Meanwhile, Microsoft began introducing its most prominent office products. Microsoft Works, an integrated office program which combined features typically found in a word processor, spreadsheet, database and other office applications, saw its first release as an application for the Apple Macintosh towards the end of 1986. Microsoft Works would later be sold with other Microsoft products including Microsoft Word and Microsoft Bookshelf, a reference collection introduced in 1987 that was the company's first CD-ROM product. Later, on August 8, 1989, Microsoft would introduce its most successful office product, Microsoft Office. Unlike the model of Microsoft Works, Microsoft Office was a bundle of separate office productivity applications, such as Microsoft Word, Microsoft Excel and so forth. While Microsoft Word and Microsoft Office were mostly developed internally, Microsoft also continued its trend of rebranding products from other companies, such as SQL Server on January 13 1988, a relational database management system for companies that was based on technology licensed from Sybase.

On May 22, 1990 Microsoft launched Windows 3.0. The new version of Microsoft's operating system boasted such new features as 16 color graphics and support for the Intel 386 processor; it sold over 100,000 copies in two weeks. Windows at the time generated more revenue for Microsoft than OS/2, and the company decided to move more resources from OS/2 to Windows. In an internal memo to Microsoft employees on May 16, 1991, Bill Gates announced 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. This changeover from OS/2 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 assert that the Office team did not have access to the Windows source code at the time, and relied on reverse engineering instead. Although this assertion is debunked by no lesser source than a Microsoft insider writing for Microsoft Press which includes numerous examples of internal communication and requests between different teams inside Microsoft - access that developers from other companies simply would not have had. 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 copyright infringement legal case brought by Apple Computer, dubbed Apple Computer, Inc. v. Microsoft Corp., in which the ruling was in Microsoft's favor, the release of 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 on March 22, the first encyclopedia designed to run on a computer. Microsoft changed its slogan to "Where do you want to go today?" in 1994 as part of an attempt to appeal to nontechnical audiences in a US$100 million advertising campaign.

Microsoft continued to make strategic decisions directed at consumers. The company released Microsoft Bob, a graphical user interface designed for novice computer users, in March 1995. Discontinued in 1996 due to poor sales, Bill Gates later attributed its failure to hardware requirements that were too high for typical computers; Microsoft Bob is widely regarded as Microsoft's most unsuccessful product.Multiple:

• DreamWorks SKG and Microsoft formed a new company, DreamWorks Interactive, to produce interactive and multimedia entertainment properties. In August, Microsoft released Microsoft Windows 95, a new version of the company's flagship operating system which featured 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. 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 ventures

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 (now called Windows Live ID) 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 15 to compete with similar news outlets such as CNN. Microsoft also 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 Computer, Internet Explorer was bundled with the Apple Macintosh operating system as well as with Windows. Windows CE 2.0, the handheld version of Windows, was released this year, including 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.

1998 was another significant year in Microsoft's history, with Bill Gates appointing Steve Ballmer president of Microsoft but remaining as Chair and CEO himself. The company 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 launched its Indian headquarters as well, which would eventually become the company's second largest after its U.S. headquarters. Finally, a great deal of controversy took place when a set of internal memos from the company were leaked on the internet. These documents, colloquially referred to as "The Halloween Documents", were widely reported by the media and go into detail of the threats that open source software poses to Microsoft's own software, previously voiced mainly by analysts and advocates of open source software. The documents also allude to legal and other actions against Linux as well as other open source software. While Microsoft acknowledges the documents, it claims that they are merely engineering studies. Despite this, however, some believe that these studies were used in the real strategies of the company.

2000–2005: Legal issues, XP, and .NET

2000 saw a new release of all three lines of the company's flagship operating system, as well as the end of one its most prominent legal cases. On February 17, 2000 Microsoft released an update to its business line of software in 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 due to its usage of the Windows NT kernel, and provided matching features for several of those found in the home line of the operating system including 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, calling the company an "abusive monopoly" and 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. On June 15, 2000 the company also 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. The update to the consumer line, Windows Me (or Windows Millennium Edition), was released on September 14, 2000. It sported several new features such as enhanced multimedia capabilities and consumer-oriented PC maintenance options, but is often regarded as one of the worst versions of Windows due to installation problems and other issues.

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. Later, Microsoft would enter the multi-billion-dollar game console market dominated by Sony and Nintendo, with the release of the Xbox. As of 2005, the console ranked second to Sony's PlayStation 2 and ahead of Nintendo's GameCube in market share in the United States (although behind the two worldwide). The console shipped 22 million units, compared with PlayStation 2 at greater than 100 million units, and the company took a US$4 billion loss on the console.

In 2002, 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. However, Microsoft would encounter more turmoil in March 2004 when antitrust legal action would be brought against it by the European Union for allegedly abusing its market dominance (see European Union Microsoft antitrust case). Eventually Microsoft was fined €497 million (US$613 million), ordered to divulge certain protocols to competitors, and to produce a version of Windows that did not include the Windows Media Player. (PDF format - from the official EU website) Microsoft was also ordered to produce separate packages of Windows after South Korea also landed a settlement against the company in 2005. It had to pay out US$32 million and produce more than one version of Windows for the country in the same vein as the European Union - one with Windows Media Player and Windows Messenger and one without the two programs.

2005–2006: The road to Vista

Formerly codenamed "Longhorn" in the early development stages, the next planned version of Windows, Windows Vista, is in its second beta and as of July 2006 is scheduled for release to consumers in January, 2007. Microsoft announced the new name of the operating system at the Microsoft Global Business Conference (MGB) in Atlanta, Georgia on July 21, 2005. The next version of the company's server operating system, codenamed Windows Server "Longhorn" is scheduled for release in 2007 as of March 2006 . Microsoft plans to release a new version of Microsoft Office as well, called Microsoft Office 2007 (formerly known as 'Office 12'), and is set to be released along side Vista in January 2007 as of May 2006. In addition to Office, the next version of Visual Studio, the company's development suite, code named Orcas, is currently available as a Community Technology Preview (CTP). As of May 2006, an official release date is yet to be set for the development suite.

In guise of competing with other Internet companies such as the search service Google, in 2005 Microsoft announced a new version of its MSN search service. Later, in 2006, the company launched Microsoft adCenter, a service that offers pay per click advertisements, in an effort to further develop their search marketing revenue.

On June 15, 2006 Gates announced his plans for a two year transition period out of a day-to-day role with Microsoft until July 31, 2008. After that date, Gates will continue in his role as the company's chairman, head of the Board of Directors and act as an adviser on key projects. His role as Chief Software Architect will be filled immediately by Ray Ozzie, the Chief Technical Officer of the company as of June 15, 2006. Bill Gates stated "My announcement is not a retirement – it’s a reordering of my priorities."

Product divisions

To be more precise in tracking performance of each unit and delegating responsibility, Microsoft reorganized into seven core business groups—each an independent financial entity— in April 2002. Later, on September 20 2005, Microsoft announced a rationalization of its original seven business groups into the three core divisions that exist today: the Windows Client, MSN and Server and Tool groups were merged into the Microsoft Platform Products & Services Division; the Information Worker and Microsoft Business Solutions groups were merged into the Microsoft Business Division; and the Mobile and Embedded Devices and Home and Entertainment groups were merged into the Microsoft Entertainment and Devices Division.

Microsoft Platform Products and Services Division

This division produces Microsoft's flagship product, the Windows operating system. It has been produced in many versions, including Windows 3.1, Windows 95, Windows 98, Windows 2000, Windows Me, Windows XP, and Windows Server 2003. Almost all IBM compatible personal computers designed for the consumer come with Windows preinstalled. The next planned desktop version of Windows is Windows Vista. The online service MSN, the cable television station MSNBC, and the Microsoft online magazine Slate are all part of this division. Slate was later acquired by The Washington Post on December 21, 2004. At the end of 1997, Microsoft acquired Hotmail, the first and most popular webmail service, which it rebranded as "MSN Hotmail". Later in 1999 Microsoft introduced MSN Messenger, an instant messaging client, to compete with the popular AOL Instant Messenger. Along with Windows Vista, MSN is to become Windows Live.

Microsoft Visual Studio is the company's set of programming tools and compilers. The software product is GUI-oriented and links easily with the Windows APIs, but must be specially configured if used with non-Microsoft libraries. The current version is Visual Studio 2005. The previous version, Visual Studio.Net 2003, was named after the .NET initiative, a Microsoft marketing initiative covering a number of technologies. Microsoft's definition of .NET continues to evolve. As of 2004, .NET aims to ease the development of Microsoft Windows-based applications that use the Internet, by deploying a new Microsoft communications system, Indigo (now renamed Windows Communication Foundation). This is intended to address some issues previously introduced by Microsoft's DLL design, which made it difficult, even impossible in some situations, to manage, install multiple versions of complex software packages on the same system (see DLL-hell), and provide a more consistent development platform for all Windows applications (see Common Language Infrastructure). In addition, the Company established a set of certification programs to recognize individuals who have expertise in its software and solutions. Similar to offerings from Cisco, Sun Microsystems, Novell, IBM, and Oracle Corporation, these tests are designed to identify a minimal set of proficiencies in a specific role; this includes developers ("Microsoft Certified Solution Developer"), system/network analysts ("Microsoft Certified Systems Engineer"), trainers ("Microsoft Certified Trainers") and administrators ("Microsoft Certified Systems Administrator" and "Microsoft Certified Database Administrator").

Microsoft offers a suite of server software, entitled Windows Server System. Windows Server 2003, an operating system for network servers, is the core of the Windows Server System line. Another server product, Systems Management Server, is a collection of tools providing remote-control abilities, patch management, software distribution, and a hardware/software inventory. Other server products include:

• SQL Server, a relational database management system;
• Exchange Server, for certain business-oriented e-mail features;
• Small Business Server, for messaging and other small business-oriented features; and
• BizTalk Server, for employee integration assistance and other functions.

Microsoft Business Division

The Microsoft Business Division produces Microsoft Office, which is the company's line of office software. The software product includes Word (a word processor), Access (a personal relational database application), Excel (a spreadsheet program), Outlook (Windows-only groupware, frequently used with Exchange Server), PowerPoint (presentation software) and Microsoft FrontPage, a WYSIWYG HTML editor, and Publisher (desktop publishing software). A number of other products were added later with the release of Office 2003 including Visio, Project, MapPoint, InfoPath and OneNote.

The division focuses on developing financial and business management software for companies. These products include products formerly produced by the Business Solutions Group, which was created in April 2001 with the acquisition of Great Plains. Subsequently, Navision was acquired to provide a similar entry into the European market, resulting in the planned release of Microsoft Dynamics NAV in 2006. The group markets Axapta and Solomon, catering to similar markets, which is scheduled to be combined with the Navision and Great Plains lines into a common platform called Microsoft Dynamics.

Microsoft Entertainment and Devices Division

Microsoft has attempted to expand the Windows brand into many other markets, with products such as Windows CE for PDAs and its "Windows-powered" Smartphone products. Microsoft initially entered the mobile market through Windows CE for handheld devices, which today has developed into Windows Mobile 5. The focus of the operating system is on devices where the OS may not directly be visible to the end user, in particular, appliances and cars. The company produces MSN TV, formerly WebTV, a television-based Internet appliance. Microsoft used to sell a set-top Digital Video Recorder (DVR) called the UltimateTV, which allowed users to record up to 35 hours of television programming from a direct-to-home satellite television provider DirecTV. This was the main competition in the UK for British Sky Broadcasting's (BSkyB) SKY + service, owned by Rupert Murdoch. UltimateTV has since been discontinued, with DirecTV instead opting to market DVRs from TiVo Inc. before later switching to their own DVR brand.

Microsoft sells computer games that run on Windows PCs, including titles such as Age of Empires and the Microsoft Flight Simulator series. It produces a line of reference works that include encyclopedias and atlases, under the name Encarta. Microsoft Zone hosts free premium and retail games where players can compete against each other and in tournaments. Microsoft entered the multi-billion-dollar game console market dominated by Sony and Nintendo in late 2001, with the release of the Xbox. The company develops and publishes its own video games for this console, with the help of its Microsoft Game Studios subsidiary, in addition to third-party Xbox video game publishers such as Electronic Arts and Activision, who pay a license fee to publish games for the system. The Xbox also has a successor in the Xbox 360, released on 2005-11-22 in North America and other countries. With the Xbox 360, Microsoft hopes to compensate for the losses incurred with the original Xbox. However, Microsoft made some decisions considered controversial in the video gaming community, such as selling two different versions of the system, as well as providing backwards compatibility with only particular Xbox titles. In addition to the Xbox line of products, Microsoft also markets a number of other computing-related hardware products as well, including mice, keyboards, joysticks, and gamepads, along with other game controllers, the production of which is outsourced in most cases.

The division also houses Microsoft's Macintosh Business Unit, one of the largest developers of Macintosh software outside Apple itself. The unit produces Macintosh versions of popular Microsoft productivity titles such as Office for Mac and Virtual PC for Mac; as well as certain Mac-specific titles such as Entourage.

Business culture

Microsoft has often been described as having a developer-centric business culture. A great deal of time and money is spent each year on recruiting young university-trained software developers and on keeping them in the company. For example, while many software companies often place an entry-level software developer in a cubicle desk within a large office space filled with other cubicles, Microsoft assigns a private or semiprivate closed office to every developer or pair of developers. In addition, key decision makers at every level are either developers or former developers. In a sense, the software developers at Microsoft are considered the "stars" of the company in the same way that the sales staff at IBM are considered the "stars" of their company.

Employees of Microsoft are expected to be comfortable with ambiguity in that they may not, for example, know with any degree of certainty when a product will ship, what it will be called, or what features will be included. Managers at Microsoft are expected to have a general attitude of long-term strategic wariness, to be ready for any challenge from the competition or the market, and to keep in mind that being the largest software company in the world is not seen as a form of safety or a guarantee of future success. For instance, future competitors could rise from other industries, or computer hardware companies could try to become less dependent on Microsoft, or consumers could decide not to upgrade their software as often.

Within Microsoft the expression "eating our own dog food" is used to describe the policy of using the latest Microsoft products inside the company in an effort to test them in "real-world" situations. Only prerelease and beta versions of products are considered dog food. This is usually shortened to just "dog food" and is used as noun, verb, and adjective. The company is also known for their hiring process, dubbed the "Microsoft interview", which is notorious for off-the-wall questions such as "Why is a manhole cover round?" and is a process often mimicked in other organizations, although these types of questions are rarer now than they were in the past. For fun, Microsoft also hosts the Microsoft Puzzle Hunt, an annual puzzle hunt (a live puzzle game where teams compete to solve a series of puzzles) held at the Redmond campus. It is a spin-off of the MIT Mystery Hunt.

User culture

Technical reference for developers and articles for various Microsoft magazines such as Microsoft Systems Journal (or MSJ) are available through the Microsoft Developer Network, often called MSDN. MSDN also offers subscriptions for companies and individuals, and the more expensive subscriptions usually offer access to pre-release beta versions of Microsoft software. In recent years, Microsoft launched a community site for developers and users, entitled Channel9, which provides many modern features such as a wiki and an Internet forum. Another community site that provides daily videocasts and other services, On10.net, launched on March 3, 2006.

Most free technical support available through Microsoft is provided through online Usenet newsgroups (in the early days it was also provided on CompuServe). There are several of these newsgroups for nearly every product Microsoft provides, and often they are monitored by Microsoft employees. People who are helpful on the newsgroups can be elected by other peers or Microsoft employees for Microsoft Most Valuable Professional (MVP) status, which entitles people to a sort of special social status, in addition to possibilities for awards and other benefits.

Corporate affairs

Corporate structure

There are several other aspects to the corporate structure of Microsoft. For worldwide matters there is the Executive Team, made up of sixteen company officers across the globe, which is charged with various duties including making sure employees understand Microsoft's culture of business. The sixteen officers of the Executive Team include the Chairman and Chief Software Architect, the CEO, the General Counsel and Secretary, the CFO, senior and group vice presidents from the business units, the CEO of the Europe, the Middle East and Africa regions; and the heads of Worldwide Sales, Marketing and Services; Human Resources; and Corporate Marketing. In addition to the Executive Team there is also the Corporate Staff Council, which handles all major staff functions of the company, including approving corporate policies. The Corporate Staff Council is made up of employees from the Law and Corporate Affairs, Finance, Human Resources, Corporate Marketing, and Advanced Strategy and Policy groups at Microsoft. Other Executive Officers include the Presidents and Vice Presidents of the various product divisions, leaders of the marketing section, and the CTO, among others.

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