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IBM PC - The W1nners' Club


Way back in the summer of 1980, representatives from IBM reached out to a group of computer nerds at a company called Digital Research Inc. based in California. Their aim was to commence talks about licensing DRI’s all-conquering operating system CP/M.


Legend has it that rather than take the call, DRI’s founder Gary Kildall instead went off to fly about in his airplane and a frustrated IBM then turned to Bill Gates’ Microsoft to supply the operating system for their new PC. The rest as they say, is tech history. Within a couple of years the IBM PC was the market leader and Microsoft were on course to dominate the future of the computing industry for years to come.

However – and there usually is a however in stories such as these, Microsoft’s operating system was based at least in part on Kildall’s CP/M.

Kildall had made a name for himself back in the early 1970’s for building the first operating system for microcomputers. It was a direct result of his vision to create an operating system that was separate from the hardware so that applications could run on computers made by different manufacturers, that we ended up with the PC revolution of later years.

It’s impossible to get a credible account of exactly what happened in those critical days back in the summer of 1980, as accounts from people on all sides paint a blurry picture of the truth, but the aggregated story is as follows:

The IBM team who were working on a clandestine project to build a PC, flew to Seattle in August 1980 to see if Microsoft could supply them with an operating system. Gates and his team couldn’t, so they referred IBM to Kildall’s group at DRI. When they turned up at DRI’s headquarters the following day, Kildall’s then-wife refused to sign their non-disclosure agreement. Kildall then apparently returned from a business trip in the afternoon and met with IBM, although it’s unclear whether a cast-iron deal was agreed between the computer giant and DRI. At around the same time, Tim Paterson had been working on his QDOS operating system that had borrowed elements of Kildall’s CP/M (this was the days before patenting for computer software was enshrined in law) and sold it to Microsoft for $50,000. Gates and his team then improved the code and licensed it to IBM for a low rate royalty fee.

As IBM sent out test versions of their new PC, a consultant working on behalf of DRI noticed that the operating system bore more than a striking resemblance to CP/M. Rather than suing however, Kildall licensed CP/M to Big Blue who retailed it at $240 per copy, but then got floored when IBM charged only $40 for DOS. In his memoirs Kildall said, “I believe the entire scenario was contrived by IBM to garner the existing standard at almost no cost.”

As IBM’s PC became the industry standard, Microsoft leveraged their big break to go on to tech industry greatness whilst DRI’s CP/M gradually faded into irrelevance.

Kildall sold his company in 1991 for £120 million, but he has always been embittered by the apparent treachery that took place at the time and suffered from alcohol related problems in later life.

Whether Kildall really did miss the crucial meeting with IBM because he was out gallivanting in his hobby plane will likely remain a part of business folklore, but one thing that is clear, is that DRI missed out on untold riches and status as a major tech player as a direct result of IBM going with Microsoft.

There are some that say the computer industry would have been far more innovative if Kildall had triumphed in the early days, but others insist that it was Bill Gates that had the mettle to lead an industry.

All we can say is that if you ever end up owning a computer company and an aircraft, you need to decide which is more important or you could miss out on being the richest person in the world.


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