On Friday, we noted the 40th anniversary of Microsoft’s official reveal of Windows 1.0 on November 10, 1983 (even though the actual launch of the operating system wouldn’t happen for another two years).

More than two years earlier, in August 1981, Microsoft released the first version of its MS-DOS operating system. This version was not technically developed by the company; she purchased the rights to a previously created operating system, 86-DOS, from a programmer named Tim Paterson.

However, even before these two events, Microsoft sold its first computer operating system, which was officially announced on August 25, 1980. It was called Xenix and at the time, Microsoft had hoped that it would become the system of standard operation for the personal computer market. In the end, this did not happen.

Similar to MS-DOS, Microsoft did not develop Xenix itself from scratch. It was based on Unix, originally created by AT&T’s Bell Lab. The specific version Microsoft used as the basis for Xenix was Unix version 7, first released in 1979.

Microsoft CEO Bill Gates reportedly believed that Unix would become the standard operating system for PCs when they became powerful enough to use it. Prior to its collaboration with IBM to help create software for its first IBM PC in 1981, Microsoft purchased the license to the Unive version 7 source code from AT&T. However, these rights did not extend to the actual name “Unix”, which is why Microsoft used the name “Xenix” for its very first operating system.

The company sold Xenix directly to PC manufacturers. Unlike MS-DOS and then Windows, it never sold Xenix as its own standalone operating system to businesses or consumers. According to this blog post by Rob Ferguson, who worked for a few years on the Xenix team at Microsoft, Microsoft was selling Xenix for between $2,000 and $9,000 per copy, depending on the number of users. That’s more than $6,000 in today’s dollars.

Microsoft has marketed the use of Xenix for 16-bit PC chips and applications, as well as its multitasking features. OEMs had the option of offering the operating system as part of a complete PC or as an option. It was ported to work on a variety of different chips and PC architectures in the early 1980s. Many of these ports were jointly developed by Microsoft and another company, Santa Cruz Operation, better known as SCO. In 1984, SCO purchased the rights to distribute Xenix to American consumers.

According to Ferguson’s blog, Microsoft was discussing whether Xenix should be the official successor to MS-DOS for 16-bit PCs around 1985. However, a few events occurred that ultimately doomed the development of Xenix within the company.

One was AT&T’s decision to sell a version of Unix, UNIX System V, directly to commercial users. When this happened, Microsoft felt it couldn’t compete with the huge (at the time) AT&T.

The other was Microsoft’s decision to work with IBM on another new GUI-based operating system, OS/2 (as we mentioned before, we’ll probably talk about that another day).

In the late 1980s, Microsoft sold its rights to Xenix to SCO, in exchange for a small stake in the company. Ferguson wrote of a 1989 vigil held at Microsoft to signal the end of their direct involvement in Xenix:

Many MS alumni had worked on Xenix at one point, so the party was filled with many of the senior development staff from across the company. There was cake, beer and nostalgia; stories have been told, most of which I cannot repeat. Some of the older people dug through their files to find particularly amusing Xenix-related materials, and they were copied and distributed to attendees.

The operating system would continue to be actively developed by SCO for a few more years. In fact, it released a version, Xenix System V/386, which was the first 32-bit operating system running x86 chips. However, by the early 1990s, development of the Xenix-based operating system had ended. Xenix remains an interesting footnote in the history of Microsoft and operating systems in general.

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