MITS and the Altair

The debut of the Altair 8080 from Model (later changed to Micro) Instrumentation and Telemetry Systems (MITS) on the cover of the January 1974 issue of Popular Electronics presented the next entrepreneurial opportunity for Gates and Allen. Performing a task thought impossible by Intel, Gates, Allen, and a fellow Harvard student, Monte Davidoff, ported the BASIC programming language to the Altair's Intel 8080 microprocessor using only the technical schematics of the Altair, a manual on the 8080 chip, and the Harvard PDP-10, which had been modified to react like the Intel chip. After demonstrating the BASIC for Ed Roberts, the founder of MITS, Allen left Honeywell to become software director at the fledgling computer company in the spring of 1975. Since the magazine issue, MITS, which had been bordering on bankruptcy, suddenly was inundated with orders for the Altair. The PC era was beginning to dawn.

Hoping to reap the financial rewards of selling BASIC along with the Altair, Gates joined Allen after his sophomore year, and, in the summer of 1975, the two founded Micro-Soft (which was later condensed to simply, Microsoft) in Albuquerque, New Mexico, where MITS was based. Other developers, including Monte Davidoff and Lakeside associates and LPG members, were hired to help enhance Microsoft BASIC. The licensing agreement between Microsoft and MITS would never bring extreme wealth, but it provided the foundation on which Microsoft could build. Microsoft's BASIC spread nationwide through hobbyist groups and often through illegal copies of the software. However, what Microsoft lost in licensing fees in the early days was more than recouped in the de facto standard that resulted in the young industry.

By the end of 1976, Microsoft had contracts with NCR and GE to provide BASIC, and Allen had quit MITS to work full-time at his growing company, whose first year revenues surpassed $100,000. He was joined by Gates who dropped out of Harvard that January. However, the relationship with MITS, which had never been exactly cordial, was beginning to fray. Frustration had even led Gates, early on, to offer to sell full rights to BASIC to MITS for a paltry $6,500. The agreement between the companies mandated that MITS authorize any licensing of BASIC to any other company, something that MITS rarely allowed in order to prevent competitors to the Altair entering the market. Verbal agreements between Microsoft and several large corporations were quickly struck down by Roberts and MITS. The disagreements came to a head in the spring of 1977 when the two companies engaged in a legal battle just prior to the sale of MITS to Pertec on May 22. Exploiting a small portion of the agreement between the two companies that required MITS, and consequently Pertec, to extend its "best efforts" to market BASIC, Microsoft won the case in arbitration.

The Early Years

Beyond MITS