Computer History page 7
In 1974, Gary Kildall was a programming teacher at the U.S. Navy Postgraduate school in California. Excited by the potential of Intel's new programmable microprocessors, Kildall contacted the ascendant electronics company. Kildall was immediately hired by Intel to write programs for the 4004 microprocessor.
When Intel began manufacturing peripheral devices, such as floppy disk drives for storage, Kildall created the microcomputer world's first operating system for microcomputers. An operating system is a program that helps the microprocessor work cooperatively with peripherals such as storage devices, keyboards, and monitors. Kildall's invention made it possible for microcomputer makers to equip their machines with keyboards, monitors, disk and tape drives, and more. With an operating system, microcomputers could perform tasks that were once reserved for more expensive mainframe computers. Kildall named his new operating system CP/M, the Control Program for Microcomputers.
When Intel decided not to get involved in microcomputer manufacturing, Kildall set up his own company, Intergalactic Digital Research, to sell CP/M. By the mid-1970s, Kildall's CP/M was the dominant operating system. Within months, Kildall's CP/M was being used to control microcomputers made by MITS, Commodore, Radio Shack, Xerox, Kaypro, Morrow, and almost one hundred other major manufacturers.
Microsoft, the company founded by Paul Allen and Bill Gates after they left MITS, was also enjoying a similar level of success. Microsoft specialized in adapting programming languages for microcomputer manufacturers.
BASIC, a public-domain language that Microsoft had licensed and improved, was extremely popular with microcomputer makers. BASIC allowed microcomputer users to feed instructions directly to the microprocessor. With an operating system and a programming language like BASIC, motivated users could teach their machines to perform math and statistics, manage names and addresses, perform simple accounting tasks, or even play games.
The microcomputer revolution made Kildall, Gates, and Allen very wealthy. Each of the two companies seemed to have settled into its niche--Digital Research provided microcomputer makers with operating systems, and Microsoft provided them with programming languages. Other companies began to use Microsoft's programming languages to produce applications for microcomputers running the CP/M operating system. Some of these products included WordStar (for writing), dBase (for record-keeping), and, later, VisiCalc (for number-crunching).
In 1975, a young Atari employee named Steve Wozniak joined an informal computer club in the Silicon Valley area of California. At the first meeting, one of Ed Roberts' Altair computers was demonstrated. Inspired by what he saw, Wozniak set out to build a computer--just to see if he could. He succeeded, and proudly demonstrated his plywood-encased machine at the next club meeting.
Wozniak's machine was far more sophisticated than the Altair. Steve Jobs, another computer club member, was duly impressed. Jobs was an entrepeneurial sort, and he decided that the two should immediately begin marketing an improved version of Wozniak's creation. Wozniak agreed, and the two sold a Volkswagen bus and a prized calculator in order to form a computer company.
The two Steves plotted for days. Although it was an industry tradition to give computers pompous and technical-sounding names (like ENIAC or UNIVAC or ALTAIR or TRS-80), the two Steves believed that their product would appeal more to the general public if it had a non-threatening moniker. Choosing an earthy but highly symbolic name, Jobs and Wozniak named their fledgling company Apple Computer. Wozniak's first machine was named the Apple I, and the pair came up with plans for a new machine they called the Apple II.
Jobs wanted to see an Apple II in every home, but felt that the blinking lights, gleaming chrome, and brushed aluminum cases that were popular at the time would prove too intimidating to the general public. Instead, he proposed enclosing Wozniak's electronics in a sleek plastic case--something that would make the computer look like an everyday household appliance. Wozniak was an avid game player, so he insisted that the new machine have color and audio capabilities.
An ex-Intel executive got wind of what Apple was doing and immediately arranged for some serious venture capital. Wozniak designed a prototype, Jobs built a factory, and a network of ComputerLand stores popped up around the nation to sell the new machines. At $2500, the Apple computers were a bargain (most other CP/M machines sold for twice that amount), and Apple quickly became the world's leading microcomputer maker. By 1980, Apple was churning out thousands of shiny new Apple II machines every month.
Apple's meteoric rise did not go unnoticed by the world's largest business machine manufacturer. In 1980, IBM decided to add a microcomputer to its line of adding machines, typewriters, large and mid-size computers, and other business machines. Instead of building all of the components from scratch, IBM decided to work cooperatively with experienced subcontracters. IBM tapped Zenith to build its monitors, Microsoft for its BASIC programming language, and Intel for its new programmable 8088 and 8086 microprocessors.
IBM also wanted to license CP/M, the industry-standard operating system, for their machines. When IBM's representatives arrived to negotiate a deal, Kildall was out flying his private plane, leaving the task of negotiating with IBM to his wife, Dorothy. As was their custom, the IBM reps presented Dorothy with a nondisclosure letter.
The IBM project was top-secret, and the reps wanted Dorothy to promise in writing that she wouldn't share details of this meeting with anyone else. Sensibly, Dorothy refused to sign the letter without approval from her attorney. Disagreement ensued, and the IBM reps spent the entire day bickering with Dorothy, Dorothy's attorney, and IBM's attorneys about the letter. By the time Gary showed up, nothing had been resolved and the IBM reps had a flight of their own to catch. Gary Kildall signed the nondisclosure letter, purchased a ticket, and flew back to Florida with the reps, talking all the way.
Unfortunately, the two sides were unable to close a deal. After much negotiation, the exasperated IBM reps gave Kildall what they considered their best offer: a flat $200,000 fee. In return, IBM wanted a perpetual, royalty-free license to use CP/M on their machines. Kildall knew that IBM's microcomputers would be worthless without an operating system, and CP/M was the only game in town. Sensing that he might be able to obtain a better deal, Kildall declined what turned out to be IBM's final offer.
CP/M was originally designed to run on Intel's 8080 microprocessor. When Intel first introduced the 8086 microprocessor, CP/M couldn't communicate with the new microprocessor. Intergalactic Digital Research immediately began updating their operating system so that it would work with the new microprocessor, but the project was beset by numerous delays.
Because of the delays, a Washington hardware manufacturer named Seattle Computer Products found themselves with an 8086-based computer to sell, but the computer had no operating system. Sensing that Digital Research wasn't going to be producing an update any time soon, the Seattle hardware company contacted Tim Patterson, a talented freelance programmer.
As a favor to his friends at Seattle Computer Products, Patterson single-handedly updated the CP/M operating system, changing only what was required to make Kildall's operating system compatible with the 8086 microprocessor. As a joke, he called his new operating system QDOS, the Quick and Dirty Operating System.
As it turned out, Seattle Computer Products was one of Microsoft's clients, so Gates and Allen were quite familiar with QDOS. Gates was also familiar with the stalled CP/M negotiations. On a hunch, Gates hopped a quick flight to Seattle for a talk with Patterson. When he left Seattle, Gates was $50,000 poorer--but he now owned QDOS.
Gates dropped the 'Q' from QDOS, changed the word Dirty to Disk, and MS-DOS, Microsoft's Disk Operating System, was born. Gates then offered DOS to IBM for a flat, royalty-free fee of $50,000. IBM was thrilled. Microsoft had brought them a product that looked like CP/M, acted like CP/M, and that would cost them a whole lot less than CP/M. If they couldn't have CP/M, Microsoft's DOS was the next best thing.
IBM hastily accepted Gates' tempting offer. As it turned out, the agreement IBM signed with Microsoft contained an interesting provision--a provision that would come back to haunt IBM in the years to come. IBM was not granted exclusive rights to Microsoft's operating system. In his agreement with IBM, Gates had reserved the right to sell his operating system to other microcomputer manufacturers.
In 1981, the IBM Personal Computer (PC for short) made a dramatic appearance. The machine was faster and smarter than anything else on the market at that time. At $2000, the machines were priced attractively. A basic PC cost only a tiny bit more than the less powerful microcomputers other manufacturers were offering.
IBM's legendary sales force went to work on large corporations, government agencies, schools, and hospitals. In order to capture the small to mid-sized business market, IBM launched an expensive nationwide TV advertising campaign. At the same time, Sears used its catalog division and massive network of stores to bring IBM PC to small businesses and individuals in every nook and cranny of the nation.
Within months, IBM was out of inventory and racing to fill tens of thousands of backorders. By the end of 1982, IBM had shipped over one million PCs. The IBM personal computer was a runaway success.
