In 1980, disregarding the unduly cautious legal advice of his attorney Gerry Davis, operating system guru Gary Kildall of Digital Research, Inc. (DRI) took a snap business decision and signed a non-disclosure agreement (NDA) presented by the impatient IBM lead negotiator Jack Sams.
CP/M licensed for IBM PCsWith that routine formality out of the way, the IBM representatives visibly relaxed, and the historic meeting at Pacific Grove progressed into substantive discussions. The conclusion was an agreement to license CP/M-86 for the IBM PC, but it was a done deal after Tom Rolander demonstrated DRI's brilliant multi-tasking operating system.
Until the NDA was signed, the IBM representatives had been unwilling to reveal their plans. Because their one-year accelerated product-to-market plan ("Project Chess") was dependent upon the taking of a strategic decision to drop their first choice Motorola chip. This judgement was central to the negotiations because DRI's MP/M-86 already worked on the second choice Intel 16-bit model (the operating system had actually been developed two years before).
Inevitably, the most sensitive aspect of the negotation was commercial. Because IBM opened bidding with a ludicrous offer of the one-off payment of $250,000 unaware that CP/M was generating annualised sales of $6m. Eventually, they settled on the scalar formula that would make Rowlander and Kildall (pictured) fabulously wealthy, a royalty price of $10 per license. After this business was concluded, three quite startling facts emerged.
- Kildall and Rowlander had been scheduled to fly to meet with a CP/M distributor. Fortunately, the meeting had been cancelled because Kildall's wife Dororthy was notoriously hesitant to sign NDAs without her husband present.
- DRI was scheduled to meet with representatives of IBM's competitor, Hewlett Packard that very afternoon.
- IBM had made the lazy assumption that a company in Seattle owned CP/M. Amazingly, Jack Sams and his colleague Pat Harrington had even contacted a couple of "long-hairs" who had been reluctantly forced to admit they did not own the operating system and instead referred the IBM-ers to DRI.