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How the Web Was Won: How Bill Gates and His Internet Idealists Transformed the Microsoft Empire

Overview

The inside story of how a small band of agitators at Microsoft staged the stunning turnaround that transformed the company from an Internet laggard into such a dominant force that it was declared a monopolist.

1993. When Bill Gates peered into Microsoft's crystal ball, he saw a world of Windows. Then the Internet burst onto the scene, and suddenly Gates's Windows-oriented future didn't look so bright. The Internet was the future of ...
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Overview

The inside story of how a small band of agitators at Microsoft staged the stunning turnaround that transformed the company from an Internet laggard into such a dominant force that it was declared a monopolist.

1993. When Bill Gates peered into Microsoft's crystal ball, he saw a world of Windows. Then the Internet burst onto the scene, and suddenly Gates's Windows-oriented future didn't look so bright. The Internet was the future of computing—and the world's largest software company wasn't ready for it. In How the Web Was Won, veteran Seattle Times journalist Paul Andrews chronicles the explosive drama and high-stakes gamesmanship behind the most remarkable business turnaround of the 1990s: the story of Microsoft's turbulent journey from Windows to the Web—and of the handful of Internet believers who led the charge.
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Product Details

  • ISBN-13: 9780767900492
  • Publisher: Broadway Books
  • Publication date: 8/15/2000
  • Edition description: 1ST TRADE
  • Pages: 368
  • Product dimensions: 6.14 (w) x 9.17 (h) x 1.02 (d)

Meet the Author

Coauthor of the 1993 national bestseller Gates, Paul Andrews has watched Microsoft as a Seattle Times reporter since the company moved to suburban Bellevue from Albuquerque, New Mexico, in 1979. Since 1989 he has written one of the nation's longest-running weekly personal technology columns, "User Friendly." Andrews has won numerous awards for his coverage of Microsoft over the past decade. He lives in Seattle with his wife, Cecile, and bichon frise, Maggie.
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Read an Excerpt

Nightmare

You would never have known it from his wealth, fame, and reputation, but Bill Gates was a worried, worried man.

On April 30, 1991, the software king isolated himself for a week at the family compound he had built along the southeastern shore of Hood Canal in Washington State's Puget Sound. The canal, a long, narrow stretch of inlet that ran the length of the sound, was one of Gates's favorite spots on earth. Growing up in Seattle, Gates had spent some of his happiest times visiting Hood Canal, going water-skiing, attending summer camp, staying with his grandmother Adelle Maxwell, whom he and the rest of the family called Gam, at her summer cabin there. After she passed away, Gates had built as a monument to his grandmother Gateaway, a four-house compound on three and a half acres, for family and executive retreats. An hour and a half's drive from Seattle, Gateaway was well known to Microsofties as the site for Microgames, an annual summertime adventure competition where teams of players matched wits and motor skills in a sort of extreme games for the brainy set. The compound also hosted periodic strategic planning sessions for Microsoft's inner circle, guys like Steve Ballmer, Paul Maritz, Jeff Raikes, Brad Silverberg, Jim Allchin. And Gates liked to bring in friends like megainvestor Warren Buffett and Washington Post publisher Katharine Graham for occasional get-togethers.

That week, Gates was alone. There was something calming yet energizing about the canal. The damp air seemed to enclose you in a cocoon of concentration and focus. Your mind cleared out. Issues and challenges became more defined. Ideas flowed more easily. It was amazing how whenyou eluded the noise and demands of the everyday world, you could grab hold of the things that really mattered. Drilling down, augering in-call it what you wanted, the misty isolation of Hood Canal really allowed you to bring things into focus.

Gates had been poring over a stack of technology-oriented reading material-memos, white papers, journals, magazines, and books-early that afternoon. The software king loved to read. The bookshelves in the living room of his compound quarters held some of his recent perusings. There was Running Critical by Patrick Tyler, examining the Cold War power struggle between Admiral Hyman Rickover and General Dynamics. There was Robert Lacey's look at Ford and God Knows, the bleak Joseph Heller novel. The Great Getty, by Bob Lenzner, on the oil baron turned art patron; Honorable Justice by Sheldon Novick, on Oliver Wendell Holmes; The Second Creation, a look at twentieth-century physics; The Bishop's Boys, Tom Crouch's study of the Wright brothers, and Liar's Poker, Michael Lewis's look at Wall Street. Gates gravitated toward historical biographies. Part of his fascination derived from his own sense of history and his role in one of the great revolutions of the twentieth century: the Information Age. By any measure, Gates and Microsoft were successes-amazingly, astonishingly so. Founded in 1975 by Gates and his Seattle private-school chum Paul Allen, Microsoft had grown sixteen years later into an international software empire generating $1.8 billion in revenues and 25 percent after-tax profits. Microsoft's third version of Windows, issued a year earlier on May 22, 1990, had sold 9 million copies and was well on its way to supplanting MS-DOS as the bestselling software program ever written. Within five months Gates, thirty-five years old and worth $4.8 billion, would ride the success of Microsoft and Windows to the No. 2 position on the Forbes 400 list of the richest Americans, a distinction Gates considered more a distraction than an honor.

To the world at large, Microsoft was a mighty kingdom, yes. But to Gates, that just made it a bigger target. The way he saw things, Microsoft was under assault from every front. And if the company relaxed its defense for a moment, if it made the wrong strategic decision or pursued the wrong technology, the whole thing could go up in smoke tomorrow. It was one reason he liked to tell executives at Microsoft, "For every piece of good news you send me, tell me a piece of bad news." Gates mentally ticked off the challenges Microsoft faced. First there was IBM, upset about the success of Windows versus OS/2-the big, next-generation PC operating system that Big Blue wanted to use to supplant Microsoft's DOS and Windows. The delicate partnership that had defined personal computing through the 1980s had in the fall of 1990 finally dissipated in a miasma of distrust and reprobation. "IBM always had these projects to wipe us out, so every company retreat we're saying, 'It looks like IBM is going to try and replace us,'" Gates would recall. "What can we do to prevent that? What's our strategy once that happens?"

The two companies were still working together under a three-year agreement to share some technologies, but IBM's strategy was for OS/2 to supersede Windows by the time the agreement expired in 1993.

Besides Big Blue, there was Big Brother to worry about. The Federal Trade Commission was investigating possible antitrust violations related to the way Microsoft licensed DOS to computer manufacturers. Then there was the Apple lawsuit, filed three years earlier and still hanging fire. Perhaps worst of all, Microsoft was having to bear the ignominy of being crushed by Novell, the Provo, Utah, PC networking software company. For eight years Microsoft had been trying to come up with a good networking strategy. And each year it seemed to fall deeper and deeper off the chart. Starting in 1989 Microsoft had made overtures of a merger with Novell. But talks were desultory, and Gates held little hope the two companies would get together. Networking was an embarrassment, one that Gates repeatedly used as a reminder when someone started talking about how big and powerful and dominant Microsoft was becoming.

Gates thought about a memo he had been reading by John Walker, the founder of Autodesk. Warning his wildly successful computer-aided design company of complacency, Walker depicted a nightmare scenario where Microsoft decided to compete in the market Autodesk had built an empire upon. Gates considered Walker's notion irrelevant; getting Microsoft into CAD might spread the company too thin. On the other hand, Gates considered the notion of nightmare scenarios all too relevant. Unless he and his company could make the leap to the next paradigm, Gates mused, Microsoft would be tomorrow's WordStar. When the IBM PC had come out, WordStar was the No. 1 word processor, with something like 90 percent market share. Everyone knew what control-KD did. You could ask out loud, "How do you boldface?" And someone across the room would call out the command. WordStar had been the standard, the market leader, the dominant force in word processing.

And where was WordStar today?

If Microsoft continued to execute well on its core strategy, the company would do well, Gates knew. He could see DOS and Windows and Microsoft's desktop applications-Word, Excel, PowerPoint, and on down the line-continuing to thrive in their traditional market, the desktop computer. It was a good business, one that had brought Microsoft much of its success. The operating system standards Microsoft had created-first DOS, on the IBM PC and "clone" computers, and then Windows-empowered computer users to create and customize information in new and exciting ways. PCs had exploded in power, functionality, and popularity throughout the 1980s, putting the Gates-Allen vision of a computer on every desk and in every home ever more closely within reach. By 1990 computers were selling at the clip of more than 20 million a year. But peering down the road ahead, Gates saw a looming dead end. Ultimately the model of standalone computers on desks and in homes had a fundamental limitation that would prevent it from continuing to transform society. To be truly useful, to become as popular and effective as television and radio and the telephone, computers had to be linked together somehow. Like people, computers could get a lot done on their own. But like people, they became a real social force and powerful change agent when they networked together.

And networking, Gates knew, was Microsoft's bête noir.
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