In 1980, on this day commercial discussions with the little parts supplier Microsoft collapsed over IBM's boneheaded demand for an exclusive license to their disk operating system.
Talks between IBM and Microsoft collapseBut the broader issue was really one of vision because the long-haired visionary programmers Paul Allen and Bill Gates were pretty outspoken in their advocacy of an IBM PC powered by a Motorola 68000 chipset and running Xenix, a Microsoft implementation of Unix.
And the problem was that the IBM Executives were just thinking about the numbers, long-term profitability and how to compete favourably with rival products such as the Apple Computer and the Radio Shack's TRS-80. In fact they had only sought out little parts suppliers such as Microsoft and Intel for the sole purpose of reaching a sub-$3,000 price point. Reluctant to change course and embrace an open commercial and technical partnership, IBM reverted to the trusted in-house model, re-designing the PC architecture on the IBM 801 CPU and its own Unix.
IBM regretted their obstinate decision because they were unable to squeeze their in-house design under the sub-$3,000 price point (a task requiring small company agility not available at the Entry Systems Division in Boca Raton, Florida). And while the IBM project went no where fast, Allen and Gates banged their head against the same wall with Hewlett Packard before seeking out same-sized start-up companies that shared a common mindset.