On January 2, 1975, Microsoft announced Altair Basic, their first product. It was a programming language for the MITS Altair 8800 computer, a product that let people write their own software for the new computer. The makers of the computer licensed Altair Basic on July 22, 1975, and sold $16,005 worth of product by the end of the year.
The MITS Altair 8800
In 1974, MITS was a calculator manufacturer looking to move into a less saturated market. Its solution was a personal computer you could build yourself. But the experience wasn’t like building a computer today. They sent you a box of parts, but nothing was pre-assembled. Before you could plug the circuit boards together, you had to solder all of the individual components onto those circuit boards, and then you could put the computer together.
That may not sound like a very appealing product, but MITS couldn’t keep it in stock. There was a long waiting list to get one.
Bill Gates and Paul Allen recognized the potential. Their families were wealthy enough that they had access to computers in high school in the early 1970s, but there was no such thing as a home computer. This was uncharted territory. They knew this home computer would be popular, and it was going to need software. Their bright idea was to create software for this new computer that would make it easier for its owners to write their own software for it. The product was an implementation of a programming language called Basic, a simple language you could learn in an afternoon.
They were in the right place at the right time with the right idea, except for one problem. They couldn’t get one of the machines.
Developing the first Microsoft product on hardware sight unseen
Gates was a student at Harvard, where he had access to a large business computer, a DEC PDP-10. So they wrote an emulator for the Altair that ran on the DEC PDP-10. Or, should I say, Paul Allen wrote the emulator. Gates worked on the product, then used Allen’s emulator to test his code once it was ready.
And even that is an oversimplification. What set Microsoft’s implementation of this programming language apart was that it could do complex math with decimal points. Gates wasn’t looking forward to writing that part, and another friend, Monte Davidoff, overheard the conversation and volunteered to write that part of the project, telling Gates he had done something like that before and could do it again.
By the time they finished, they had a paper tape containing their code. It ran fine on the emulator, but up to that point, it had never run on the real hardware. For that matter, they had never seen the real hardware except in photographs.
Once it was ready, Paul Allen flew to MITS to demonstrate the product, carrying the paper tape with him. When he arrived on site, he loaded the tape into the machine, loaded their code, and tried it out on real hardware for the very first time. It worked, and MITS worked out an agreement to distribute the software to its owners.
Crucially, when they signed a licensing agreement with MITS on July 22, 1975, Microsoft did not give MITS exclusive rights to the product. Microsoft reserved the right to port the product to other machines.
Microsoft’s stroke of genius: Licensing, not selling rights
Microsoft Basic immediately became the de facto standard for small computers, and it put the company, then called Micro Soft, on the map. Microsoft was founded as a company in April 1975.
The software also became widely pirated, leading to Gates’ (in)famous anti-piracy letter, in which he claimed he made $2 an hour writing it. That was slightly less than minimum wage, which was $2.10 an hour in 1975. Journalist David Bunnell helped him distribute the letter, leading to a lasting friendship between the two men.
As you might imagine, other companies noticed MITS and its early success and decided they wanted a piece of that market. So other computers followed, some of them compatible with the MITS computer, and some not. And it wasn’t long before several companies decided it might be a good idea to try selling already assembled computers that the purchaser could take out of the box and plug in without having to know how to solder. Those computers, the Apple II, Commodore PET 2001, and TRS-80 Model 1, were ready by 1977. All of them either shipped with Microsoft Basic, or were running Microsoft Basic soon after release. And in most cases, Microsoft collected a royalty from the computer manufacturer based on the number of units sold, eliminating the piracy problem.
By 1978, at the age of 23, Gates was a millionaire.
We’ve all seen that notorious 1977 mugshot of Bill Gates where he looks like he’s barely a teenager and has a goofy grin on his face. He was older than he looked, and within a few months, he would be a millionaire. Because there were dozens of companies making computers to sell to consumers, and without a product he controlled, those computers were essentially useless. It didn’t matter whose computer you bought, Bill Gates and Paul Allen made money off it.
But it all started with Altair Basic. To celebrate Microsoft’s 50th anniversary in January 2025, Bill Gates released a scan of its original source code.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.