Microsoft Corporation, headquartered in Redmond, Washington, USA, was founded in 1975. Microsoft is the world's largest software company with over 50,000 employees in various countries as of May 2004. Microsoft develops, manufactures, licenses, and supports a wide range of software products for various computing devices. Its most popular product is the Microsoft Windows operating system family, which has achieved near ubiquity in the desktop computer market.
The company's aggressive business practices led to several governmental investigations, including a 1998 federal lawsuit which found Microsoft to have illegally used its monopoly power to defeat its competitors. Through appeals and negotiated settlements, Microsoft mitigated the adverse effects of this ruling on its operations and financial status.
Microsoft's mission is "to enable people and businesses to realize their full potential."
Main article: History of Microsoft Windows
"Micro-soft" was a software company founded in Albuquerque, New Mexico in 1975 by Bill Gates and Paul Allen to develop and sell BASIC interpreters for the Altair 8800, which was manufactured by their former Albuquerque-based employer MITS. The name "Micro-soft" (short for microcomputer software) was used by Gates in a letter to Allen for the first time on November 29, 1975. "Microsoft", without a hyphen, became a registered trademark on November 26, 1976. Microsoft's second product was its Fortran compiler for CP/M, released in August 1977. The third was the MS COBOL compiler (for CP/M), released in April 1978. Both Gates and Allen ran a company called Traf-O-Data prior to starting Microsoft.
Microsoft's key moment came in the late 1970s when IBM was planning to enter the personal computer market with its IBM Personal Computer (PC), which was released on August 12, 1981. IBM first approached Microsoft about its BASIC and asked them for an operating system. Since Microsoft did not have an OS, they suggested CP/M from Digital Research. IBM then approached Digital Research for a version of CP/M and spoke to Gary Kildall's wife Dorothy. IBM representatives wanted Dorothy to sign their standard non-disclosure agreement, which Dorothy considered overly burdensome. IBM then returned to talk to Microsoft. Microsoft licensed a cloned design of CP/M called Quick and Dirty Operating System, from Tim Paterson's Seattle Computer Products in order to sell it to IBM as the standard operating system for the IBM PC. Microsoft subsequently purchased all rights to QDOS for $50,000, and renamed it MS-DOS (for Microsoft Disk Operating System). Later, IBM discovered that Gates' operating system could have infringement problems with CP/M, contacted Kildall, and in exchange for a promise not to sue, made an agreement that CP/M would be sold along with IBMDOS when the IBM PC was released. The price set by IBM for CP/M was $250 and for MSDOS/PCDOS it was $40. Obviously, MSDOS/PCDOS outsold CP/M many times over, eventually becoming the standard. In contracting with IBM, however, Microsoft had retained the rights to license the software to other computer vendors as MS-DOS. The early 1980s saw a flood of IBM PC clones, and Microsoft was quick to use its position to dominate the operating system market. By marketing MS-DOS aggressively to manufacturers of IBM-PC clones, Microsoft gained unprecedented visibility in the microcomputer industry, even rivaling IBM. In February 1986 Microsoft relocated to Redmond, Washington. One month later the company went public raising $61 million at $21.00 per share (by the end of the trading day the price had risen to $28).
During the following years, Microsoft used its growing resources to displace competitors such as WordPerfect, and Lotus 1-2-3, among many others. It is alleged (although never explained in detail) that Gates instructed Microsoft programmers to include special code in one of the MS-DOS versions to make Lotus 1-2-3 produce errors, making it appear to the users as if Lotus's software was the problem.
OS/2 to Windows
In the late 1980s, Microsoft and IBM partnered in the development of a more advanced operating system, OS/2. The operating system was marketed in connection with a new hardware design, the PS/2, that was proprietary and secret to IBM. In 1989 Microsoft announced at Comdex that the 1991 release of Windows 3.0 would be the last version of Windows. Over the next few years Microsoft continued to issue statements of direction that developers outside Microsoft interpreted to mean that OS/2 was the platform of the future, and Windows merely a temporary stopgap that would be limited to low-end systems.
It was also at this time, in 1987, that Microsoft adopted their current logo, the so-called "Pacman Logo" designed by Scott Baker. According to the March 1987 Computer Reseller News Magazine, "The new logo, in Helvetica italic typeface, has a slash between the "o" and "s" to emphasize the "soft" part of the name and convey motion and speed." Employees ran a campaign to save the old logo, which was green, in all uppercase, and featured a fanciful letter O nicknamed the blibbet, but it was nevertheless discarded.
On May 16 1991 Bill Gates announced to Microsoft employees that the OS/2 partnership was over and Microsoft would henceforth focus its platform efforts on Windows and the Windows NT kernel. In the ensuing years OS/2 fell to the side and Windows became the favored PC platform.
This switch in direction was unexpected. Developers that had ignored Windows and committed most of their resources to OS/2, believing they were following Microsoft's direction, were taken by surprise. Some felt that Microsoft had engaged in deliberate misdirection, and the move was frequently referred to within the industry as "the head-fake."
Software running on PC hardware was not necessarily technically better than the mainframe software that it replaced, but it was much less expensive. Microsoft's success rode on the PC boom.
Microsoft, now highly profitable, diversified into a wide variety of software products including:
In many cases, early versions of Microsoft software were buggy and inferior to their competition, but later versions improved rapidly and eventually overwhelmed their competitors by offering more features for a lower price. The best example of this is probably that of WordPerfect, which in the early 1990s appeared to have an unassailable dominance over the PC word processor market but eventually found itself in a distant second place.
Microsoft's focus on software usability was a large factor in its early successes. Some key aspects of this were:
- A common user interface: all Microsoft applications used the same menu commands, shortcuts, and procedures for similar tasks. This reduced the barrier to learning and using new software.
- Backward compatibility: Microsoft made sure that older code and data would work on newer systems. In contrast, until about 1986, some major manufacturers of hardware-software combinations would periodically introduce new machines with new operating systems giving little or no compatibility with the previous ones. A common Microsoft demo was to show old Visicalc software running on the latest version of Windows.
- Interconnectedness: generally, and especially in Microsoft Office, data prepared with one Microsoft application can be brought into other Microsoft applications. A common example is creating a diagram in Excel and pasting it into a Word document.
Microsoft has devoted large amounts of money and effort to developing, integrating, and marketing its products and services. By the turn of the millennium, many of Microsoft's software products dominated their respective markets.
Products and organization
Microsoft sells a wide range of software products. Many of these products were developed internally, such as Microsoft Basic. Some products were acquired and rebranded by Microsoft for distribution, including Microsoft Project, a project management package; Visio, a charting package; DoubleSpace; Virtual PC, acquired from Connectix; and MS-DOS itself, the basis for the company's success.
In April 2002, Microsoft reorganized into seven core business units, each with its own financial reporting to delegate responsibility and more closely track the performance of each unit.  These business units are:
- Windows Client (managing the Windows client, server, and embedded operating systems)
- Information Worker (managing the office software products)
- Microsoft Business Solutions (managing the business services and process applications)
- Server and Tools (managing developer tools and integrated server software)
- Mobile and Embedded Devices (managing palmtop and phone devices)
- MSN (managing web-based services)
- Home and Entertainment (managing consumer hardware and software)
There also is a Macintosh Business Unit which makes Microsoft the largest developer of Macintosh software outside of Apple itself.
Windows Client group
Microsoft's flagship product is the Windows operating system. It has been produced in many versions including Windows XP and Windows Server 2003. Almost all IBM compatible personal computers are sold with Windows pre-installed. (See History of Microsoft Windows.)
Microsoft integrated the Internet Explorer web browser and the Outlook Express email client into Windows. The act of integrating Internet Explorer with Windows helped to defeat Netscape Communications Corporation's rival product Netscape Communicator, and formed the central point of the Microsoft antitrust case brought by the United States government in 1998.
Information Worker group
Microsoft Office is the company's line of office software. It includes Word (a word processor), Access (a personal relational database), Excel (a spreadsheet), Outlook (Windows-only groupware, frequently used with the Exchange server), PowerPoint (presentation software) and Microsoft FrontPage, a WYSIWYG HTML editor.
With the release of Office 2003, a number of other products were brought under the Office banner, including Microsoft Visio, Microsoft Project, Microsoft MapPoint , Microsoft InfoPath, Microsoft Publisher and Microsoft OneNote.
Microsoft also produces Microsoft Office for Apple Macintosh computers, which includes the Mac-only Entourage instead of Outlook.
As with many common and popular software products third-party developers have created applications that allow the Microsoft Office Suite of applications to be run on previously unsupported operating systems. Such operating systems include Linux, and Sun Microsystems' Solaris.
Like Windows, Office has grown to dominant share in many markets.
Microsoft Business Solutions group
The Business Solutions Group was created in April 2001 with the acquisitions of Great Plains . Subsequently, Navision was acquired to provide a similar entry into the European market. (The acquisition resulted in the planned release during the week of 18 October 2004 of Microsoft Navision 4.0.) The Business Solutions group focuses on developing financial and business management software for companies.
Server and Tools group
Microsoft Visual Studio is the company's set of programming tools and compilers. It is GUI oriented and links easily with the Windows APIs, but must be specially configured if used with non-Microsoft libraries. The current version is Visual Studio .NET 2003.
Microsoft also have a line of server software, the current version being Windows Server 2003.
Systems Management Server is a collections of tools that provide remote control, patch management, software distribution, and hardware/software inventory.
The .NET initiative is an important marketing initiative by Microsoft, covering a number of different technologies. Microsoft's definition of .NET continues to emerge over time. As of 2004, .NET encompasses:
- Easing the development of Microsoft Windows-based applications that use the Internet, through use of a new Microsoft communications system called Indigo;
- Correcting some problems previously introduced by Microsoft's DLL design, which made it difficult to manage and installing multiple versions of complex software packages on the same system (see DLL-hell);
- Providing a more consistent development platform for all Windows applications (see Common Language Infrastructure, also known as CLI)
It was previously believed that .NET would also include a login and authentication system that could be shared among different websites and .NET programs. This functionality was previously codenamed "Microsoft Hailstorm " and is related to the Microsoft Passport service.
Mobile and Embedded Devices group
Microsoft has attempted to expand the powerful Windows brand into many other markets, with products such as Windows CE for PDAs and its "Windows powered" Smartphone products. Microsoft initially entered the Mobile market through Windows CE for handheld devices which today has developed into Windows Mobile 2003. Microsoft works with companies such as HP, Motorola and Dell in providing the operating system for these devices and reference designs.
Microsoft recently moved the embedded group and the mobile group under one team. The embedded group focus is on devices where the OS may not directly be visible to the end-user, e.g. appliances and cars. The company also bought WebTV (subsequently renamed MSN TV), a television-based internet appliance.
Mobile Devices group is the only Microsoft group losing money. Due to vast profits in other groups, Microsoft can continue to sell Windows CE with unprofitable prices to gain market share from smaller embedded OS vendors like PalmSource,Symbian,QNX,Wind River Systems.
In the mid-1990s, Microsoft began to expand its product line into the networked computer world. It launched its online service MSN (Microsoft Network) on August 24, 1995 as a direct competitor to AOL. MSN became an umbrella service for all of Microsoft's online services.
In 1996, Microsoft and NBC, an American broadcasting network, created MSNBC, a combined 24-hour news television channel and online news service. Microsoft owned the online magazine Slate until December 21, 2004, when it was then acquired by The Washington Post.
At the end of 1997, Microsoft acquired Hotmail, the first and most popular webmail service. It was rebranded MSN Hotmail and was used as a platform to boost Passport, a universal login service.
MSN Messenger, an instant messaging client, was introduced in 1999 to compete with the popular AOL Instant Messenger (AIM).
Home and Entertainment group
Microsoft sells computer games that run on Windows PCs, including titles such as Age of Empires and the Microsoft Flight Simulator series. Also produced is a line of reference works, such as encyclopedias and atlases, under the name Encarta.
Microsoft entered the multi-billion dollar game console market dominated by Sony and Nintendo in late 2001, with the release of the Xbox. Currently the console ranks second only to Sony's PlayStation 2 in market share in the United States. Microsoft develops and publishes its own video games for this gaming console, and in addition, "third party" Xbox video game publishers such as Electronic Arts and Activision can pay a license fee to publish games for the system.
The Xbox is widely regarded as the most powerful game console currently available. Rumors abound regarding the successor to the Xbox (suggested names include Xbox 2, Xbox Next, "Xbox 360", and Xenon), its technical specifications, and when it will be released.
Microsoft also sold a set-top Digital Video Recorder (DVR) called the UltimateTV which allowed users to record up to 35 hours of television programming from direct to home satellite television provider DirecTV. UltimateTV has since been discontinued, with DirecTV instead opting to market DVRs from TiVo Inc.
The product which allowed Microsoft to generate its enormous wealth was the MS-DOS operating system. All versions of Windows prior to Windows NT (for business systems) and Windows XP (for business and home systems) were based on an MS-DOS foundation.
Microsoft Bob, a program manager add-on for Windows 3.1 and Windows 95, was short-lived and widely ridiculed in the press.
In the early 1980s, in cooperation with a large number of companies, Microsoft created a home computer system named MSX. It became fairly popular in Japan and Europe, but the IBM PC became increasingly dominant through the late 1980s and the early 1990s, bringing an end to the MSX and many other systems like it.
Microsoft has launched the Next-Generation Secure Computing Base (formerly known as the Palladium operating system, also known as Trusted Computing) as its solution to computer insecurity. Opponents have characterized it as another exercise in entrenching and extending Microsoft's dominance, effectively allowing the company to control all uses of PC technology. In particular, they have accused Microsoft of using it as a way to combat the emergence of free software.
Microsoft has established a set of certification programs to recognize individuals who have expertise in their products and solutions. Similar to offerings from Cisco, Sun, IBM and Oracle, these tests are designed to identify a minimal set of proficiency in a specific role, which can include developers ("Microsoft Certified Solution Developer" MCSD), system/network analysts ("Microsoft Certified Systems Engineer" MCSE), trainers ("Microsoft Certified Trainers" MCT ) and administrators ("Microsoft Certified Systems Administrator" MCSA).
Microsoft also produces a number of computing related hardware products including mice, keyboards, joysticks, and, until mid-2003, gamepads and other game controllers.
On February 19 2003, Microsoft purchased the virtual machine solutions of privately held Connectix, a leading provider of virtualization software for Windows- and Macintosh-based computing. Microsoft purchased the following products and technologies: Virtual PC for Windows (now called Microsoft Virtual PC), Virtual PC for Mac and Virtual Server . Microsoft also brought on board key members and developers from the Connectix team to continue development of these products. Microsoft have continued development of all three of these virtual machine solutions from Connectix and have since released updated versions of Virtual PC for both the Windows and the Mac platforms. 
The software developer
Microsoft has often been described as having a developer-centric business culture. A great deal of time and money is spent each year on recruiting young university-trained software developers who meet very exacting criteria, and on keeping them in the company. For example, while many software companies often place an entry level software developer in a cubicle desk within a large office space filled with other cubicles, Microsoft assigns a private or semi-private closed office to every developer or pair of developers. In addition, key decisionmakers at every level are either developers or former developers.
In a sense, the software developers at Microsoft are considered the "stars" of the company in the same way that sales staff at IBM are considered the "stars" of their company. This culture is reflected in their hiring process -- the "Microsoft Interview" is notorious for off-the-wall questions such as "Why is a manhole cover round?" and is a process often mimicked in other organizations.
"Eating our own dog food"
Within Microsoft the expression "eating our own dog food" is used to describe the policy of using Microsoft products inside the company. It is most often applied to pre-release and beta versions of software.
Microsoft fosters a general attitude of long term strategic wariness in its managers, who are expected to be ready for any challenge from the competition or the market. In this frame of mind, being the largest software company in the world is not seen as a form of safety or a guarantee of future success; for instance, future competitors could rise from other industries, or computer hardware companies could try to become less dependent on Microsoft, or consumers could decide not to upgrade their software as often. Microsoft requires its managers to maintain vigilance and sustain a dynamic expansion in new markets.
Microsoft takes security as a very serious issue. If it did not secure its software and hardware secrets successfully (such as the source code to software) then it could stand to lose its market position. The Microsoft Security System is therefore very complex.
Microsoft was named one of the 100 Best Companies for Working Mothers in 2004 by Working Mothers magazine.
Monopoly and legal issues
In the 1990s, Microsoft adopted exclusionary licensing under which PC manufacturers were required to pay for an MS-DOS license even when the system shipped with an alternative operating system. It also used allegedly predatory tactics to price its competitors out of the market, and competitors claimed that Microsoft erected technical barriers to make it appear that competing products did not work on its operating system . An investigation by the United States Department of Justice on August 21, 1993 resulted in an opinion stating that this behavior was illegal; in a consent decree issued on July 15, 1994, Microsoft agreed to a deal in which, among other things, it would not "tie" other Microsoft products into its operating system.
After bundling the Internet Explorer web browser into its Windows operating system in the late 1990s and acquiring a dominant share in the web browser market, an antitrust case was brought against Microsoft. In a controversial ruling by judge Thomas Penfield Jackson, the company was convicted for violating its earlier consent decree and abusing its monopoly in the desktop operating systems market. The "findings of fact" during the antitrust case established that Microsoft has a monopoly in the PC desktop operating systems market:
III.34. Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows. 
The findings of fact goes on to explain the nature of the "barrier to entry": The fact that there is a multitude of people using Windows makes the product more attractive to consumers. The large installed base ... impels ISVs [independent software vendors] to write applications first and foremost to Windows, thereby ensuring a large body of applications from which consumers can choose. The large body of applications thus reinforces demand for Windows, augmenting Microsoft's dominant position and thereby perpetuating ISV incentives to write applications principally for Windows. ... The small or non-existent market share of an aspiring competitor makes it prohibitively expensive for the aspirant to develop its PC operating system into an acceptable substitute for Windows. (III.39-40)
The proposed remedy (dividing Microsoft into two companies) was overturned on appeal, and Microsoft has since reached a settlement with the Department of Justice and some of the states which brought suit against it. Meanwhile, several class-action lawsuits filed after the conviction are still pending.
In early 2002, Microsoft proposed a settlement to end the private lawsuits against it by donating $1 billion in money, software, services, and training, including Windows licenses and refurbished PCs, to about 12,500 underprivileged public schools. This was seen by some as a potential windfall for Microsoft, not only in educating schoolchildren on Microsoft solutions but also in collecting additional license fees if the schools ever wanted to upgrade. After protests from Apple Computer, which feared further loss of its educational market share, a federal judge rejected the proposed settlement. 
In 2003-2004, the European Commission investigated the bundling of media player software into Windows, a practice which rivals complained was destroying the market for their own products. Negotiations between Microsoft and the Commission broke down in March 2004, and the company was subsequently handed down a record fine of €497 million ($613 million) for its breaches of EU competition law. The ruling is subject to appeal in the European courts. Separate investigations into alleged abuses of the server market were also ongoing at the same time. On December 22 2004, the European Court decided that the measures imposed on Microsoft by the European Commission would not be delayed, as was requested by Microsoft while waiting for the appeal. Microsoft will thus have to pay the €497 million fine, ship versions of Windows without Windows Media Player, and license many of the protocols used in Microsoft's products to developers in countries within the European Economic Area.
In March 2004, during a consumer class-action lawsuit in Minnesota, internal documents subpoenaed from Microsoft revealed that the company had violated nondisclosure agreements seven years earlier in obtaining business plans from Go Corporation, using them to develop and announce a competing product named PenWindows, and convincing Intel to reduce its investment in Go. After Go was purchased by AT&T and Go's tablet-based computing efforts were shelved, PenWindows development was dropped  .
In May 2004, a class-action lawsuit accused Microsoft of overcharging customers in the state of California. The company settled the case for $1.1 billion. A California court ordered Microsoft to pay an additional $258 million in legal fees (including over $3,000/hour for the lead attorney in the case, more than $2,000/hour for his colleagues, and in excess of $1,000/hour for administrative work). A Microsoft attorney responded, "Somebody ends up paying for this. These large fee awards get passed on to consumers." . The total bill for legal fees was later reduced to just over $112 million.  Because of the structure of the settlement, the law firm which sued Microsoft may end up getting more money from the company than California consumers and schools, the beneficiaries of the settlement.
In July 2004, Japan's Fair Trade Commission warned Microsoft to remove a provision from its licensing contracts whereby PC makers would not be allowed to file patent infringement suits if future versions of Windows add features similar to their own technology. Microsoft plans to appeal the warning.
Microsoft has fought legal battles against:
Apple Computer, which accused Microsoft of stealing QuickTime code and using it in Windows Media Player.
Be Incorporated, which accused Microsoft of exclusionary and anticompetitive behavior intended to drive Be out of the market.  Be even offered to license its BeOS operating system for free to any PC vendors who would ship it pre-installed, but the vendors declined due to fears of pricing retaliation from Microsoft: by raising the price of Microsoft Windows for one particular PC vendor, Microsoft could price that vendor's PCs out of the market.
- Burst.com, which claims that Microsoft stole Burst's patented technology for delivering high speed streaming sound and video content on the internet. Also at issue in the case is a 35 week period of missing emails in the evidence Microsoft handed over to Burst which was discovered by Burst.com's lawyers. Burst accuses Microsoft of crafting a 30 day email deletion policy specifically to cover up illegal activity.  
Caldera, which accused Microsoft of having modified Windows 3.1 so that it would not run on DR DOS 6 although there was no technical reason for it not to work.  The encrypted code that Microsoft added to five otherwise unrelated Microsoft programs in order to prevent the functioning of DR DOS can be found here , in pseudocode and assembler. The article describes error messages given to users of a pre-release beta version of Windows 3.1. According to the article, the version of Windows 3.1 sold to the public was able to run under DR DOS.
Netscape Communications Corporation
Opera, which accused Microsoft of intentionally making its MSN service incompatible with the Opera browser on several occasions.
Sendo, which accused Microsoft of terminating their partnership so it could steal Sendo's technology to use in Windows Smartphone 2002. 
Spyglass, which licensed its browser to Microsoft in return for a percentage of each sale; Microsoft turned the browser into Internet Explorer and bundled it with Windows; Spyglass sued for deception.
Stac Electronics, which accused Microsoft of stealing its data compression code and using it in MS-DOS 6. 
Sun Microsystems, which held Microsoft in violation of contract for including a modified version of Java in Microsoft Windows; Microsoft responded by abandoning Java.
On October 1, 2004, at an appearance at the Computer History Museum in northern California, Bill Gates was asked about a possible threat from Linux and was quoted as replying: "Microsoft has had competitors in the past. It's a good thing we have museums to document this stuff." 
In 2004 Microsoft began to file applications for patents related to XML Parsing and Word Processing with various patent offices worldwide[]. These patents create legal barriers for competing desktop word-processing applications, such as Open Office, to access Microsoft Word data stored in the XML format.
Linux and open source
In recent years Linux has become an increasingly popular server operating system, particularly for the low-margin, price-sensitive hosting market, and it has begun to make inroads to the desktop market. Wal-Mart now sells several cheap consumer PCs running various different Linux distributions, including Xandros, Linare and Linspire (formerly known as Lindows, renamed after a trademark challenge from Microsoft), which are all versions of Linux made to look and work like Microsoft Windows. Recently, several governmental users have announced the conversion of their desktop computers from Windows to Linux, including the countries of Brazil and Venezuela, the city of Munich, Germany; and France's Ministry of Equipment and Transport .
Microsoft CEO Steve Ballmer has stated that Linux is a "tough competitive force... It's non-traditional, it's free and it's cheap. We have to educate people why what they pay for [our offerings] is more than offset by the value we deliver. We used to be the cheap guys. We were cheaper than Novell, cheaper than Oracle. We can't do that with this one." (Reported in CRN.com, June 17, 2002)
Microsoft has been using various channels on the Internet and in popular media to fight the open source movement, usually with the help of think-tank organizations funded by Microsoft. One of their main claims is that the GPL license (the copyright license that Linux and much open-source software is released under) is a viral license that threatens intellectual property. They also argue that open source software is less secure, more expensive, and more attractive to terrorists than proprietary software. Supporters of open source assert that Microsoft's tactics amount to a campaign of FUD (Fear, Uncertainty, and Doubt). .
Microsoft has also facilitated a legal attack on Linux companies by licensing Unix from The SCO Group . SCO, which is currently suing IBM and other defendants, claims that IBM devalued the SCO operating system by taking SCO proprietary code and releasing it as part of Linux.
In November 2004, Ballmer stated that Linux violates more than 228 software patents and that "someday, for all countries that are entering the WTO, somebody will come and look for money owing to the rights for that intellectual property. ... We think our software is far more secure than open-source software. It is more secure because we stand behind it, we fixed it, because we built it. Nobody ever knows who built open-source software."  He provided no details on which patents have been violated, nor did he mention the patent lawsuits currently facing Microsoft.  Microsoft later issued a statement saying that Ballmer was citing a study written by a risk-management company. The author of the study responded by saying that his study found 283 potential patent violations in Linux, but that such allegations are a long way from a court finding merit in them, and that proprietary software is at equal or greater legal risk. 
Microsoft has begun to take measures to limit the use of its products under the open-source Wine emulator on Linux:
- After Wine was updated to support Visual FoxPro, thereby providing an inexpensive platform from which to run database applications, Microsoft claimed that it is a violation of the Visual FoxPro software license to use Visual FoxPro run-time applications on any platform other than a genuine Microsoft Windows installation. 
- Microsoft has implemented a "Windows Genuine Advantage" program which validates a user's operating system before allowing him to download any patches for Microsoft software. WGA blocks Wine users from being able to obtain patches for Microsoft Office.  Microsoft has announced that WGA's block of Wine is specific and intentional; this marks the first time Microsoft has publicly mentioned Wine. 
Meanwhile, Microsoft has placed three projects under an open source license: the Windows Installer XML (WiX) toolset, the Windows Template Library (WTL) and FlexWiki.
Main article: Common criticisms of Microsoft
Microsoft has been the focus of much controversy in the computer industry, especially since the 1980s. Among the more frequently criticized areas are:
- Ease of use: Microsoft has been accused of allowing the user interface of its products to become inconsistent and overly complicated, requiring interactive "wizards" to function as an extra layer between the user and the interface. This violates the anti-modality principles of early user interface design (the principle that the user should be forced to do one particular thing as little as possible).
- Security: Microsoft products (such as Internet Explorer) are seen as overly vulnerable to computer viruses and malicious attacks, both for the simple reason of monoculture, and because of design decisions which often value ease of use over security.
- Business practices: Microsoft is believed to engage in unfair and anticompetitive business tactics. The findings-of-fact from a federal antitrust case have affirmed this, and Microsoft has lost other lawsuits in which competitors accused it of stealing code, making Microsoft operating systems incompatible with their products, or using predatory pricing and licensing tactics.
- Total cost of ownership (TCO): Microsoft software is seen by some as more expensive to purchase, use, and maintain than competitors' software. As the price of PCs has fallen, the price of Microsoft Windows has not.
The next version of Windows in development is codenamed Longhorn, which is an extension of Windows XP and Windows Server 2003. Planned features include better user interaction with devices (such as media players) and an enhanced user interface called "Aero". Longhorn was planned to ship during 2003, but has since slipped to 2006.
Microsoft will parlay its current success in desktop operating systems into new markets, such as media players, server software, handheld devices, in-dash car devices, Web services, video games, and more recently search engines. Microsoft is attempting to establish PCs running Windows XP Media Center Edition as home entertainment hubs, and is considering moving towards a licensing subscription model. Microsoft's current revenue scheme depends on users buying upgrades on a periodic basis; however, this is proving increasingly difficult due to many users continuing usage of outdated-yet-"good-enough" packages of Microsoft's software. With a subscription basis, users would pay an annual fee for use of Microsoft's software.
Recent managerial comments from Microsoft suggest that Microsoft is attempting to move up-market by positioning its products as "high value" rather than "low cost". Steve Ballmer said in 2002, "We are actually having to learn how to say, 'We may have a high price on this one, but look at the additional value and how that value actually leads to a lower cost of ownership despite the fact that our price may be higher.'" (Reported in VARbusiness, July 15, 2002).
Amid concerns from investors that Microsoft will not be capable of sustaining its historical growth rates, Microsoft announced in July 2004 its intention to implement a $30 billion stock repurchase plan over the next 4 years. Microsoft also announced a special one-time dividend in December 2004 that would pay Microsoft stockholders $32 billion, which is historically the largest payout by any company.
Microsoft's Redmond campus maps