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Microsoft CEO Satya Nadella unveils Copilot + PCs, a linchpin of the company’s plan to reinvent Windows, during a special event in Redmond in May 2024. (GeekWire Photo / Todd Bishop)
Editor’s Note: Microsoft @ 50 is a year-long GeekWire project exploring the tech giant’s past, present, and future, recognizing its 50th anniversary in 2025. Learn more and register here for our special Microsoft @ 50 event, March 20, 2025, in Seattle.
A tech icon has reached another turning point.
After fueling the rise of Microsoft, enabling the dream of a computer on every desk and in every home, making the leap online, becoming the target of rivals and governments around the world, suffering security breaches, missing out on mobile, and expanding to the cloud, the fate of Windows depends on the tech giant’s ability to reinvent its flagship product one more time.
Microsoft is betting Windows on AI, looking to breathe new life into one of the most successful products in tech history. Just as it introduced the masses to the PC and the web, Microsoft now sees in Windows the potential to bring the full promise of AI to the world.
A lot has changed since Windows debuted in 1985 as a “graphical operating environment which runs on the Microsoft MS-DOS operating system.”
For one, due in large part to the success of Windows during the past four decades, the company today has vast financial resources and strategic advantages, including its own massive cloud and AI infrastructure.
But in other ways, the odds are against Microsoft as it tries to insert Windows into another revolution.
The center of gravity in software development has shifted to smartphones, the cloud, and the web. After struggling for decades to get into new areas, from phones to mixed-reality headsets, the core of the Windows business remains desktop and notebook computers.
And with the likes of Android, iOS, Chrome, AWS, and Meta serving as giant platforms in their own right, it’s not clear where the breakthrough AI apps will ultimately emerge.
Microsoft has been laying the groundwork for the new era of Windows by working with silicon manufacturers and PC makers to augment the CPU and GPU with a powerful new chip — a neural processing unit, or NPU — to run advanced AI programs directly on the machine.
But the first steps into the AI era have been shaky. Security and privacy questions delayed Microsoft’s efforts to give Windows a photographic memory with the new “Recall” feature, requiring Microsoft and other PC makers to initially launch their new Copilot+ PCs without it.
Yet the sheer footprint of Windows continues to set it apart. By one measure, Microsoft’s global share of the desktop PC market stands around 70% — down from 90% a decade ago but still maintaining a wide lead over MacOS and Linux despite the gradual decline.
This lasting presence is the outcome of a 50-year-old decision. Microsoft co-founders Bill Gates and Paul Allen chose to produce software for a range of PCs, rather than making hardware of their own. That was the defining strategy of those early years, and it’s still playing out today.
Pavan Davaluri, Microsoft vice president for Windows & Devices, discusses the company’s partnership with Qualcomm on Copilot+ PCs on May 20, 2024, in Redmond. (GeekWire Photo / Todd Bishop)
“Windows is at planet scale. We have over a billion people using the product,” said Pavan Davaluri, Microsoft’s vice president for Windows & Devices, in a recent interview.
The “superpower” of Windows, Davaluri said, is still the ecosystem: the software developers who build on the platform, the hardware partners who enable it, and the diversity of devices, applications, and experiences that result. Davaluri said the plan now is to use that diversity — along with AI — to make Windows “a more personalized experience than ever before.”
In the early years, when Microsoft was trying to put a PC on every desk and in every home, the company would distribute one version of its software to all its users. AI is the opposite of that.
“We go from compiling code one time for millions of people to now really compiling code for each person on the planet,” said Steven “Stevie” Bathiche, a Microsoft technical fellow and the longtime leader of its Applied Sciences Group, which works on future generations of technology.
“If you think about the scale of that,” Bathiche said, “it’s kind of crazy.”
For this third chapter in our Microsoft @ 50 series, GeekWire spent more than a month revisiting the story of Windows, taking a new look at its history, and getting a sense for what’s coming next. We spoke with current Windows leaders, longtime journalists and analysts, and some of the former Windows chiefs who led the OS through pivotal moments in the past.
We toured the Redmond lab where Microsoft prototypes and tests new Windows devices, including its own Surface laptops and tablets — a line of first-party hardware that represents one of the biggest changes in approach from the early years of Gates and Allen.
A Microsoft Surface Studio laptop in an anechoic chamber on the Redmond campus, used by the company for testing device audio systems. (GeekWire Photo / Todd Bishop)
And as with prior chapters, we looked for new insights in books and other historical records, including Microsoft’s annual reports and our own reporting archives, with help from AI.
There were waves of nostalgia. For many people, listening to the history of Windows startup and shutdown sounds is like hearing the soundtrack of our personal and professional lives.
This being Windows, there were also chances to chuckle. The very real headline, “Man gets Windows Vista to work with printer,” didn’t land me a job at The Onion, but seeing that old post again reminded me just how much it resonated with frustrated Windows users at the time.
Knowing what Windows would become, some of the history seems quaint in hindsight.
The first version of Microsoft Windows, foreground, with the Microsoft CodeView debugger, background, as pictured in the company’s annual report to shareholders in 1986. (Microsoft Photo)
In Microsoft’s first annual letter to shareholders, in 1986, Bill Gates and Jon Shirley, the company’s COO and president, listed the release of Windows 1.0 as one of many milestones for Microsoft in the prior year. They noted that more than 500 software developers were planning to build applications for the fledgling operating system.
It was just a hint of the giant wave of third-party software to come.
Companywide, Gates and Shirley cautioned investors that Microsoft’s 20% profit margin was “probably not sustainable, especially in this period of heavy R&D expenditures.”
They were completely wrong. Or at least way too conservative. Fueled by the rapid growth of Windows and Office, and the exponential economics of the software business at the time, Microsoft’s overall profit margins climbed steadily, to more than 40% in the company’s 2000 fiscal year, based on $9.4 billion in profits and nearly $23 billion in revenue.
Fast-forward nearly 25 years to today: Microsoft had more than $88 billion in profits in fiscal 2024, with $245 billion in revenue — a substantial 36% profit margin at a very large scale.
A long road to ubiquity
Entire books have been written about what happened to Windows in between. The internal code names that were used for different Windows versions — Cairo, Whistler, Longhorn, etc. — still elicit groans of disgust or nods of appreciation from those who lived through those eras.
After its introduction in 1985, Windows at first struggled to gain traction. The debut of Windows 3.0 in 1990 provided the first real sign of success. Microsoft’s decision to end its partnership with IBM on OS/2 in the early 1990s gave the company the freedom to go its own way.
“Like Star Trek movies, Windows releases alternated between good and bad, odd and even,” writes Steven Sinofsky, recalling that era in his book and website, Hardcore Software, which tells the inside story of his time at Microsoft, including his tenure as Gates’ technical assistant, before running Office, and then Windows.
In those terms, Windows 95 was the box-office blockbuster.
Tonight Show host Jay Leno joined Gates in Redmond to introduce the new operating system at one of the most memorable launch events in tech history. And yes, many years before the iPhone, people actually lined up at the store for a PC operating system.
“Seeing all that came together was incredibly exciting, incredibly rewarding — seeing the vision of graphical operating systems go mainstream,” said Brad Silverberg, who joined Microsoft in 1990 and led Windows development for the next decade. “We changed the world.”
Silverberg recalled that the Windows 95 launch ad, set to the Rolling Stones classic, “Start Me Up,” was so effective that it influenced the Windows team’s division to go with the name “Start” for the button in the lower left corner of the desktop, after seeing an early preview.
“Some people wanted to call it the ‘Go’ button,” he said. “There were some other names … ‘Start’ was one of them. There was good debate internally. Then when we saw the TV ad that Weiden+Kennedy put together for us, that made the decision. There was no more debate.”
Behind the scenes, the development of the 32-bit Windows NT and the Win32 API in the 1990s ultimately solidified and unified the platform for businesses, developers, and consumers, culminating in the debut of Windows XP on the NT kernel in 2001.
Windows Vista in 2007 was a flop, Windows 7 in 2009 redeemed the franchise, Windows 8 in 2012 pivoted to tablets, Windows 10 in 2015 refocused on desktops and laptops, and Windows 11 in 2021 set the stage for a shift to the cloud (Windows 365) and AI (Copilot+ PCs).
Toss in a few landmark antitrust cases and a string of high-profile cybersecurity incidents, and you get a very abbreviated caricature of how Windows got to where it is today.
In the process, Windows has been dwarfed by the rest of Microsoft’s business, as its revenue has flattened, and Office (Microsoft 365) and the cloud (Microsoft Azure) have soared.
After Microsoft’s acquisition of game giant Activision Blizzard, the company’s Xbox division surpassed Windows in revenue earlier this year, at least temporarily. And for the 2024 fiscal year, which ended in June, Windows fell below 10% of Microsoft’s total revenue for the first time.
“I feel like Windows is holding its place in society — a hard-fought, very important, mission-critical place in society, and that requires great work from a lot of people,” said Terry Myerson, who led Windows from 2013 to 2018 as part of a 21-year career at Microsoft, before his current position as CEO of Seattle-based healthcare data startup Truveta.
At the same time, Myerson said, “there’s still this dream of growing its role in society.”
And that’s where Microsoft is betting on AI.
‘Computers that understand us’
It starts with the NPU. It originated on mobile phones and the field of computational photography. As phones evolved, the constraints around optics and sensors drove a shift towards using more computational power to enhance image quality, requiring a special chip.
Especially as Microsoft worked with Qualcomm to expand its Surface lineup from Intel to ARM-based processors, it became clear that the NPU could open a new world for Windows.
Microsoft had already been working on the plan for years when a small group of leaders met with Sam Altman and others from OpenAI for an early demo of its breakthrough AI model. Bathiche, the longtime leader of Microsoft’s Applied Sciences Group, remembers turning to Panos Panay, who was then in charge of the Windows and Devices business.
“We were in the middle of Windows planning, and I was like, ‘This is it.’ Everything we’re planning to do with Windows, this is how it all fits in,” Bathiche said in a recent interview.
That ultimately led to the introduction of the new Copilot+ PCs earlier this year, including the Recall feature that gives users the ability to quickly find anything they’ve seen on their PC.
In May, at the Copilot+ PC launch event on the Redmond campus, Microsoft CEO Satya Nadella reminisced about the launch of Windows 95 in almost the same spot 30 years earlier.
“If you go all the way back to even the birth of modern computing, 70 years ago, the pursuit has always been about how to build computers that understand us, instead of us having to understand computers,” Nadella said. “I feel like we are close to that real breakthrough.”
In other ways, the rollout so far has felt at times like an homage to the roller-coaster history of Windows. Apart from the privacy and security concerns, and delays in the release, the Recall preview has been getting mixed reviews from early users in the Windows Insider program.
Other Windows features enabled by the NPU include the ability to generate AI images and translate real-time captions for conversations in different languages — interesting use cases but not enough to compel people to line up to buy new Copilot+ PCs, a la Windows 95.
“Most of what we’ve seen so far has been pretty lackluster,” said Paul Thurrott of Windows Weekly and Thurrott.com, a longtime analyst, author, reviewer and reporter. “At the end of the day, I don’t think we’ve seen what will make the most sense for Windows ultimately.”
With the addition of a new NPU, one key function for Windows will be to serve as an orchestrator, delegating tasks to the most efficient chip for the job. But that’s still a low-level task, in the original spirit of a traditional operating system, not a glitzy new feature.
“As a human being, or as a user, you have to look at this stuff and say, ‘Well, OK , but what do I get out of it?’” Thurrott said. “The problem with local AI, especially, but maybe even AI in general, is that there’s no killer app. There’s a lot of micro-utilities that are excellent, and useful, but don’t benefit everyone generally.”
Davaluri, the Windows & Devices chief, said the company listened and acted on the feedback it received about the potential security and privacy issues in Recall, in line with Microsoft’s Secure Future Initiative, and made a series of adjustments in response (including making it an opt-in experience) before releasing it in limited preview even to the Windows Insider program in November.
More broadly, he said, AI in Windows is still in its infancy.
“We’re at the start of the journey when it comes to AI products and features,” he said, promising that the company will continue to “listen, learn, iterate and refine” its approach.
Tapping into the ecosystem
In an echo of the past, Microsoft is also working to spark new third-party applications on Windows, this time taking advantage of the NPU, Microsoft Copilot, and other AI features.
A Copilot+ PC display at the company store on Microsoft’s Redmond campus. (GeekWire Photo / Todd Bishop)
“In the big picture, the world is a lot bigger than Microsoft,” said Brett Ostrum, Microsoft’s corporate vice president of Surface devices. “And so the expectation would be that they’re going to come up with as much, if not more, over time, than the engineers at Microsoft.”
Silverberg, the retired Microsoft executive who led the Windows team in the 1990s, said he sees clear parallels between AI and Microsoft’s approach to integrating the internet into everything in his era. It wasn’t just about Internet Explorer, even though the browser got the headlines.
Brad Silverberg
Microsoft today sees AI “as a fundamental element of everything, and not just off in a chatbox somewhere,” Silverberg said, citing the possibility of third-party developers creating “a whole new generation of applications that unleash unforeseen types of creativity.”
“That’s when you know you have something really powerful and really exciting — when it gets used in ways that the inventors never really imagined,” Silverberg said. “That happened with the internet, for sure, and that happened with PCs, and it’s going to happen with AI.”
Microsoft, like many companies, tends to keep its product roadmap close to the vest until it’s ready to reveal. But it’s not hard to guess some of the directions that Windows could go from here.
Speaking with Bathiche recently, I described how I was using AI to help with the research for this project, uploading a whole range of source materials to Google’s NotebookLM to search for new insights and quickly verify key facts in a matter of seconds, rather than hours.
But first I was collecting many of these documents in a folder on my Windows PC. To me, it would make more sense to skip the upload and do the AI analysis directly on my computer.
“That’s good,” he said. “It’s good thinking.”
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