Bill Gates And The Management Of Microsoft
Harvard Business School
9-392-019
Rev. July 8. 1993
Bill Gates and the Management of Microsoft
Despite the fact that we’ve been successful financially, there’s an ongoing need to anticipate where this industry is going, and to be at the forefront of changing the products.
And this is every bit as challenging as it’s ever been--and perhaps more so.
Bill Gates, Microsoft Chairman and CEO, 1991
On June 30, 1991, Microsoft Corporation closed the books on another year of dazzling growth. Revenues for the Redmond, Washington, software developer surpassed $1.8 billion, up 56% from the previous year, and ten times the level of 1986 (see Exhibit 1). Profitability remained exceptionally high, with net income reaching $463 million, 25% of revenues (see Exhibit 2).
The founder and chief executive of this company was 35-year old William H. (Bill) Gates III, arguably the most influential person in the computer industry. He was also one of the wealthiest
Americans, owning 30% of Microsoft stock with a market value of $4 billion. Under Gates’ leadership, Microsoft had successfully navigated the transition from a start-up firm to a major corporation. The dominant supplier of personal computer (PC) operating system software during the
1980s, Microsoft had by the end of the decade surpassed such competitors as Lotus Development
Corporation in sales of applications software. The release in 1990 of Windows 3.0, which enabled applications programs to work together in a user-friendly graphics environment, had been a spectacular success, selling over three million copies in its first year. Microsoft’s success was reflected in a stock price of 30 times earnings, well above the industry average. Adjusting for splits, the stock price had increased by a factor of 20 since the company went public in 1986 (see Exhibit 3).
Looking ahead, however, Microsoft confronted a fresh set of challenges. It had expanded into new areas, including networking and consulting, and faced increasingly strong
9-392-019
Rev. July 8. 1993
Bill Gates and the Management of Microsoft
Despite the fact that we’ve been successful financially, there’s an ongoing need to anticipate where this industry is going, and to be at the forefront of changing the products.
And this is every bit as challenging as it’s ever been--and perhaps more so.
Bill Gates, Microsoft Chairman and CEO, 1991
On June 30, 1991, Microsoft Corporation closed the books on another year of dazzling growth. Revenues for the Redmond, Washington, software developer surpassed $1.8 billion, up 56% from the previous year, and ten times the level of 1986 (see Exhibit 1). Profitability remained exceptionally high, with net income reaching $463 million, 25% of revenues (see Exhibit 2).
The founder and chief executive of this company was 35-year old William H. (Bill) Gates III, arguably the most influential person in the computer industry. He was also one of the wealthiest
Americans, owning 30% of Microsoft stock with a market value of $4 billion. Under Gates’ leadership, Microsoft had successfully navigated the transition from a start-up firm to a major corporation. The dominant supplier of personal computer (PC) operating system software during the
1980s, Microsoft had by the end of the decade surpassed such competitors as Lotus Development
Corporation in sales of applications software. The release in 1990 of Windows 3.0, which enabled applications programs to work together in a user-friendly graphics environment, had been a spectacular success, selling over three million copies in its first year. Microsoft’s success was reflected in a stock price of 30 times earnings, well above the industry average. Adjusting for splits, the stock price had increased by a factor of 20 since the company went public in 1986 (see Exhibit 3).
Looking ahead, however, Microsoft confronted a fresh set of challenges. It had expanded into new areas, including networking and consulting, and faced increasingly strong