First conceived in 1975 by Bill Gates and Paul Allen, Microsoft has evolved through several stages throughout its history. By 1985, the company was selling the Microsoft Windows operating system and MS-DOS, and had collaborated with IBM to produce OS/2 Warp. By 1992, Microsoft had released an IPO in the stock market and discontinued OS/2 development to focus directly on Windows. By 1995, Windows was the most widely used graphical operating system in the world, and with the introduction of Windows 95, the company became a more consumer-driven company. Microsoft would proceed to enter other business markets, such as publishing and video games, would be sued more than once by the U.S. Justice Department and other governments and companies, and would continue to dominate the operating system market.

1975–1984: The founding of Microsoft

Days after reading the January 1, 1975, issue of Popular Electronics that demonstrated the Altair 8800, Bill Gates called the creators of the new microcomputer, MITS (Micro Instrumentation and Telemetry Systems), offering to demonstrate an implementation of the BASIC programming language for the system. Gates had no interpreter nor even an Altair system, but in the eight weeks before the demo he and Allen developed the interpreter using stolen computer time on Harvard's minicomputers (computer resources were for educational not commercial use). The interpreter worked at the demo and MITS agreed to distribute Altair BASIC. Gates left Harvard University, moved to Albuquerque, New Mexico where MITS was located, and founded Microsoft there. The name Microsoft, without the hyphen, was first used in a letter from Gates to Allen on November 29, 1975, and on November 26, 1976 the name became a registered trademark. The company's first international office was founded on November 1, 1978, in Japan, entitled "ASCII Microsoft". On January 1, 1979, the company moved from Albuquerque to a new home in Bellevue, Washington. Steve Ballmer joined the company on June 11, 1980, and would later succeed Bill Gates as CEO. The company restructured on June 25, 1981, to become an incorporated business in its home state of Washington (with a further change of its name to "Microsoft, Inc."). As part of the restructuring, Bill Gates became president of the company and Chairman of the Board, and Paul Allen became Executive Vice President.

Microsoft's first operating system was Xenix, released in 1980 and later sold to Santa Cruz Operation. However, the source of the real success for the company was the DOS operating system. On August 12, 1981, after negotiations with Digital Research failed, IBM awarded a contract to Microsoft to provide a version of the CP/M operating system, which was set to be used in the upcoming IBM Personal Computer (PC). However, Microsoft did not have an operating system at the time, so it purchased a CP/M clone called QDOS (Quick and Dirty Operating System) from Tim Paterson of Seattle Computer Products for $50,000, which Microsoft renamed to PC-DOS. Due to potential copyright infringement problems with CP/M, IBM marketed both CP/M and PC-DOS for $250 and $40, respectively, with PC-DOS eventually becoming the standard because of its lower price. Around 1983, in collaboration with numerous companies, Microsoft created a home computer system, MSX, which contained its own version of the DOS operating system, entitled MSX-DOS; this became relatively popular in Japan and Europe. Later, after Compaq successfully cloned the IBM BIOS, the market saw a flood of IBM PC clones. Microsoft was quick to use its position to dominate the home computer operating system market. Microsoft began licensing its operating system for use on non-IBM PC clones, and called this version of the operating system MS-DOS (short for Microsoft Disk Operating System). By marketing MS-DOS aggressively to manufacturers of IBM-PC clones, Microsoft rose from a small player to one of the major software vendors in the home computer industry. Starting on May 2, 1983, with the "Microsoft Mouse", Microsoft entered markets such as computer hardware. This expansion included Microsoft Press, a book publishing division, on November 10 the same year, which debuted with two titles: "Exploring the IBM PC Home Computer" by Peter Norton, and "The Apple Macintosh Book" by Cary Lu.

1985–1991: the rise and fall of OS/2

The Republic of Ireland became home to Microsoft's first international production facility in 1985, and on November 20 Microsoft released its first retail version of Microsoft Windows, originally a graphical extension for its MS-DOS operating system. In August, Microsoft and IBM partnered in the development of a different operating system called OS/2. OS/2 was marketed in connection with a new hardware design proprietary to IBM, the PS/2. Shortly afterwards on February 16, 1986, Microsoft relocated to Redmond, Washington. Around one month later, on March 13, the company went public with an IPO, raising $61 million at $21.00 per share. By the end of the trading day, the price had risen to $28.00. In 1987, Microsoft eventually released their first version of OS/2 to OEMs. Continuing its trend of rebranding products from other companies, Microsoft announced SQL Server on January 13, 1988, a relational database management system for companies that was based on technology licensed from Sybase

In 1989, Microsoft announced at Comdex that the 1991 release of Windows 3.0 would be the last version of Windows. Over the next few years, Microsoft continued to issue statements indicating that OS/2 was the future of computing. On May 16, 1991, Bill Gates announced to Microsoft employees that the OS/2 partnership was over, and that Microsoft would henceforth focus its platform efforts on Windows and the Windows NT kernel. Some people, especially developers who had ignored Windows and committed most of their resources to OS/2, were taken by surprise, and accused Microsoft of deception. The Windows changeover was frequently referred to in the industry as "the head-fake". In the ensuing years, the popularity of OS/2 declined, and Windows quickly became the favored PC platform. 1991 also marked the founding of Microsoft Research, an organization in Microsoft for researching computer science subjects, and Microsoft Visual Basic, a popular development product for companies and individuals.

1992–1995: domination of the corporate market

During the transition from MS-DOS to Windows, the success of Microsoft's product Microsoft Office allowed the company to gain ground on application-software competitors, such as WordPerfect and Lotus 1-2-3. Some allege that Microsoft used its inside knowledge of the DOS and Windows kernels and of undocumented Application Programming Interface features to make Office perform better than its competitors, but internal sources at Microsoft later revealed that the Office team did not have access to the Windows source code at the time, and relied on reverse engineering. Eventually, Microsoft Office became the dominant business suite, with a market share far exceeding that of its competitors. In March 1992, Microsoft released Windows 3.1 along with its first promotional campaign on TV; the software sold over three million copies in its first two months on the market. In October, Windows for Workgroups 3.1 was released with integrated networking capabilities such as peer-to-peer file and printing sharing. In November, Microsoft released the first version of their popular database software Microsoft Access. By 1993, Windows had become the most widely used GUI operating system in the world. Fortune Magazine named Microsoft as the "1993 Most Innovative Company Operating in the U.S.". The year also marked the end of a five-year legal case brought by Apple, dubbed Apple Computer, Inc. v. Microsoft Corp., in which the ruling was in Microsoft's favor. That same year, Microsoft released Windows for Workgroups 3.11, a new version of the consumer line of Windows, and Windows NT 3.1, a server-based operating system with a similar user interface to consumer versions of the operating system, but with an entirely different kernel.

As part of its strategy to broaden its business, Microsoft released Microsoft Encarta in 1994, the first encyclopedia designed to run on a computer. Microsoft also created the Microsoft Plus product support program for its customers, a service that offered cost savings on Microsoft products. The name of that program was later used for several expansion packs for Windows. The company changed its slogan to "Where do you want to go today?" in that year, as part of an attempt to appeal to nontechnical audiences in a US$ 100 million advertising campaign, which some critics regarded as uninspired. Dreamworks SKG and Microsoft formed a new company, Dreamworks Interactive, to produce interactive and multimedia entertainment properties in 1995. In March, Microsoft released Microsoft Bob, a Windows 3.1 program manager replacement, which is widely considered Microsoft's most unsuccessful product; its unpopularity became the source of many jokes.

Up until 1995, Microsoft was a business-oriented company. However, in August 1995, it released a new version of its flagship software, Microsoft Windows 95, with a completely new user interface, including a novel start button; more than a million copies of Microsoft Windows 95 were sold in the first four days after its release. The new version of Windows was the start of a major transition towards a consumer-oriented company. In September, the Chinese government chose Windows to be the operating system of choice in that country, and entered into an agreement with the Company to standardize a Chinese version of the operating system. Microsoft also released the Microsoft Sidewinder 3D Pro joystick in an attempt to further expand its profile in the computer hardware market.

1995–1999: foray into the Internet and other venues

In the mid-90s, Microsoft began to expand its product line into computer networking and the World Wide Web. On August 24, 1995, it launched a major online service, MSN (Microsoft Network), as a direct competitor to AOL. MSN became an umbrella service for Microsoft's online services, using Microsoft Passport as a universal login system for all of its websites. The company continued to branch out into new markets in 1996, starting with a joint venture with NBC to create a new 24/7 cable news station, MSNBC. The station was launched on July 16 to compete with similar news outlets—in particular, CNN; in the same year, Microsoft launched Slate, an online magazine edited by Michael Kinsley, which offered political and social commentary along with the cartoon Doonesbury. In an attempt to extend its reach in the consumer market, the Company acquired WebTV, which enabled consumers to access the Internet from their televisions. Microsoft entered the palm computing market in November with Windows CE 1.0, a new built-from-scratch version of their flagship operating system, specifically designed to run on low-memory, low-performance machines, such as handhelds and other palm-sized computers. 1996 saw the release of Windows NT 4.0, which brought the Windows 95 GUI and Windows NT kernel together.

While Microsoft largely failed to participate in the rise of the Internet in the early 1990s, some of the key technologies in which the company had invested to enter the Internet market started to pay off by the mid-90s. One of the most prominent of these was ActiveX, an application programming interface built on the Microsoft Component Object Model (COM); this enabled Microsoft and others to embed controls in many programming languages, including the company's own scripting languages, such as JScript and VBScript. ActiveX included frameworks for documents and server solutions. The company also released the Microsoft SQL Server 6.5, which had built-in support for internet applications. Later in 1997, Microsoft Office 97 as well as Internet Explorer 4.0 were released, marking the beginning of the takeover of the browser market from rival Netscape, and by agreement with Apple, Internet Explorer was bundled with the Apple Macintosh operating system as well as Windows. Windows CE 2.0, the handheld version of Windows, was released this year, which included a host of bug fixes and new features designed to make it more appealing to corporate customers. In October, the Justice Department filed a motion in the Federal District Court in which they stated that Microsoft had violated an agreement signed in 1994, and asked the court to stop the bundling of Internet Explorer with Windows.

In 1998, Microsoft released an update to the consumer version of Windows, Windows 98. Windows 98 came with Internet Explorer 4.0 SP1 (which had Windows Desktop Update bundled), and included new features from Windows 95 OSR 2.x including the FAT32 file system, and new features specifically for Windows 98, such as support for multiple displays. Microsoft also launched its Indian headquarters that year, which would eventually become the company's second largest after its U.S. headquarters. Steve Ballmer was appointed president of Microsoft, and Bill Gates remained as Chair and CEO. Later in 1999, Microsoft Office 2000 was released, along with Internet Explorer 5.0.

2000–2005: legal issues, XP, and .NET

On February 17, 2000 Microsoft released Windows 2000, which some considered to be a significant improvement over previous versions. It provided an OS stability similar to that of its Unix counterparts. Unlike previous home-user operating systems, Windows 2000 was built on the Windows NT kernel, rather than the consumer Windows kernel that previous consumer versions had used. Windows 2000 also provided a DOS emulator that could run many legacy DOS applications.

On April 3, 2000, a judgment was handed down in the case of United States v. Microsoft, forcing the company to split into two separate units. Part of this ruling was later overturned by a federal appeals court, and eventually settled with the U.S. Department of Justice in 2001. See main article: United States v. Microsoft

In the same year, Microsoft released Windows ME (Millennium Edition), a consumer version of their flagship product. Widely regarded as one of the most unstable operating systems Microsoft had ever produced, it mainly featured enhanced multimedia capabilities.

In June, the company released a new version of its hand-held operating system, Windows CE 3.0. The main change was the new programming APIs of the software. Previous versions of Windows CE supported only a small subset of the WinAPI, the main development library for windows, and with Version 3 of Windows CE, the operating system now supported nearly all of the core functionality of the WinAPI.

Microsoft released Windows XP in 2001, a version that aimed to encompass the features of both its business and home product lines. The release included an updated version of the Windows 2000 kernel, enhanced DOS emulation capabilities, and many of the home-user features found in previous consumer versions. XP introduced a new graphical user interface, the first such change since Windows 98. The operating system was the first to require Microsoft Product Activation, an anti-piracy mechanism that requires users to activate the software with Microsoft within 30 days.

In 2003, Microsoft launched the .NET initiative, along with new versions of some of its development products, such as Microsoft Visual Studio. The initiative has been an entirely new development API for Windows programming, and includes a new programming language, C#. Windows Server 2003 was launched, featuring enhanced administration capabilities, such as new user interfaces to server tools. In 2004, the company released Windows XP Media Center Edition 2005, a version of Windows XP specifically designed for multimedia capabilities, and Windows XP Starter Edition, a version of Windows XP with a smaller feature set designed for entry-level consumers.

In March 2004, the European Union brought legal action against Microsoft for antitrust violations. Eventually Microsoft was fined $613 million, ordered to divulge certain protocols to competitors, and to produce a version of Windows that did not include the Windows Media Player. Many Korean retailers now offer two separate packages, one with Windows Media Player and Internet Explorer and one without either software but with links to obtain third-party software Microsoft announced a new version of its MSN search service later in 2005, designed to compete with Google.

2006 and beyond

Microsoft will release a new version of its Windows operating system, Windows Vista (formerly known as 'Longhorn') in the autumn of 2006. It is described by Microsoft as the largest upgrade to Windows since the release of Windows 95. Bill Gates is quoted as saying that it will be pre-installed with computers sold around Christmas 2006.

It will also release Microsoft Office 2007 (formerly known as 'Office 12'), a major revamp to its productivity suite.

Microsoft will also release its Windows Live products, which are online services that do not require installation in individual computers, and are thus available to users anywhere they access the Internet. As many as 30-50 Windows Live services are rumored to be in the works. Many are now available for testing, including Live.com, Windows Live Mail (a successor to MSN Hotmail), Windows Live Messenger (a successor to MSN Messenger), Windows Live Local (a re-branding of MSN Virtual Earth), Windows OneCare Live, and many more. The services are said to interoperate with one another.

The successor to Visual Studio 2005, code named Orcas, is currently scheduled to be released at the same time as Windows Vista. The successor to Orcas is code-named Hawaii.

Photon is the next major revision to the Windows Mobile platform. In December 2005, Microsoft announced that the Smartphone and Pocket PC platforms will be merged for this release. Microsoft has also indicated that this release is still fairly far off in the future. Nothing much is known about this OS yet, apart from special design improvements and greatly improved battery life.

In 2007, Microsoft will release Windows Server "Longhorn", the successor to Windows Server 2003. That year, Microsoft is also scheduled to provide service packs for Windows XP and Windows Vista, which will include its WinFS, a storage subsystem that emphasizes relationships between files through metadata.

The successor to Windows Vista will be Windows "Vienna", set to release sometime from 2009-2012.