Microsoft is worth roughly $1 trillion today, but that sky-high valuation didn’t come without a few train wrecks during its first 50 years. I’m not talking about smaller screwups like the brain-dead Clippy, Microsoft’s intrusive Office helper from 1995. Instead, I’m looking at the ones with major consequences that in some cases set Microsoft back years, made it lose out on important markets, and cost the company billions of dollars.
Here are the company’s four worst screw-ups. (And here’s a look at its biggest successes.)
Microsoft’s antitrust trial and the lost decade
During Microsoft’s first 23 years, the company was on a rocket-like trajectory, with only relatively minor bumps. It ruled the tech world, swatting away competitors with ease, building monopolies in operating systems, productivity software, and beyond.
Its iron-fisted rule seemed unlikely ever to end.
Then in 1998, the US Justice Department and 20 state attorneys general filed an antitrust suit charging the company with illegally using its OS monopoly to crush competitors. Notably, the DOJ claimed Microsoft wouldn’t allow Netscape or other browsers to easily be installed on Windows (allowing them to compete with the company’s own Internet Explorer browser).
Microsoft’s bullying tactics were laid bare during the trial, with the government citing evidence such as a Microsoft executive telling an Intel honcho the company would “cut off Netscape’s air supply” by including Internet Explorer for free in Windows, so no one would pay for a rival browser.
Microsoft lost the suit, appealed, and eventually settled with the feds. It avoided a corporate break-up, but was forced to allow alternatives to Internet Explorer to ship with Windows or be easy to install. The penalty at the time seemed like a slap on the wrist. But Microsoft put so much energy into the fight, it had little time and resources to focus on the changing tech world — and lost out on a generation of tech advances.
Steve Ballmer’s Monkey Boy dance and disastrous 14-year reign
Steve Ballmer took over from Bill Gates as Microsoft CEO in 2000 and began a 14-year reign in which he acted like a cross between a clown and the Godfather, with disastrous results.
His solution to almost every problem the company faced was to try to use Windows as a bludgeon to pound and beat competitors. The tactic failed time and time again, and Ballmer learned nothing along the way. In just one example of how arrogance blinded him to the new reality of tech, he insisted a Windows-based mobile operating system would rule the world, telling USA Today in 2007 after the iPhone’s launch: “There’s no chance that the iPhone is going to get any significant market share. No chance.” (More on that below.)
His sometimes clownish public behavior made him a laughingstock, such as his infamous “Monkey Boy Dance,” where he danced, howled, screamed and acted like a madman at a conference to show his enthusiasm for Microsoft. Another YouTube favorite is the famous “Developers” video, which captured him soaked with sweat, screaming “Developers, developers, developers, developers…” — until his voice gave out.
Thanks to his antics, Microsoft under his leadership went from the world’s tech leader to not much more than an afterthought. The company lost out on internet search and web browsing to Google, social networking to Meta (then known as Facebook) and others, and mobile computing to Apple.
A cloudy Vista
Microsoft became the early king of tech based largely on its worldwide monopoly on operating systems, first with the character-based MS-DOS, and later with Windows. So, when one of its operating systems bombed, it had an outsized influence on the tech world and the company itself.
Though it has released plenty of stinkers along the way, Windows Vista stands out for its utter awfulness — so bad that even top executives at the company couldn’t get it to perform the simplest tasks, such as printing.
People hated its resource-hungry interface, it wouldn’t run on older PCs, and it was doomed by countless hardware incompatibilities. To try and juice sales, Microsoft came up with a bone-headed plan to release “Vista-capable PCs” that would run only a stripped-down version of the operating system.
Unfortunately, those PCs couldn’t even do that. Mike Nash, who became a corporate vice president for Windows product management, wrote in an email about the PCs, “I PERSONALLY got burnt…I now have a $2,100 e-mail machine.” Another Microsoft employee wrote in an email, “Even a piece of junk will qualify” to be called Windows Vista Capable.
Steven Sinofsky, who was the top executive in charge of Windows, couldn’t even get his printer to work with it. He admitted he wasn’t even sure what “Vista-capable” meant.
Windows, don’t phone home
When it comes to the biggest bomb in Microsoft’s past, none comes close to the disaster of Windows Phone, which started out its sad life in 2001 as a mobile operating system called Pocket PC 2002. Although Microsoft launched the mobile operating system six years before the iPhone’s debut, it was doomed from birth because Ballmer decided any mobile operating system had to be closely tied to Windows — not designed from the ground up for mobile.
I won’t go into all the gory details of what a poorly designed, unusable operating system it was. Instead, I’ll let a few numbers tell the tale. When Microsoft launched a revamped, full-blown version in 2012, it had already spent billions in development costs, then spent $400 million publicizing the launch.
But money can’t buy you love. Few people bought the phones, and the company ended up spending $1,666 in marketing and advertising for each one sold, far above the $100 retail price, which Microsoft was forced to slash to $50, to no avail.
Microsoft bought Nokia for $7.2 billion in a desperate attempt to salvage the operating system. It didn’t work. When the company finally put Windows Phone out of its misery, it had a pathetic 1.3% market share in the US, and less in most other places, including 1% in Great Britain and Mexico, 1.2% in Germany, and 0% in China.
If you like business horror stories, you can get more gruesome details here.