The bespectacled Gates achieved billionaire status in 1986, only 11 years after he and friend Paul Allen founded Microsoft as an informal partnership and set up shop in Albuquerque, N.M., when Gates was 20. The products developed under his watch-Windows, particularly--were often lackluster at first, achieving market acceptance only after several versions and market dominance only after several more. It wasn't until 1988 that Microsoft surpassed Lotus to become the world's largest software company.Windows 1.0 was announced in 1983 and released in 1985; Windows 3.0 debuted in 1990 at a splashy rollout in New York with Gates presiding. Even then, most experts agree, Windows significantly trailed the Apple Macintosh OS, introduced in 1984, as a graphical operating system for personal computers. Click to download "Bill Gates: A Considered Life", a graphic timeline (PDF file). This lateness to market was often a reason for rivals to underestimate Microsoft's technology and Gates' business skills. But time and time again, Gates waited for a market to develop, moving in only once he fully understood it. In the process, he often drove out pioneers and took over markets, sometimes by way of business practices that fueled bitterness among competitors and eventually stirred the dogs of antitrust. Key to Microsoft's success was a relationship with IBM that started as a close partnership and ended in a bitter schism. It began this way: When Digital Research's Gary Kildall was slow in striking a licensing deal with IBM for his CP/M operating system, Gates told Big Blue he could provide the technology. He then purchased QDOS ("Quick and Dirty Operating System," a close cousin of CP/M written by Tim Paterson) from Seattle Computer Products and licensed the software to IBM as MS-DOS. Critically, Gates retained the right to license the operating system to other hardware vendors such as Compaq, which would in a few years leapfrog IBM's hardware. The maneuver required a lot of nerve. It required Gates. Recognizing the value of IBM as a partner, Gates cultivated a close relationship with the industry giant through several versions of DOS, culminating in an agreement to create a successor operating system, OS/2, in 1985. Version 1.1 of the ill-starred OS was released in 1988. While IBM sought to herd its vast installed base of corporate PCs toward this expensive, proprietary hardware hog of an operating system, Gates maintained a separate development team focused on Windows, which was practically as good as OS/2, was less expensive, required less hardware and was available on a vast array of compatible PC vendors' gear. Gates' move cast him in the eyes of many as David versus IBM's Goliath. His gamble was bold, risky and--we all know now--a sure thing. What others would have shrunk from, Gates did. IBM, by far the dominant player in the IT industry, would pour untold millions into OS/2 before throwing in the towel and, eventually, abandoning the PC business altogether.
"Windows 1.0 didn't work," said John Dodge, who in 1983 was one of the founding editors of PC Week, now eWEEK. "It promised more than the hardware could deliver--more processing speed and memory. Windows 3.0 was the first really useful version."