Introduction of the Personal Computer (PC) - The Rise Of The Pc

IBM Corp. chose Intel's 8088 chip for its new personal computer line in 1980. That year, IBM asked Microsoft to develop four languages, as well as an operating system, for its new PCs. Microsoft released Softcard, which allowed Microsoft BASIC to operate on Apple II machines. Apple Computer released the Apple III, its most advanced machine to date. Boasting a new operating system, a built-in disk controller, and four peripheral slots, the Apple III was priced at $3,495, nearly double the price of its predecessors.

In August of 1981 IBM began selling its landmark PC, which was powered by Microsoft's new operating system, known as MS-DOS. The machine was IBM's smallest and least expensive computer system to date, and it is credited for helping to launch the PC revolution. Although other firms, like Hewlett-Packard, actually had beaten IBM to market with their own PCs, IBM's dominance in the business machines market gave it a considerable edge as most IBM business machine clients simply replaced those machines with IBM computers. To sell its PCs, IBM began authorizing retailers like Sears, Roebuck & Co. and Computerland. The firm also expanded its sales channels to include manufacturers who integrated IBM products into their systems. Within several months of IBM's launch of its first PC, more than 50 microcomputer manufacturers had licensed MS-DOS from Microsoft. That year, Apple Computer completed its initial public offering (IPO), selling 4.6 million shares at $22 apiece. The IPO was the largest in U.S. corporate history since Ford Motor Co. had first listed its shares in 1956. With more than 1,000 employees, a network of 800 distributors in the United States and Canada, and an another 1,000 distributors overseas, Apple had the largest worldwide presence in the computer industry.

In 1982, Apple became the first PC company to secure $1 billion in annual sales. By that time, more than 100 companies had started manufacturing PCs, including Compaq Computer Corp., which focused its efforts on developing a machine similar to IBM's PC. In January of 1983, Compaq released its first PC. The upstart's sales reached $111 million that year, setting a record for the highest first-year sales of any U.S. business. Apple shipped its blockbuster Macintosh machine in 1984, after first advertising it on television during the SuperBowl. Initial versions of the Macintosh retailed at $2,495, while the more powerful Macintosh 512K sold for $3,195. In November of that year, Microsoft introduced its Windows operating system, which was based on the MS-DOS operating system and offered users a graphical user interface (GUI), similar to the one offered by Apple machines. The firm marketed the new platform to the 200 microcomputer manufacturers already licensing MS-DOS. Within a single month, Microsoft sold more than 500,000 copies of Windows. The company also began developing software, including a version of its recently launched Microsoft Word program, for Apple's Macintosh computer. IBM's dealer outlets across the globe reached 10,000, as the firm's sales soared to $46 billion.

By the end of 1985, Microsoft had started distributing Windows to retailers for sale to consumers. It also headed up an alliance with IBM's competitors—including Compaq, Hewlett-Packard, Texas Instruments, and Digital Equipment—in an effort to weaken IBM's monopoly on PC standards development. In response, IBM began to work with Microsoft's competitors on software programs. Despite its increasingly rocky relationship with IBM and the fact that several problems had emerged with the earliest version of Windows, Microsoft convinced IBM to use an upgraded version of Windows on its next line of PCs. By then, more than 30 million PCs had been sold in the United States.

Microsoft conducted its IPO in March of 1986, offering its shares at $21 each and raising $61 million in fresh capital. When Microsoft shares began trading at $85 the following year, the firm's 31-year-old founder, Bill Gates, became the PC industry's first billionaire. Microsoft released a third version of Microsoft Word, which quickly became the firm's best selling product. By 1987, Apple had extended its reach to 80 countries and released the next generation of Macintosh PCs. To compete with Microsoft's increasingly popular software offerings, Apple also founded Claris, an independent software manufacturer.

After several decades of considerable growth, IBM's sales began to decline in the mid-1980s in the face of stiff competition from rivals like Compaq, which was named to the Fortune 500 list in 1986. In fact, many manufacturers of IBM "clones" were able to outsell IBM in the retail PC market. Ironically, the PC revolution that IBM had played a major role in sparking eventually hindered the computing giant's success. Used to selling large-scale systems to businesses, IBM was not prepared to target the fastest growing segment of the booming PC market: individual consumers.