The PC business segment that IBM began has done a complete flip--IBM has handed off its PC operations to a Chinese company, and today it's Microsoft, not IBM, sitting in the leader's seat. Here's one view of how IBM jumped into the PC market, and how Microsoft got involved.

W. David Gardner, Contributor

August 14, 2006

3 Min Read

The IBM Personal Computer, announced 25 years ago this month, had a decisive moment two and a half decades ago IBM's president John Opel was told that startup company Microsoft headed by a 24-year-old named Bill Gates might get involved in IBM's crash program to build its PC.

"Oh, is that Mary Gates' boy's company," Opel asked?

Indeed, it was, as Opel would later learn to his chagrin. Years before IBM had assigned Opel to Seattle where he had worked with Bill Gates' mother on the United Way Appeal. Bill Gates would later tell interviewers that he thought the old friendship had helped him get the assignment from IBM to develop the operating system for its PC.

The PC business segment that IBM began has done a complete flip -- IBM has handed off its PC operation to a Chinese company, Lenovo, and Microsoft, not IBM, is top dog in the industry.

In an announcement Monday, the Computer Almanac said its calculations of IBM-compatible PC sales have resulted in sales of about $3,100 billion. The figures, from the market research firm's Future Computing unit, are calculated on the basis of 1.5 billion PCs delivered.

IBM had been panicked into developing the PC primarily by the planned debut of a business computer from Apple Computer. The Apple machine, the Apple III, had advanced specs, but it would suffer from a brace of manufacturing problems. A last-minute spreadsheet by VisiCalc developer Dan Bricklin gave the Apple III some meaningful software, but wasn't enough and the Apple computer never logged significant sales in the marketplace. IBM had overreacted, it seemed.

The IBM PC was a winner at the beginning but it hardly seemed to be an IBM computer and that would eventually create problems for the firm, then overwhelmingly dominant in computing.

The PC's 8088 microprocessor was made by Intel Corp. The disk drives by Tandon Corp., the video screen by an unidentified Taiwan contractor, the printed circuit boards by SCI Systems, and the all-important MS-DOS operating system by Microsoft. IBM never protected its design and Microsoft and Intel went on to become dominant players in PC software and microprocessors respectively. Today, Taiwan and Chinese contractors dominate much of the hardware side of the IBM-compatible PC market.

Today, with IBM virtually out of the PC business, a question is begged: why did it jump into the business so quickly?

Frank Cary, IBM's chairman at the time the PC was being developed, would later say his company had feared it would lose the PC business in much the same manner it had lost the minicomputer market (to Digital Equipment Corp. and Data General).

The PC operation was set up in an independent manner like a "skunk works."

Cary had said the operation, which he called an Independent Business Unit, was "IBM's answer to the question, 'How do you make an elephant tap-dance?'"

It's taken 25 years, but we now have the answer: elephants can't tap dance.

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