How IBM Won Then Lost The PC Wars

In 1981, the IBM PC generated $1 Billion in revenue, they had estimated that they would sell 200 000 PC’s in the first year, but their projections were wrong they were selling 200 000 PC’s a month. By 1982 they had an 80% market share of the computer industry. They were by far the biggest name in the computer industry but if you look around today you will not be able to find an IBM PC anywhere. So how did IBM go from dominating and winning the computer market to not even being present in it today? This is the story of the IBM PC and how it won and then lost the PC Market.

1974 the Altair 8800 computer kit is launched, it was a microcomputer that was a very basic miniaturized version of the IBM mainframe, it had switches you could flip to load instructions into memory and had LEDs that would display the output of the instructions you input that is if you had inputted them correctly. IBM’s mainframes did the same thing but could handle much more data and could do far more complex tasks, but this was the first sign of the changing tides of the computer industry, computers were getting smaller.

In 1977 the next step in the PC revolution was taken when Apple unveiled the Apple 2, not only was this a small computer that could fit on your desk it had a screen and an interface that made it easier to use, now a larger group of people could use these computers to do tasks and run calculations that they used to do on the IBM big Mainframes. The Apple 2’s success created more interest in PCs and soon many players began to spring up with their own versions of PCs. The PC was causing a lot of buzz to the point where IBM’s mainframe customers were telling IBM to enter the PC market, so they could buy IBM’s PC which was the only legacy computer brand at the time that had built trust with its customers, the rest of the computer companies were barely 5 years old.

Lowe’s design plan was called the open system architecture which basically meant that the first IBM PC was mostly made up of off-the-shelf parts. The operating system too was not developed by IBM, instead, it was developed by Microsoft through a deal that allowed IBM to license the operating system for just $75 000. The operating system was called QDOS or the quick and dirty operating system.

The Big day came on the 12th of August 1981, when the first IBM PC was released.

The IBM PC with its tagline “A tool for the modern times” generated $1 billion in revenue, far exceeding company projections. IBM's original manufacturing forecasts called for 1 million machines over three years, with 200,000 in the first year. In reality, customers were buying 200,000 PCs per month. The IBM PC was a smashing success, it let corporate America know that it was okay to buy PCs. After all, people used to say you never got fired for going with IBM, IBM had been the standard for decades with mainframe computers and now their IBM PC had instantly become the new standard for what a PC should be like. The IBM name that had been trusted for decades by corporate America made the IBM PC an instant hit and gave the entire PC industry as a whole legitimacy to a broader market that included corporate America. IBM popularized the PC in what could be called the 3rd step of the PC revolution after the Altair 8800 and the Apple 2. All of a sudden everyone knew what a PC was and they wanted one, and the brand on most people’s minds was IBM which by 1982 had an 80% market share of the PC industry. And IBM’s success began attracting competitors.

IBM changed its strategy, it negotiated terms with Microsoft, and created a joint development agreement. This agreement was for Microsoft and IBM to collaborate on developing a new operating system called OS/2. OS/2 was going to be proprietary and Microsoft could not license it to anyone else; it was solely built for IBM and its computers. Microsoft agreed but the interesting thing was Microsoft was also simultaneously working on its own operating system called Windows, which was going to be an update to the DOS operating system that was initially built for the first IBM computer. OS/2 came out in late 1987 and it was a total disaster, IBM in trying to create their own operating system forgot one thing, the applications. Because this was IBM's own operating system existing popular software applications built for DOS were not compatible with OS/2. The main reason why people were buying computers at the time was because of their applications like spreadsheets and word processors. A lot of these popular applications were not compatible with IBM’s new OS/2. Consumers began thinking twice about purchasing an IBM PC. Maybe you could be fired for going IBM after all, so consumers began buying other PCs that were compatible with popular applications, namely PCs that run Microsoft’s windows which had launched before IBM OS/2.

[rohithpokala]

Sad to see this spectacular content is having less views and less subscribers. Hope you will not give up and continue to provide these valuable historical insights. One day definetly your channel will blow up.

[wlsmojo]

Great Video :-) Compaq were more ibm compatible than ibm :-) there a book called “Open” by Rod Canion that really illustrates how IBM was taken down .

[KevinInPhoenix]

IBM may have lost the PC Wars but the IBM "standard" PC design continued to evolve from ISA, EISA, PCI, to the PCI Express machines we use today. Apple is still a proprietary niche player in the PC market.

[ZAUS]

The Macintosh wasn't a success? I think you meant to say that it wasn't as successful as Apple hoped. It still sold decently, and it obviously outlasted IBM.

[SebastianSnoeck]

in a way ibm was what mac & microsoft is today think they are the best and to corporate ....