Part 12 - The Deal of the Century
Microsoft - in the deal of the century - bought Seattle Computer Products "Quick and Dirty operating system" for a mere $ 50,000 - without Seattle Computer products knowing it was for IBM - and then proceeded to talk IBM into letting Microsoft also market it separate from the IBM PC project. Microsoft had the market savvy and already realized the potential profit - or "revenue bomb" - their own operating system and languages might generate.
It was a frantic several months of around the clock work to meet the product introduction deadline. IBM gave Microsoft hardware prototypes of their PC to develop Basic and the new operating system for. IBM required strict security procedures, which Microsoft felt were silly. Microsoft's Bellevue offices and IBM's Boca Raton, Florida, production facilities were at exact opposite ends of the country, necessitating hundreds of flights to hastily called meetings - usually by IBM. Despite these problems, and the clash of corporate cultures, - the deadline of introducing the IBM PC on August 12, 1981 was met. However, Microsoft - to whom the project had been a labor of love - was not even invited to the product introduction. To IBM, Microsoft was just another vendor. The PC was just another product.
The finalized IBM PC was close to what Bill Gates had specified should comprise a new generation computer. IBM decided to use the Intel 8088 chip - a 16/8 chip - instead of the true 16-bit 8086 chip, saving a few dollars in production cost, but slowing the system down. The 8088 could address up to 1 Megabyte of memory - 16 times more than the 64K CP/M computers - more than what mainframe computers used - who would ever need that much memory? The system had a built-in cassette tape interface but was designed to use 5" floppy disk drives and have monochrome graphics. The Basic language was in a ROM chip inside the computer, and you had your choice of 3 operating systems - The New MS-Dos, CP/M-86, or the UCSD P system. Several application software programs - including a modified version of Visicalc - were offered. Configuration prices ranged from about $ 1600 for a 16K RAM mono system, up to over six Grand for a 320K system which included color graphics. What really made the IBM PC unique from previous IBM traditions is that it was built from off the shelf parts - available to anyone - and that it was marketed by computer dealers - not IBM salesmen.
IBM was so unsure of market acceptance that they made a low key product introduction. Other PC makers of the day such as Radio Shack expressed little concern. Apple Computer even ran a newspaper ad welcoming IBM into the marketplace. The new IBM PC didn't really have the power to blow its competition away, there wasn't much software available, it used 3 new and untried operating systems, and it was marketed through a new non-IBM marketing channel.
And the market acceptance - was phenomenal. Software for it seemed to grow on trees. A new spreadsheet program called Lotus - written to take advantage of the 8088 - soon became a reason to buy the new IBM PC. Quality Word Processing and Database programs emerged. 3rd Party hardware companies began creating drop-in cards such as the Hercules monographics adapter. People rushed to computer stores like Lemmings to the sea. Demand was so high that stores had lotteries for the chance to buy an IBM PC at grossly inflated prices.
Within 18 months IBM was forced by market demand to introduce a PC-XT which had a hard disk and a new version of DOS. Business demanded more RAM and storage. The unheard of 1 meg of memory was soon eaten up by the demands of huge spreadsheets, and tricks - such as the Above Board and the LIMSpec or Expanded memory specification were created to fool the systems into being able to use resources that theoretically weren't there.
So incredible was IBM's success that the October 3rd, 1983 issue of Business Week magazine ran a cover story entitled "Personal Computers - and the Winner is - IBM", which went on to explain how IBM had gone from zero to market domination in 2 years.
And the future certainly looked much like George Orwell's 1984 - as IBM was poised to dominate the world again, and was readying the introduction of its new Advanced Technology PC and even a home pc they planned on calling junior.
And this probably would have happened, were it not for some interesting developments at - of all places - a Copier company's research laboratory - and next week we'll learn how both Apple's Steve Jobs and Microsoft's Bill Gates took a walk in the "PARC", and how it changed the future of personal computing.
On to Segment 13, "A Walk in the PARC"
Back to the Table of Contents