Interesting article but I'm not sure some of the statements chime with how things looked at the time (IME ofc).
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.
I started my career in '95, too, and yeah, as difficult as it is to believe now, Microsoft's monopoly wasn't yet assured. The OS market was pretty much locked up (OS/2 Warp???), but as I recall, Wordperfect was the big obstacle in the office-suite space. It had a massive userbase, especially in markets that were not friendly to change (law offices).
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.
Os/2 warp was miles ahead of windows 95 technically. The main issue was that it was also a bit too ambitious in terms of system requirements which meant that on most systems it was slow as molasses really.
Add that to the Microsoft first mover advantage and it was doomed to fail.
Windows 95 was what has started the dominance of Microsoft in office suites, so in 1995 it was too early to see the results.
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.
In the case I dealt with, I was buying new Gateway PCs and they were shipping full Office Pro (including MS Access) for free with the PC.
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.
I was only starting working with computers as an unpaid IT help at that time, but I distinctly remember that MS Office was just better. More streamlined, and well-integrated.
Back then, pretty much everybody in my country just pirated the software, so the cost was not a consideration at all.
It's worth noting that Microsoft was the first company to sell a complete office suite as a bundle for the PC. Others quickly caught on, but still MS Office was the only suite that had consistent UX across the different programs they were packaging together. Lotus SmartSuite checked all the same boxes on paper, but switching between the different programs feels like tripping on cracks in the sidewalk.
Back in the day, a word processor or spreadsheet app could cost several hundred dollars each. Buying an office suite was supposed to be cheaper than if you bought the 3 apps in an office suite separately.
Consistency in UX and integration between app in the office suite were other touted advantages.
> Today’s entrepreneurs would do well to note that Microsoft made minimal use of venture capital. Microsoft’s only VC only owned 6.2 percent of the company. Gates didn’t trust them.
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?
Something I find interesting about early technology IPOs is how early they IPO-ed compared to more recent tech companies and how much of their growth and value creation happened post-IPO.
- 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.
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
There’s some market/observer bias in these numbers; they hit four very different eras of VC and public markets perspectives on tech stocks.
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.
Yeah but that was their worst moment. Michael Dell joked someone should buy Apple for a few bucks and put them out of their misery.
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.
I still hold the theory that the entire success of Apple post-1997 hinged on iTunes for Windows.
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.
> Something I find interesting about early technology IPOs is how early they IPO-ed compared to more recent tech companies
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.
Yup. Strikes me as obvious that folks figured out how to get in there earlier rather than leave it to the public markets. Just sort of speaks to a combination of market efficiency plus increased regulation in my mind.
Most of people's issues with the Securities Exchange Commission came from changes in corporate behavior that made people notice they had an issue with the Securities Exchange Commission
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
Yep. Michael Lewis’s book The New New Thing is a great little window into that timeframe. He claims Jim Clark really wanted a new boat, so Clark forced the IPO on the board to get some liquidity.
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.
People play up Bill Gates’ connections, sure, but next to no 16-year-olds could program BASIC in assembly.
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.
Correct regarding the BASIC. MS DOS (and even MSX BASIC and MSX DOS) was pretty important though in the grand scheme of the ecosystem forming.
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.
Windows 95 and 98 came with QBasic, but it was not installed by default. It was an optional "extra feature" that could be added from your Windows installation media.
Hmm yeah Gates was a bit of a programming prodigy sure. But none of Microsoft's success really has anything to do with that. It was all about smart business acumen, starting with the deal made with IBM, being allowed to sell MS-DOS to PC clone makers.
To me, Visual Basic (not Visual Basic .NET) was the game changer for Microsoft. It empowered many power users (user, not programmer) to create software that they couldn’t find on the market.
> Today’s entrepreneurs would do well to note that Microsoft made minimal use of venture capital. Microsoft’s only VC only owned 6.2 percent of the company. Gates didn’t trust them.
> 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.
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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.
Add that to the Microsoft first mover advantage and it was doomed to fail.
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...
Do you mean Microsoft Works[1]? Or were they more commonly shipping the full version of MS Office with new PCs in the UK?
[1] https://en.wikipedia.org/wiki/Microsoft_Works
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.
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.
AppleWorks came out in 1984 for the Apple //e. Microsoft Office came out for the Mac in 1989.
Consistency in UX and integration between app in the office suite were other touted advantages.
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.
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?
- 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
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.
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.
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.
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.
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
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.
> 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.