Bill Gates - Chmn, CEO of Microsoft Corp - The Power Players

Discount Store News, Dec 4, 1995 by Pete Hisey

The Nation's Richest Man. The Ultimate Greek. Machiavelli in Dockers. Microsoft's Bill Gates has been called all of that, with varying degrees of accuracy, and much more. At 40, Gates is chairman of what is arguably the most successful U.S. company ever. In 20 years, he has moved Microsoft from his apartment to become the closest thing America has to a monolith outside of Wal-Mart.

The introduction of Windows 95 marks an acceleration of Gates' and Microsoft's incursion into the world of retailing. Until recently, the retail end of Microsoft's business was an afterthought; its major sales came from corporate America and licensing agreements with hardware and software manufacturers.

But as the PC enters millions of new homes each year, Microsoft has moved to capture a significant share of this rapidly growing market. Gates, more known for appearances at technical computing conferences, was recently the keynote speaker at the heavily retail-oriented Consumer Electronics Show. Microsoft kiosks are popping up everywhere - from Best Buy to Wal-Mart. The home of Works, Windows and Word recently played Halloween host to a flock of computer games developed specifically for play with Windows 95.

Microsoft developed a mass-channel group in the late 1980s, roughly at the same time that discount stores began testing the computer market's potential. It has partnered extensively with leading mass retailers in the discount, consumer electronics, warehouse club and computer superstore industries, as well as book and music retailers.

Earlier this fall, the company cut prices on many of its popular Microsoft Home titles by as much as 40%, to new price points of roughly $29.95 and $39.95.

During the introduction of the new operating system, simulcast live at many major retailers like Computer City and The Incredible Universe, the consumer-friendly atmosphere was clear. Gates chose to highlight Activision's Pitfall: A Mayan Adventure over some of the more esoteric, business-related capabilities of Windows 95.

Anyone who reads Wired magazine on a regular basis knows that the true paternity of the home-based personal computer will forever be in question. Gates, former partner Paul Allen, Steve Jobs at Apple and several others are candidates. But one thing is clear. With his software, Gates had the vision to develop a system that met the needs of large businesses, yet was operable by relatively unskilled home users. Apple's operating system may have been more intuitive, but Gates got to the mass market first.

Tandy chairman John Roach was Gates' first large customer when Gates developed the BASIC programming language in 1977 and 1978. "He was only 20 or so," says Roach, "and since we needed to grow with our PC division, we enlisted Bill. By then we were already barnstorming with our first from town to town and buying ads in local papers. That was probably the first time most people had ever seen a PC. "Bill's a tremendous businessman and a great technologist," says Roach.

Microsoft's breakthrough, though, came when Gates convinced IBM to use his operating system on the first IBM Pc introduced in 1981. When other manufacturers jumped, Gates' fortune was made. The same was true of the computer retail market, which slowly grew as successively easier-to-use features were added, culminating in this year's Windows 95.

Within the first month of release, the package had sold 7 million copies at about $90 each, more than half of that at retail and most of the rest bundled with new PCs, most of which in turn were sold at retail. Somewhere in the vicinity of 15 million copies of the program should have shifted off retail shelves by the end of the year.

In turn, Windows 95 is stimulating sales of all kinds of compatible goods, from memory upgrades to new software to high-speed modems. The impact of that single product at retail measures in the billions and in the long term could make the PC as commonplace as the household refrigerator.

Gates, of course, is already on to the next market with great potential: the Internet. He has already tied up rights to some of the greatest images in the world, including the 30 million images in the Bettman Archive and exclusive rights to digital representations of the collections of some of the world's greatest museums. He has signed up Michael Kinsley, considered one of the nation's top editors, to launch a digital magazine. Every copy of Windows 95 comes with a single button that launches the user directly into cyberspace. And the Microsoft Network, Gates' nascent on-line service, comes preloaded with each copy.

In a memo to his top managers, reprinted by The Wall Street Journal, Gates said, "I assign the Internet the highest level of importance. In this memo I want to make clear that our focus on the Internet is critical to every part of our business. The Internet is the most important single development to come along since the IBM PC was introduced in 1981."

The Internet presents the first real threat to Microsoft's position in the computer industry. Theoretically, a stripped-down $500 PC, little more than a modem, keyboard, a CD-ROM player and 16 megs of RAM, could perform most of the functions of today's Pcs - without a hard drive and without loading software. Instead, users would "borrow" what they need over the Net, use software only as long as needed, and pay a few cents per use. Such a product, if feasible, would not need an operating system in the present sense of the word.