WHERE THEY CAME FROM
Microsoft didn’t begin, as the tech-startup stereotype goes, in a garage. Instead, it bloomed in the desert. In 1975 childhood pals Bill Gates and Paul Allen teamed up in Albuquerque, New Mexico, the home of their first customer, Micro Instrumentation & Telemetry Systems, to develop a programming language for M.I.T.S.’s Altair 8800—an early personal computer sold through Popular Electronics—and from there, Microsoft was born.

In 1980, Microsoft scored a key win by buying an operating system known as QDOS, renaming it, and licensing it to I.B.M. for an early line of PCs. The I.B.M. deal opened doors for Microsoft, which quickly turned its software into a de facto industry standard. By 1984, Bill Gates was on the cover of Time. Microsoft went public two years later.

That’s when the company really began to grow. As Windows became ubiquitous, Microsoft’s business software trounced competing products like WordPerfect and Lotus 1-2-3. In the mid-1990s, Microsoft expanded beyond software, partnering with NBC to start MSNBC and launching its MSN internet portal. By 1998, Microsoft’s Internet Explorer browser—packaged with its own operating system—had surpassed rival browser Netscape.

Microsoft moved into the videogame business in 2001, and today its Xbox 360 gaming console leads the market, outselling comparable machines from competitors Sony and Nintendo. In 2006, Microsoft positioned the Zune digital media player to go head-to-head with Apple’s iPod. And in January 2007, Microsoft released its long-anticipated Vista operating system after years of delays.

Microsoft’s corporate culture is nearly as famous as its products. With its sprawling 400-acre campus, Microsoft has been described as a cultlike company filled with khaki-clad developers working 24 hours a day. Microsoft has more than 71,000 employees worldwide and has been dubbed a “velvet sweatshop” by some members of the press.

WHAT THEY DO
As the world’s largest software company, Microsoft is in the videogame business, the internet-search business, the television business, the cell phone business, the automotive business—oh, and the personal computer business. Over the past three decades, the Redmond, Washington, behemoth has conquered the PC market, thanks to its Windows operating system and Office software suite, and since has moved on to attempt the same with videogames, media players, and internet applications.

WHAT THEY GOT WRONG
Microsoft has a reputation for being a bully. The company once thrived by creating a monopoly around its operating systems and software; as a result, it has faced numerous charges of unethical and uncooperative business practices.

By 1998, those practices became the subject of a major lawsuit. The U.S. Department of Justice, backed by 18 states, filed antitrust charges against Microsoft, claiming that the company stifled competition and limited consumer choice. Microsoft settled in 2001 by agreeing to end exclusive contracts with manufacturers and to allow competing software to be included with its operating systems—a move that rattled Microsoft’s stock price.

A slew of individual settlements followed: In 2003, Microsoft paid AOL Time Warner (Netscape’s owner) $750 million to settle a private antitrust lawsuit, while in the same year, Sun Microsystems netted $1.6 billion in its patent and antitrust lawsuit settlements.

WHAT’S NEXT
Microsoft is on a quest to dominate all things digital. Analysts have warned that its bread and butter—packaged software—is dying out and being replaced by subscription-based services and Web applications. And while the company relies on Windows and Office software for most of its profits, Microsoft is pushing firmly into growing markets for entertainment and Web services—the territory of rivals Apple and Google. —Clancy Nolan