It's simple really, and even if you don't know right away, it's obvious once you read the explanation. The name is actually a "blend word" of sorts, in which two other words combine to make one.
From a 1995 Forbes magazine interview with Microsoft cofounders Bill Gates and Paul Allen:
Gates: When we signed that first contract with MITS, we referred to ourselves as 'Paul Allen and Bill Gates doing business as Micro-Soft.' I don't remember why we spelled it with a hyphen and a capital 'S.' We put a credit line in the source code of our first product that said, 'Micro-Soft BASIC: Bill Gates wrote a lot of stuff; Paul Allen wrote some other stuff.''
Allen: We had talked about a lot of different names back in Boston, and at some point I said, 'Well, the totally obvious name would be Microsoft.'
Gates: We also had mentioned names like Outcorporated Inc. and Unlimited Ltd., but we were, you know, joking around. We talked a lot about whether we should call it Allen & Gates, but decided that was not a good idea.
Allen: Yeah. Because companies like DEC and IBM weren't named after personalities, they would have a longevity and identity way beyond the founders...
Gates: ...and it seemed like a law firm or like a consulting company to call it Allen & Gates. So we picked Microsoft even before we had a company to name.
So why combine "micro" and "soft?" In the 1970s, before Microsoft was a thing, Gates and Allen got their start developing MICROcomputer, or MICROprocessor, SOFTware. And it was actually Allen that originally came up with the name.
The company was originally formed in 1975, but it didn't officially incorporate until years later in 1981.
Did you know where Microsoft got its name?
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