Hard Drive: Bill Gates and the Making of the Microsoft Empire

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Praise for
HARD DRIVE
by James Wallace and Jim Erickson

“A stupendous success story. This is the most informative book yet on Bill Gates and Microsoft.” —
Washington Post

“Remarkable....
[Hard Drive]
will almost certainly leave you wistful. No, not wishing that you worked for Microsoft, which sounds like what you might experience if you combined Marine boot camp, a fraternity party, and, a trip to the zoo. The book will make you wonder why you didn’t buy Microsoft stock when it went public.”

—Wall Street Journal

“Wallace and Erickson display an admirable sense of journalistic detachment and detail, plumbing the depths of Gates’s experience to see what makes him tick. Everyone from Gates on down to his ex-Scoutmaster seems to have chatted with the authors.”

—San Francisco Chronicle

“This well-written book deserves an audience beyond the computer literate. Packed with anecdotes,
Hard Drive
helps show that from the beginning of his career to today, Gates has always been something more than a 98-pound megalomaniac.”

—Detroit Free Press

“An engaging, almost classic tale of a boy who finds power in gadgets and then won’t let go.” —
Los Angeles Times

“An exciting tale, told in racy style, with plenty of detail and well researched quotations, all focused on the enigmatic personality of Bill Gates.” —
London Financial Times

“A biting biography and computer industry expose.”

—Publishers Weekly

“Captivating reading, more enthralling than any thriller” —
Nature

HARD

DRIVE

Bill Gates and the Making of the Microsoft Empire

James Wallace Jim Erickson

HarperBusiness

To my mother and father; and to Linda Joyce Buzbee, because a promise is, after all, a promise.

James

To my mother, father, and to Nancy.

Jim

A hardcover edition of this book was published in 1992 by John Wiley & Sons, Inc. It is here reprinted by arrangement with John Wiley & Sons, Inc.

hard
drive
.
Copyright © 1992 by James Wallace and Jim Erickson. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information address HarperCollins Publishers, Inc., 10 East 53rd Street, New York, NY 10022.

HarperCollins books may be purchased for educational, business, or sales promotional use. For information please write: Special Markets Department, HarperCollins Publishers, Inc., 10 East 53rd Street, New York, NY 10022.

First HarperBusiness edition published 1993.

Library of Congress Cataloging-in-Publication Data

Wallace, James. 1947-

Hard drive : Bill Gates and the making of the Microsoft empire / James Wallace, Jim Erickson. — 1st HarperBusiness ed. p. cm.

Reprint. Originally published: New York: Wiley, 1992.

Includes index.

ISBN 0-88730-629-2 (pbk.)

1. Gates, Bill, 1956- . 2. Microsoft Corporation—History. 3. Businessmen—United States—Biography. 4. Computer software industry—United States—History.

I. Erickson, Jim. II. Title [HD9696.C62G3378 1993]

338.4'70053'092—dc20 92-54845

96 97 98 ♦/RRDH 10

Acknowledgments

_T

his is not a book about computers or the dazzling tech

-nology that sparked one of the world’s great revolutions

less than two decades ago. Rather, it is a story about people, a remarkable collection of individuals led by one man, Bill Gates, whose drive, genius, vision, and entrepreneurial spirit created one of the great success stories in the history of American business. We wanted to write a book that would appeal as much to those who know nothing about computers as it would to those who regard these machines as the most important thing in their lives. We hope we have done that.

The book grew out of a series of stories on Gates and Microsoft published in the
Seattle Post-Intelligencer
newspaper in May of 1991. The subsequent project, a book-length profile of Gates, took the better part of a year to complete and was undertaken without the help or cooperation of Microsoft. Even so, more than 150 people, many of them past and current employees and executives of Microsoft, were interviewed. We are indebted to everyone who helped us tell this story, regardless of how much of what they told us found its way into the book.

We would like to begin by thanking J.D. Alexander, executive editor of the
Seattle Post-Intelligencer,
who not only allowed us the time to research and write this book but also gave his support and generously allowed some of the paper’s photographs of Gates to be reprinted in the book.

Others at the paper we would like to thank are Lytton Smith, who helped with the research, and all the people in systems, who provided technical assistance.

We are deeply grateful to our publisher, John Wiley & Sons, who saw the possibilities of such a book and gave us the opportunity to do it.

No one deserves more credit, or thanks, than our editor, Roger Scholl, whose patience, editorial guidance, hard work, and encouragement were invaluable. Anyone who writes a book should be so fortunate to have such an understanding editor.

This book would not have been possible without the tireless efforts of several others at John Wiley & Sons, including Marcia Samuels, production manager, and Elizabeth Doble, director of production. Our appreciation goes to all those at Impressions in Madison, Wisconsin, who spent many hours copyediting.

Finally, special thanks to many good friends who saw us through the months this project took, and who continuously offered their support—in particular, to Mary Williams, Angelo Bruscas, Ceceilia Dominique, and Dick Clever.

In addition to interviews, our research was based on a number of books, national magazines, newspapers, and trade publications. The books included
Fire in the Valley
by Paul Frei- berger and Michael Swaine;
Hackers
by Steven Levy;
Blue Magic
by James Chposky and Ted Leonsis;
The Making of Microsoft
by Daniel Ichbiah and Susan Knepper; and
Programmers at Work
by Susan Lammers. The newspapers upon which we based our research included the
Seattle Post-Intelligencer, Seattle Times, New York Times, Wall Street Journal, Washington Post, LA Times
and
San Jose Mercury News.
National magazines included
Forbes, Fortune, Money, Time, Newsweek,
and
Business Week,
as well as the trade publications
PC Week
and
InfoWorld.

For those curious about such things, this book was written on a Leading Edge compatible PC with an 8088 chip and XyWrite word processing program.

James Wallace and Jim Erickson Seattle, February 1992

Contents

Prologue I
1

The Early Years 5
2

“It’s Going to Happen”
53

3

The Microkids
85

4

Hitching a Ride with Big Blue
139

5

Growing Pains
207

6

King of the Hill
319

Index
421

HARD

DRIVE

PROLOGUE

The Winds of Fortune

_W

illiam Gates III, chairma
n of the largest computer soft-
ware company on earth, stood nervously at the front of

the ballroom of the 308-foot cruise yacht
New Yorker.
He was about to unveil Microsoft’s fifth and latest version of the most popular piece of software ever created, a computer operating system known as MS-DOS.

It was to be the biggest launch of a software product in computer industry history. More than 500 people had turned out on a humid Tuesday evening in New York City in the summer of 1991 to board the yacht—playfully dubbed
“DOS Boat
”—to listen to Gates and his corporate sidekick, Microsoft operating systems chief Steve Ballmer, make an impassioned sales pitch for MS-DOS 5.0. Both industry analysts and the press had gathered for the gala event, which promised free food, music by jazz master Dave Brubeck, and a five-hour cruise on the Hudson River and around the New York City harbor. Computer hardware and software executives had flown in from around the country to get a glimpse of Gates and to listen to the industry’s

enfant terrible
and biggest star announce where he, and Microsoft, were headed.

At 35, Gates was at the pinnacle of his young · career. In 1990 Microsoft, the company he and childhood friend Paul Allen had founded barely sixteen years before, had become the first software company to sell more than a billion dollars worth of products in a single year. Gates was the undisputed mastermind of that success, a brilliant technocrat, ruthless salesman, and manipulative—some said devious—businessman. His company’s astounding ascension had just a few years earlier made him the youngest billionaire in the history of America. By 1992 his net worth stood at more than $4 billion, making him the second richest man in the country.

His word had become the closest thing to gospel in the godless computer industry. A month earlier in Atlanta, at an industry trade show known as Comdex where Gates was the keynote speaker, people lined up for two city blocks to hear him speak on the future of the industry. Executives in business suits spilled out into the aisles and sat cross-legged on the floor when the seats were filled. But on this June evening in the Big Apple, as Gates moved stiffly to the microphones at the podium on the
New Yorker,
powerful and opposing forces were gathered across the Hudson, in Armonk, New York, headquarters of International Business Machines.

Gates straightened his 5-foot-l 1-inch frame and began his pitch, a condensed version of the history of MS-DOS. -

“In the last ten years, DOS has become the foundation of the PC industry and has sold more than ten times any other software package,” Gates intoned in his oddly high-pitched voice, which cracked occasionally like a nervous teenager’s, despite the extensive speech lessons he had taken months before. Microsoft’s operating system, he went on, was now installed on more than 60 million personal computers, which represented about 75 percent of all the personal computers in the world. He predicted that another 18 million copies of DOS would be sold with computer systems in 1991. “It’s not just that number that’s astounding, it’s the whole phenomenon behind it.”

Gates did not depart from the prepared text or interject words like “cool” or “super,” which normally were part of his standard vocabulary.

Make-up, hurriedly applied so his face would not shine into the television cameras that would beam his presentation via satellite to some 300 locations around the United States, hid the acne to which he was still prone. Lights glared off his oversize glasses, blotting out his blue eyes. His mop of dishwater blond hair was, uncharacteristically, neatly combed. But those who looked closely could see the small flakes of dandruff on the shoulders of his black suit. The joke around the industry was that Gates never went anywhere without his dandruff.

A most unlikely captain of industry, he looked as if he could have been 25, or younger. There was an engaging, boyish charm about the former computer hacker whom many in the press had once described as a nerd. No one underestimated Bill Gates, though. Too many people had done that in the past. Most of the guests in the audience already knew Microsoft’s history. In 1980 the company had sold the MS-DOS operating system to IBM when it made its irresistible entry into the desktop computing marketplace and established industry standards that have yet to be supplanted. The revenue from that partnership gave Gates a guaranteed income stream and the push he needed to make his vision—Microsoft software on every desktop PC—come true. Not long after he made the deal with IBM, the fiery, competitive Gates had slammed his fist into his palm and vowed to put several of his major software competitors out of business. By 1991, many of those competitors were indeed in full retreat under a barrage of Microsoft products.

But Gates had made a great many enemies along the way. He had stepped on too many toes on his way to the top, and subjected countless colleagues to his abrasive, childish rants and intellectual browbeatings. The Federal Trade Commission, acting on anonymous complaints, had begun investigating Microsoft for possible anti-trust violations. Many competitors wanted to see Microsoft dismantled the way the federal government had carved up Ma Bell into so many Baby Bells. Even Microsoft’s enormously profitable and long-running marriage with IBM was threatening to unravel into a messy divorce. In a magazine article about Gates entitled “The Silicon Bully,” one unnamed IBM official was quoted as saying he would like to put an icepick in Gates’ head.

Retribution was in the wind. While Gates spoke, across the Hudson in Armonk executives from IBM were huddled with the top brass of onetime archrival Apple Computer. The two giants of the computer world, threatened by Microsoft’s domination of the software industry, were plotting to form an alliance to create their own operating system, a new standard that would supplant DOS and wrest control of the industry away from Gates.

Outside
“DOS Boat,”
a thunderstorm had gathered in the muggy evening air above the harbor.^ Gates and Ballmer had finished their monologues and were now fielding questions from the audience. A reporter fired three quick questions designed to put Gates and Ballmer on the spot over the rift with IBM.

Before either could answer, something—a rogue wave from the storm, the passing wake of a freighter—disturbed the
New Yorker.
The huge yacht lurched sickeningly.

“Our boat is rocking here in New York,” a startled Ballmer said into the microphone for the benefit of the closed-circuit TV audience.

“IBM has great powers” piped up someone from the audience. The crowd began laughing, then burst into applause.

Gates, a silly grin across his face, seemed to roll with the punch. But it was as if some invisible force had landed a couple of solid body blows to Microsoft’s euphoria, auguring darker things to come.