summary. So Paul Allen and Bill Gates co founded Microsoft on April four, That was almost exactly one year before Steve Jobs and Steve Wozniak would go on to co found Apple. Bill Gates would actually drop out of Harvard in order to start this company. Allen and Gates started out by developing a Basic interpreter for the Alta eight hundred. Basic as in the programming language UH. The Altar eight eight hundred was a very early personal microcomputer. In fact, some people call it the first personal computer, and you would order it the back of a magazine and then kind of assemble the whole thing and you would have your own computer that was pretty limited in what it could do, but it was the first time that a microcomputer was widely available to people outside of you know, the engineers that were working in R and D labs. So Basic is a high level programming language. It was originally created back in the nineteen sixties as an educational tool over at Dartmouth College. So Gates and Allen didn't invent Basic, They just developed a version of Basic that would work on the ALTA eight eight hundred, and Basic was a pretty easy to grasp programming language, and college students who had been studying computers were already from the you're with it, so it was an attractive thing to have on your platform, and it made it possible for people who had studied computer science to own their own computers for the first time and to program on them. Now, Microsoft, which in the early days was hyphenated so it was micro hyphen Soft, was right there at the very dawn of the personal computer age, and the company had a dominant hold on implementations of Basic for different computer systems, including the Apple two that used Apple Soft Basic and the Commodore sixty four which had Commodore Basic. All of those came from Microsoft. The company also started producing hardware in nineteen eighty, so five years after it had been founded, and they created a computer card that users could install in an Apple too, and it would allow the Apple two to run the CP slash M operating system. That operating system was really important because there was a lot of business. The software applications that were built upon that operating system, they used that operating system and they wouldn't be compatible with the Apple TO operating system. So this was a great deal for both Microsoft and Apple because Microsoft was making a killing selling these computer cards and Apple was able to get its foot in the door in the business market. That was something that the company was having trouble. They were they were better able to get into education and personal computers, but they were having a bit of a difficulty getting into the business side of things where you had more established companies like IBM that were really dominating that space. Before Windows, Microsoft developed the Disk Operating System or DOSS for IBM. That's kind of being a little over simple. I'll explain more in a second, but IBM was launching its first personal computer. In fact, it was the company that defined the term personal computer or PC. IBM would offer up two different flavors of its PC, and one of them were was to run on the CP slash M operating system and the other was to run on DOSS. But the DOSS systems were significantly cheaper, and so people began to buy that version more than the CP slash M version. Uh which got into all sorts of issues later on. If you listen to my episodes about IBM, you know about how that story unfolded. Well before long. Microsoft doss was another industry standard, and you can learn more about that in that IBM episode. A lot of Microsoft success stem to run the company's dealings with IBM, which frequently favored Microsoft at the expense of Big Blue. I mean, the business deals favored Microsoft more than the favored IBM. Microsoft would also buy the rights for the operating system q doss from a company called Seattle Computer Products. Now this is what I meant when I said it's a little bit of a simplification as say that Microsoft developed DOS, because what they did was they found q doss that was developed out of Seattle Computer Products and said we would like to license that. We would actually like to purchase the rights to this software, to this operating system, and Seattle Computer Products said sure. Because they didn't know at the time that Microsoft had landed this deal with IBM. Microsoft kept that part secret because if Seattle Computer Products found out IBM was behind it, then they would have increased their asking price. So once Microsoft had the rights, they rebranded q doss as ms DOSS and they made truckloads of cash off it. And I suppose you could say a lot of Microsoft's business practices are both extremely aggressive and somewhat clandestine in nature. By night two, Microsoft was an international company, which was not bad considering it was less than a decade old. And in nineteen eighty three IBM cloned computers started to appear. Now Microsoft make money not just from IBM directly, but also from the manufacturers that made these clone devices. See, IBM had failed to create a proprietary machine. They had built their PCs from a lot of off the shelf parts, so that meant other manufacturers could copy the IBM PC designed by using those same components or components that were similar enough to function the same way. Further, IBM did not have an exclusive license with Microsoft, so other companies could then also licensed DOSS from Microsoft and build a machine capable of running IBM PC software. But their machines cost less than ibm s PCs did, which would eventually lead to IBM pulling out of the consumer space. But this was a huge benefit to Microsoft, because of course they were making licensing deals left and right. The first version of Microsoft Windows, the graphic user interface operating system that I'm pretty sure we're all familiar with at least on some level, would debut in the fall of nine five. That would be Windows one point oh. But the company would see real success in nineteen ninety upon the release of Windows three point oh. That signal to move away from Doss and toward the gooey or graphic user interface approach. It also meant more software companies began to develop programs that would work only on Windows because that's the operating system people were buying. So it made more sense for software programmers to focus on the operating system where the customers were rather than dedicate resources to develop software for less popular operating systems. And this made young Jonathan very sad, because young Jonathan much preferred Doss to Windows for many years, But that's a tangent. Microsoft also introduced a suite of productivity software around this time called Microsoft Office, which became incredibly popular. It would go up against a bunch of established giants in the productivity software space like word Perfect and Lotus one two three. Over time, Microsoft Office would become the most popular productivity suite in businesses, possibly because Microsoft made not only the programs but also the operating system that everyone was using in Microsoft unleashed a monstrosity on the world in the form of Microsoft Bob. This Friday's episode will be all about why that particular graphic user interface is largely considered to be one of the biggest turkeys in software. Also in ninety Microsoft made a deal with a company called Spyglass, which had created an Internet browser. Microsoft had not jumped on the internet bandwagon very early on, so the agreement was to license spyglasses browser as Microsoft Internet Explorer, and the deal was that Microsoft would pay Spyglass a royalty fee for every copy Microsoft sold. Only Microsoft didn't sell any copies at all, instead bundling the browser with Windows ninety five, so Spyglass didn't get any royalties. Womp womp. Windows was the first build of Windows to feature the start button, so int we got the start button, we would eventually lose the start button. People would cry out about it, and then we would get it back. In Microsoft announced a partnership deal with NBC to start a new cable news television station called MSNBC. Microsoft would divest itself of its ownership of the cable channel in two thousand five, it would maintain a stake in the website until two thousand twelve, in the U S. Department of Justice accused Microsoft in engaging in anti competitive practices, stating that by bundling Internet Explorer with Windows, it had an unfair advantage over other companies that were making Internet browsers. Further, the complaints state that Microsoft had tightly coupled Internet Explorer with Windows itself in an effort to disadvantage competing browsers. So for a while it looked like the U. S. Government was going to force Microsoft to break up into two companies, one of them would concentrate on operating systems and another that would create other types of software. But eventually Microsoft was able to settle the case and agreed to a policy that would allow PC manufacturers to include software from other companies on a brand new computer, not just Microsoft suite of programs. Have a little bit more to say to bring us up to but before I get into that, let's take a quick break to thank our sponsor. In two thousand, Bill Gates stepped down as CEO of Microsoft, and Steve Balmer, who had been a salesman with a company since nineteen eighty, took over. He would stress the importance of developers, developers, developers, and if you don't get that reference, you need to go to YouTube and search Steve Balmer and the word developers. You're welcome. Microsoft kept on trucking and turned out more versions of its operating system, like Microsoft XP, which was so incredibly popular that there are still people using it today even though it hasn't received any support for years. But the company also created some that were not as not received as enthusiastically, like Windows Vista that didn't do so well, then Windows seven, which did a lot better than Windows eight with its tiled metro approach that was intended to bring together traditional desktop experiences with touch screen interfaces. That product would end up getting mixed reviews, and then Windows ten, which decided to skip right over Windows nine, has done much better in general. Microsoft also waited into the smartphone market with Windows Mobile later known as Windows Phone, even purchasing Nakia's mobile division for about seven billion dollars back in fourteen. I'll talk more about how that turned out in just a moment. And Microsoft also got into console gaming with the Xbox console in two thousand one, and following that up with the Xbox three sixty and two thousand five, and the Xbox One in two thousand thirteen. I'll talk more about how that's going in these episodes as well. In two thousand nine, Microsoft introduced a search engine called bing. According to Statista dot com, which calls itself the Statistics Portal. Microsoft owned sites, including Being account for twenty of all search traffic, second only to Google, which has a dominant sixty three point five percent of the market. I was actually surprised to see Microsoft having that high of a percentage, to be honest. In Microsoft got into the cloud computing business with the launch of a new product called Microsoft Azure originally called Windows Azure or Azure if you prefer specifically, Azure is a platform for software as a service, platform as a service, and infrastruct as a service. So what does that mean. Well, software as a service is a model of business where the developer of the software hosts that software on web servers and customers pay a subscription fee typically to use that software, and you would use something like a web browser to access the software interface or maybe an app some sort of thinly designed interface. But everything's actually happening on the server side. So if you use something like Slack that's kind of a software as a service, or maybe you have a subscription with a streaming music service that's kind of the same thing. Platform as a service is similar, but goes one step further back. This is more for developers rather than end users. So let's say you've got a great idea for some software that you would love to run as a software as a service model, but you lack the foundation to develop and run your software. You could make a deal with a company that provides a platform as a service, and for a fee, you can make use of the system they've built out, so you don't have to build it out yourself. You don't have to test and then try and scale up and go through all that process. Other companies that have established themselves have already done all that. You just end up essentially leasing space from them, and then you build out your own software and you offer it up to users. Infrastructure as a service gets a bit more abstract. This approach typically uses virtualization to provide the actual infrastructure needs rather that some other entity requires in order to run its business, which could involve things like data partitioning, security measures, backup services, and more. Stuff like that so big broad things as opposed to very specific applications. In two thousand eleven, Microsoft bought Skype for about eight and a half billion dollars. But I I covered that recently in the episodes about eBay, so I'm not going to go through that again. In two thousand twelve, Microsoft produced some new hardware under the brand when those Surface, and this ends up being a little confusing for a while because the company had used surface to refer to a couple of different things, some tablet devices, and then they also use surface to talk about some high tech, extremely expensive smart tables. Ultimately, these devices are meant to be flagship products that other manufacturers can use as a model when they design their own similar devices that will feature Windows operating systems and touch screen interfaces. Today, the Surface line includes desktops, laptops, tablets, and larger devices like an interactive whiteboard called the Hub, and I'll talk more about that in our next episode. Then in two thousand thirteen, we got the Xbox One, like I mentioned a moment ago, and Microsoft's announcement of its intended acquisition of Nokia, which gets us up to speed with those older episodes of tech Stuff. Now we can turn our attention to what has happened to the company since that episode published, and a lot of stuff has gone down, y'all. Almost immediately after our last Microsoft episode went live, the company announced it would have a company wide reorganization, and this reorg would focus Microsoft on services and devices rather than software. This was something that Bomber was talking about. The reorgan dissolved some divisions and created some new ones, and grouped various products into new departments. In August, one month after our last Microsoft episode published, Microsoft announced that CEO Steve Bomber would retire within the following twelve months. So this is kind of typical for tech stuff. I do an episode about a company, and then a month after the episode goes live, something huge happens. Well. In his open letter to Microsoft employees, Bomber said that the company was undergoing a transformation into a hardware and services company. It started off as a software and operating system company, so this was a big shift in its strategy, and Bomber said there was need for a new CEO to guide the strategy for the long term. Company founder Bill Gates would end up playing a part in selecting Bomber's replacement along with the Board of Directors. To be fair, Gates was chairman of the board at the time. Now, Microsoft was still trying to pivot their mobile device strategy. At this point. They had started off with Windows Mobile, but that failed to gain real traction in the marketplace. Then they launched Windows Phone. It was kind of a reboot. The Verge would actually call it a painful reboot. That's a quote from the Verge. I can't dispute that description because it was not a smooth or seamless process. But this was when Microsoft hoped to unify the user experience across multiple devices with the touch screen tiled approach we saw on Windows eight. So Microsoft had seen how Apple users innately understood the touch interface on devices like the iPhone, the iPod Touch, and the iPad, and they said, well, that makes a lot of sense. Apple has created this interface that is the same across multiple devices, so if you use one, you understand how it works on all the others. What if we took that same idea, but we applied it even more broadly. It's not just for mobile devices, but for everything like laptops and desktops. And it seemed to make sense at first, if you went all in on Microsoft products as a user, you would have the same sort of interface, the same methods of navigating your computer as you use to navigate your phone. It just didn't really take off. Android and iOS were really firmly entrenched in the smartphone space, and enough people didn't care for the touchscreen interface on their laptop or desktop machines that it ended up derailing the strategy pretty early on. Several PC review journalists complained that this new direction on PCs actually made it harder to use the traditional keyboard and mouse interfaces. So they said, well, if don't want to use this tiled metro approach that Windows forces you into, and you switch over, you can use a mouse and a keyboard, but it's not nearly as easy as it used to be. It's actually making it more difficult for you to use your machines. So it's possible that Windows was pushing toward a jump in uniformity and user interface experience that the world just was not ready for. Or maybe you could argue that their implementation uh failed to live up to expectations, or maybe it was a combination of the two. Whatever the case, it didn't work. Speculation about who would be the next Microsoft CEO ranged from internal candidates like Tony Bates, who was leading the Business Development Division, two people from outside of Microsoft, such as Read Hastings, the CEO of Netflix. It would take the company six months to find a new CEO and to agree upon that new CEO. Bomber would stay in the position of CEO until his replacement was chosen, and that happened on February four, two thousand and fourteen, when the Board of Directors announced that Satya Nadela, who had been an executive vice president of Microsoft Cloud and Enterprise Division, would be the new CEO. And Nadela had been with Microsoft since nineteen two, so he had been with a company for quite some time. He was one of the people leading the charge to bring Microsoft services to the cloud, and as Balmer had mentioned in his retirement letter, that was sort of the direction Microsoft was heading in with more cloud based and service based businesses and fewer software packages. In two thousand thirteen, the Cloud and Enterprise Division had accounted for more than twenty billion dollars in revenue and more than eight billion dollars in operating income, so it was a clear leader in their company One thing I think is pretty phenomenal is that Satya Nodela would become only the third CEO in the history of Microsoft, which had been around for four decades at that point. So you had Bill Gates, Steve Bomber, and then Satya Nadela. Only a few companies have had their top levels of leadership remain as stable as that, and I'm reminded of companies like Nintendo, for example. Another thing that's phenomenal is that Nadela was only forty six years old when he took that position. He would end up shaking things up considerably. And uh, we'll talk more about those shakeups in just a second, but first let's take another quick break to thank our sponsor. The same day that Steve Bomber stepped down and Adela became the new CEO of Microsoft, the co founder, Bill Gates would step aside as chairman of the board and John W. Thompson would take over as chairman. Gates would remain connected to Microsoft as a technology advisor. Bomber, meanwhile, would remain on the Microsoft board until August and then he stepped down. Since really a year after announcing his retirement as CEO, he wanted to spend his time and effort focusing on a brand new purchase he had recently made, which was the basketball team, the Los Angeles Clippers. He bought the team for about two billion dollars. His Impulse Buys and my Impulse Buys are on two different planets and funding. Addendum to that, Steve Bomber said in September that he wanted the team to ban the use of iOS devices and switched to Windows based gadgets instead, So the idea would be that no longer would you see anyone on an iPhone on the Clippers team. Back to Microsoft. In July two thousand fourteen, so essentially half a year after he took over the role of CEO, Nodelo would send out a message to all employees saying that the company needed to drop the devices and services focus that Bomber had talked about just one year earlier. In that message, he said, quote, we will reinvent productivity to empower every person and every organization on the planet to do more and achieve more end quote small goal. He also proposed doing this by focusing on cloud services and mobile platforms, so getting away from this idea of devices and services, and he said we would still do some hardware, but we're not going to be a hardware company. It wasn't just a directive about the company changing focus, however, It also had some pretty tough news to come along with it. Microsoft was going to cut eighteen thousand jobs over the course of twelve months. Most of those cuts would affect people who had come over to Microsoft from Nakia. The company had also backed off of creating original streaming video content under the brand Xbox TV that was going to be a competitor to stuff like Netflix. A year later, things continued to change over at Microsoft. The mobile strategy just was not working. Stephen Elop, who had been part of Microsoft before moving over to Nakia to become the first non finish CEO of that company, had returned to Microsoft after the Nakia acquisition. But then Nadela led another reorganization and as part of that, Elop was let go. And he wasn't the only one. Several other executives were also shown the door in that reorg and then there were the rank and file employees. In July, the company cut about seven thousand, eight hundred jobs. Most of those were positions related to the phone business. The company also chose to write off seven point six billion dollars related to the Nakia acquisition, an acquisition that costs I remind you seven point two billion dollars, So they actually had to write off more than the acquisitions cost because they lost so much money on that deal. It didn't end in either. In sixteen, Microsoft would write off another nine hundred fifty million dollar impairment charge, specifically to cover severance payments that the company incur as a result of all those layoffs I just talked about right off. By the way, it's a business term. It's when you deduct the value of earnings by whatever the amount of an expense or loss happened to be. Companies do this by taking their revenue, however much money they made, and then subtracting expenses or losses from that revenue, and then they use that to report their taxable income. So it's similar to a deduction. Microsoft announced it would cut another one thousand, eight hundred fifty jobs from the phones division in May, and in July of that year, the company added another two thousand, eight hundred fifty jobs to the pile. In July, another three thousand jobs were cut. A few hundred more were cut in early eighteen and by then nearly all of the twenty five thousand Nakia employees Microsoft had brought on board after that acquisition were without a job, though there were a few who were in research and development that were retained and a couple in sales. But the layoffs also largely affected the general sales divisions at Microsoft, which we're continuing their transformation into cloud services, so there was less of a need for sales people who focused on software and hardware. Now, this all sounds like a company that's whittling itself down to bare bones, but that's not really the case. It's very misleading. We're talking about thousands and thousands of job cuts, but Microsoft has more than a hundred twenty five thousand employees worldwide, so it's still a really big company. Before I sign off on this episode, I want to go ahead and follow up with another bit about the mobile device part of Microsoft's history. Just kind of see that through because otherwise it'll just keep popping up throughout the next episode. So, unfortunately for Microsoft, Windows phone was never a strong competitor in the market. By January, their smartphone platform represented about point one five per cent of the market. So less than a percent point one the market worlds behind Google's Android operating system, the most popular smartphone OS in the world. They really saw that there was there was no support there. In July, Microsoft announced it would stop support for Windows Phone eight point one, which had launched. By January, Microsoft announced an end to push notifications support for Windows Phone seven point five and eight point oh, so not only were they no longer supported, now customers using phones running on those systems would no longer receive live updates or notifications, and the find my Phone feature would no longer. You know, find your Phone notifications still work on Windows Phone eight point one and Windows ten mobile devices, but the company had clearly moved away from mobile mostly now. I say mostly because as I record this episod sowed there are rumors of a device code named Andromeda that could at least contain some cellular phone technology and that includes a chip allowing the device to connect to the four G LTE network. Not much is known about this device as I record this show, but patents belonging to Microsoft show a foldable gadget that has two screens that can fold out to a tablet, or you could fold them back to back and turn it into a smartphone type form factor. Potentially, this could be a device that in one form factor is a smartphone you unfolded into a flat tablet, and then you could divide it in half again where you fold up one side it becomes a screen and the other side becomes your keyboard, and then it's sort of like a netbook. Now, in the next episode, I'm gonna run down some more stuff Microsoft has been doing in recent years, which will include exciting work and augmented reality and artificial intelligence, as well as the company's involvement in controversial work with you I had States Immigration Customs Enforcement Office better known as ICE. In the meantime, if you have any suggestions for future episodes of tech Stuff, maybe there's a particular company or technology you would like me to cover, maybe there's someone you would like me to interview on the show. Send me an email tell me what you want to hear. The address is tech Stuff at how stuff works dot com, or draw me a line on Facebook or Twitter to handle at both of those is tech Stuff hs W. Don't forget to follow us on Instagram and I'll talk to you again really soon for more on this and thousands of other topics because it how stuff works. Dot com