Evolution of Microsoft and its Business Model

Evolution of Microsoft and its Business Model

It all started with two computer geeks who were fascinated by the world of computers. Microsoft Corporation is an American multinational technology company with headquarters in Redmond, Washington.

Microsoft develops, manufactures, licenses, supports, and sells computer software, personal computers, and related services. The best-known software products of Microsoft are the Windows line of Operating Systems, the Microsoft Office suite, and the Internet Explorer.

Its flagship hardware products are the Xbox video game consoles and the Microsoft Surface lineup of touchscreen personal computers. In 2016, it was the world's largest software maker by revenue. Microsoft ranked #21 in the Fortune 500 rankings 2020 of the largest United States corporations by total revenue.

In 2018, Microsoft surpassed Apple Inc. as the most valuable publicly traded company in the world after it was dethroned by Apple in 2010. In April 2019, Microsoft reached the trillion-dollar market cap, becoming the third U.S. public company to be valued at over $1 trillion after Apple and Amazon respectively.

The mammoth American multinational technology corporation has steered past Apple on October 29, 2021, to become the world's most valuable company, which is publicly traded. The market cap of Microsoft was recorded at $2.45 trillion, while that of Apple was at $2.41 trillion as of November 1, 2021.

Microsoft is among the largest tech giants, which in 2018 made over $110 billion in revenues. While Microsoft Office remains the most successful product. Other parts of the business are related to advertising,  accessible home and business software solutions, secure online storage, and search services. Microsoft business computers also occupy a central part of the current popularity that Microsoft enjoys today. As a dominant tech company, Microsoft tries to keep innovating and acquiring companies that allow it to enter new markets, quickly. If you are looking for Microsoft company information, then you can take a dive into the Evolution of Microsoft and its Business model that StartupTalky brings here in teh article ahead.

Microsoft - Latest News
History of Microsoft
Evolution of Microsoft
Microsoft's Major Acquisitions
Revenue of Microsoft

Microsoft - Latest News

January 20, 2022 - Microsoft seals deal with the Telangana government to set up a data center in Hyderabad. The Microsoft data center is estimated to be built with around Rs 15,000 crore worth of funds in an area spanning over 50 acres of land. The Microsoft building is estimated to be creating 300+ jobs.

January 18, 2022 - Microsoft announced that it is acquiring gaming giant Activision, the world's 3rd largest gaming company. The deal to acquire Activision Blizzard, as announced by Microsoft CEO and Chairman Satya Nadella, would be an all-cash transaction of $68.7 billion. Cleaning up the culture after the biggest tech acquisition in history now seems to be a mammoth task ahead!

October 29, 2021 - With a market cap of $2.45 trillion, Microsoft becomes the world's most valued publicly-traded company, passing Apple's market cap of $2.41 trillion.  

June 28, 2021 - Microsoft's code-sharing service GitHub launches GitHub Copilot, which is meant to be an AI-driven pair programming tool that will help coders with invaluable suggestions to complete their codes easily.

June 24, 2021 - Microsoft reveals the much-awaited release of Windows 11 will happen late this year, 2021. The update to this latest version of Windows will be free for the existing Windows 10 users via Windows Update.

History of Microsoft

Before Microsoft was founded, Paul Allen and Bill Gates were just two friends in an age where computers were not a frequent sight. They were avid geeks, which once led them to hack into their school’s computer. Instead of being expelled, the school asked them to help in strengthening the school’s computer performance. Maybe this kindled the spirit in them to one day serve the world with the most preferred Operating System.

After this, both moved separate ways with Gates going to Harvard to pursue law in 1973 and Allen to Boston as a computer programmer. This is where faith stepped in. In January 1975, Allen read an article in Popular Electronics magazine about the Altair 8800 microcomputer and showed it to Gates. Gates called Micro Instrumentation and Telemetry Systems MITS, makers of the Altair, and offered his and Allen's services to write a version of the new BASIC programming language for the Altair.

After eight weeks, Allen and Gates demonstrated their program to MITS, which agreed to distribute and market the product under the name Altair BASIC. The deal inspired Gates and Allen to form their own software company. Thus, Microsoft was started on April 4,1975 in Albuquerque, New Mexico with Gates as the first CEO.

On July 29, 1975, Gates used the name "Micro-Soft" - which had been suggested by Allen—in a letter to Allen referring to their partnership. The name, a portmanteau of "microcomputer" and "software," was registered with the New Mexico secretary of state on Nov 26, 1976.

In August 1977, the company opened its first international office, located in Japan, which was called ASCII Microsoft. In 1979, the company moved to Bellevue, Washington, and two years later it was incorporated under the name Microsoft Inc. Gates was President of the company and the Chairman of the Board, and Allen was the Executive Vice President.

Microsoft Vs. Apple Business Model
Microsoft and Apple are the two largest companies in the world. The business model of Apple is based on customer-centric devices and innovation. Microsoft’s business spanned across Windows, Office products, Gaming (Xbox), Hardware, Web search engine (Bing), Cloud, LinkedIn, etc.

Evolution of Microsoft

Microsoft Operating Systems

As a newly formed company, Microsoft's first operating system product to be publicly released was a version of Unix called Xenix, released in 1980. Xenix was later used as the basis for Microsoft's first word processor—Multi-Tool Word—a predecessor to Microsoft Word.

Microsoft's first operating system - XENIX
Microsoft's first operating system - XENIX

Microsoft's first wildly successful operating system was MS-DOS (Microsoft Disk Operating System), which was written for IBM in 1981. In the deal of the century, Gates licensed MS-DOS to IBM but retained rights to the software. As a result, Gates made a fortune for Microsoft, which had become a major software vendor.

Microsoft Windows

Also in 1983, Microsoft's crowning achievement was released. The Microsoft Windows operating system had a novel graphical user interface and a multitasking environment for IBM computers. Windows is constantly evolving with Windows 11 recently launched on June 24, 2021, which is deemed to be the successor of 2015 released Windows 10.

In 1986, the company went public, with the resulting rise in stock making an estimated four billionaires and 12,000 millionaires from Microsoft employees. The success meant that Gates became a billionaire at 31.

Steve Ballmer—Former CEO of Microsoft
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Microsoft Office

1989 marked the release of Microsoft Office, a software package that is a collection of programs for use in an office. Still used today, it includes a word processor, spreadsheet, mail program, business presentation software, and more.

Internet Explorer

Following Bill Gates' internal "Internet Tidal Wave memo" on May 26, 1995, Microsoft stepped into the world of the web. Other than Netscape, Microsoft was the only major and established company that acted fast enough to be a part of the World Wide Web practically from the start.

The other companies acted slow, giving Microsoft a market dominance. The company released Windows 95 on August 24, 1995, featuring pre-emptive multitasking. Windows 95 Plus was bundled with the online service MSN, and Internet Explorer, a Web browser.


In 2001, Microsoft introduced its first gaming unit, the Xbox system. Xbox faced stiff competition from Sony's PlayStation, and eventually, Microsoft discontinued the original Xbox in favor of later versions. In 2005, Microsoft released the Xbox 360 gaming console, which was a success.

Microsoft Evolution

After this, from 2007-2010, Microsoft launched a variety of services and products like Windows Vista, which focused on features and security. Azure Services Platform, the company's entry into the cloud computing market for Windows, launched on October 27, 2008.

On February 12, 2009, Microsoft announced opening a chain of Microsoft-branded retail stores, and on October 22, 2009, the first retail Microsoft Store opened in Scottsdale, Arizona; the same day Windows 7 was officially released to the public.

Windows 7's focus was on refining Vista with ease-of-use features and performance enhancements, rather than an extensive reworking of Windows.
As the smartphone industry boomed in 2007, Microsoft struggled to keep up with its rivals Apple and Google in providing a modern smartphone operating system.

As a result, in 2010 it came up with Windows Phone OS. The strategy was to work more closely with smartphone manufacturers, such as Nokia. The new user Interface introduced the idea of minimalism.

Microsoft launched Windows 8 on October 26, 2012, an operating system designed to power both personal computers and tablet computers. The Surface was also launched, becoming the first computer in the company's history to have its hardware made by Microsoft.

In 2015, Microsoft began an advertising campaign centering on Windows 10, "Upgrade Your World” with the tagline "A more human way to do", emphasizing new features and technologies supported by Windows 10 that sought to provide a more "personal" experience to users.

Other than this products like HoloLens, mixed reality headsets, acquisitions of platforms like LinkedIn, GitHub have made Microsoft a pioneer in the Tech industry.

On Tuesday, June 29, 2021, Microsoft announces the launch of an AI-driven tool that will suggest codes for the world of software developers while they are busy coding. This new system, called GitHub Copilot, is named after GitHub because it draws upon the source code shared on Microsoft's code-sharing service GitHub. Microsoft and GitHub developed this pair programmer with the help of OpenAi, an AI research startup that was backed up by Microsoft in 2019.  

Microsoft's Major Acquisitions

Microsoft Acqusitions
Microsoft's Acquisitions

With more than 250 companies under its belt of acquisition, Microsoft is nothing more than a giant, when it comes to acquisition. The latest acquisition of Microsoft came in on January 18, 2022, when it acquired Activision Blizzard, the 3rd largest gaming company, in the world's largest tech acquisition deal that amounted to $68.7 billion. The all-cash deal that the CEO and Chairman of the American software giant, Satya Nadella announced, is expected to close the deal in FY23. However, Microsoft will face a major challenge in cleaning up the culture of Activision, a company that is facing numerous accusations of sexual harassment and misconduct.

Microsoft's acquisition till now has largely meant that the acquired company will work autonomously. It has been so with the companies like Linkedin, GitHub, Skype, Mojang, and more, but to handle the situation of Activision, which is currently marred by a lawsuit from California regulators that allege that the company "fostered a sexist culture" along with many other investigative stories that detail the allegations of sexual harassment internally, will require a heavier hand. Here's a list of the last 10 acquisitions by Microsoft:

Acquiree Name Acquired Date Price
Activision Bizzard January 18, 2022 $68.7 bn
Xandr December 21, 2021 -
Two Hat Security October 29, 2021 -
Clear Software October 22, 2021 -
Ally.io October 7, 2021 $76 mn
TakeLessons September 10, 2021 -
Clipchamp September 7, 2021 -
Peer5 August 10, 2021 -
Suplari July 28, 2021 -
CloudKnox Security July 21, 2021 -

Revenue of Microsoft

Microsoft has branched its revenue and is routinely ranked among the world’s top 100 companies organized by revenue. The Company’s revenue is divided into three principal segments:

Productivity and Business Processes

This includes revenue gathered by the sale and licensing of its various software products and cloud services across a range of devices and platforms. This comprises commercial and consumer licensing of Microsoft’s suite of productivity products and cloud services, including those pertaining to the Office 365 suite, content management tool OneDrive, and call services provider Skype.

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Intelligent Cloud segment

Comprises all revenue generated by its server products and cloud storage services, including the sale and licensing of Windows Server, Microsoft SQL Server, Visual Studio, System Center and Microsoft Azure services to commercial clients and general consumers. Revenue from the support and consulting services to develop innovative IT solutions for businesses – are also grouped into this segment.

More personal computing

This relates principally to its products and services that provide cross-platform utilities. This includes licensing of Windows operating systems, Microsoft patents, and Windows phones; the sale of Microsoft devices, including mobile phones and PC accessories, products relating to the Microsoft Xbox gaming platform, including Xbox Live subscriptions, transactions, third-party video game royalties, and advertising.

Microsoft revealed that it has earned $168 bn in revenue in FY21, marking an 18% year-on-year increase. Furthermore, the American software company's CEO and Chairman, Satya Nadella also mentioned that its operating income grew by 32% to $70 billion. Besides, Nadella also mentioned in the Annual Report 2021 that LinkedIn and the security business of Microsoft both crossed the $10 billion mark in annual revenue for the first time.  

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What was Microsoft's first product?

Microsoft Operating Systems was Microsoft's first product.

When was Microsoft started?

Microsoft started was started on 4 April 1975, in Albuquerque, New Mexico, United States.

Did Bill Gates start Microsoft in his garage?

In 1975, Bill Gates and Paul Allen founded Microsoft, with just a few resources and an available garage space.

What is the Microsoft company?

Microsoft is a software giant, a multinational technology company founded by Bill Gates and Paul Allen, headquartered in Redmond, Washington, United States.

Who were the original founders of Microsoft?

Paul Allen and Bill Gates are the original founders of Microsoft.


The key takeaway from the above analysis of Microsoft as a company and its revenue models is that it has constantly evolved with the market and user requirements.

It strives to innovate and adapt to market scenarios from time to time. For an instance, when the industry switched to mobiles from PCs, Microsoft didn’t take a step back, instead, it brainstormed to set its foot by merging with Nokia.

Another time when we saw its determination to stay in the stocks was when the company knew that Android is dominating the phone industry, it came up with platforms for cloud computing, explored the less traveled road of mixed reality by supplying HoolLens headsets.

Microsoft also stepped into active advertising, which used catchy themes to attract more people to its core home PC values. It held strong to its belief in the requirements of a normal computer user with simple yet varied expectations. This is what made it stand out from its competitors like Apple and Google.

At the rate at which both of its competitors are succeeding, it must be a task for Microsoft to stay in the race, but surely it hasn’t let the market or the customers get used to its absence.

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