Personal Computer (PC), Introduction of the

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PERSONAL COMPUTER (PC), INTRODUCTION OF THE

No single person or institution can be credited with the advent of the personal computer (PC). Rather, the rise of the PC is due to the work of multiple individuals, government entities, and businesses. While Apple Computer Inc. and Microsoft Corp. played pivotal roles in developing PC operating systems, the microprocessors developed by Intel Corp. proved equally important, as did the actual PC launched by IBM Corp. in 1981.

EARLY DEVELOPMENTS IN THE COMPUTER INDUSTRY

Many developments took place in the computer industry before work truly began on the machines that became known as personal computers. For example, in conjunction with Harvard University, IBM created the Automatic Sequence Controlled Calculator, the first large-scale device that could process lengthy calculations, in 1944. More than eight feet tall, the five-ton machine, known as Mark I, housed nearly 500 miles of wire and 765,000 parts. Some industry experts consider Mark I the world's first computer. In 1951, Ken Olsen, who went on to found Digital Equipment Corp., and Jay Forrester developed the first real-time computer, the Whirlwind, at the Massachusetts Institute of Technology (MIT). That year, the U.S. Bureau of Census began using the UNIVAC I computer to hold data. In 1952, IBM launched a computer designed for scientific calculations, the IBM 701. The vacuum tubes used in the 701 were smaller and easier to replace than the switches used in earlier machines. Remington-Rand developed the world's first high-speed printer for the UNIVAC in 1953. IBM employee John Backus created the FORTRAN programming language the following year. Japan developed its first computers when NEC Corp. created NEC-1101 and NEC-1102 in the mid-1950s. The IBM 705 machine, launched at roughly the same time, was one of the world's first general purpose business computers. Its success helped to oust Remington-Rand, maker of the UNIVAC, from its first place spot in the new computer market.

Digital Equipment Corp. released the PDP-1, the world's first minicomputer, in 1960. Four years later, IBM introduced the System/360, which used software and peripheral equipment compatible with each of the firm's computer models. This interchangeability was a new concept in the computer industry. Firms like Digital Equipment and IBM continued developing computer technology throughout the 1960s. In 1966, analysis and measurements instrument maker Hewlett-Packard Co. developed its first computer, the HP 2116A. Gordon Moore and Robert Noyce left Fairchild Semiconductor to established Intel Corp., which would become another major computer technology innovator, in 1968.

The development of the first personal computers resulted from the convergence of several types of technology. One of the earliest breakthroughs came in 1969 when Intel developed a four-bit central processing unit (CPU) that was able to follow instructions to perform simple data processing functions. Five years earlier, Dartmouth College mathematics professor Thomas Kurtz, and John G. Kemeny, chairman of the mathematics department there, had developed the BASIC (Beginner's All-Purpose Symbolic Instruction Code) computer programming language to allow their students to write programs that could be tested on the GE-225, a computer system developed by General Electric Corp. Because Kemeny and Kurtz did not copyright or patent BASIC, other individuals were free to use it as they saw fit.

One of the best known players in PC history, Bill Gates used BASIC to make his first major mark on the PC industry in February of 1975. The 19-year-old Harvard University student worked with 21-one-year-old Honeywell employee Paul Allen to create a new version of BASIC to run the Altair 8800, considered one of the world's first personal computers. The Altair had been developed the previous year and was powered by the Intel 8088, which was the world's first general purpose microprocessor. A few months later, Gates and Allen established Microsoft Corp. The Altair 8800 was released, with 1KB of memory, to the general public for $375. By 1977, Microsoft had become the largest U.S. distributor of microcomputer languages.

In 1976, computer programmers Steve Jobs and Steve Wozniak founded Apple Computer Corp. to market their new Apple I computer, which was essentially a computer circuit board with no keyboard, case, sound, or graphics. The following year, Apple released the Apple II, the first PC to offer color graphics capacity. The Apple II also included a keyboard, power supply, case, and 4KB of memory. Sales at Apple reached $1 million that year, fueled by the popularity of the new machine, and Apple became one of the fastest growing companies in the United States. Apple's employees replaced their typewriters with PCs in 1979.

Throughout the 1970s, IBM continued to develop new computer systems, including the 370, its most powerful computer system to date, and the 5120, its least expensive computer system to date. The firm also created the Displaywriter word processing system and started offering 24-hour telephone assistance to customers having technical problems.

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.

STRUGGLE FOR CONTROL IN THE PC INDUSTRY

Compaq's sales exceeded $1 billion in 1987. That year, Packard Bell introduced its first PC. The following year, Apple filed suit against Microsoft, alleging that the firm had used the appearance of the Macintosh operating system as the basis for its Windows program. Apple's lawyers requested that Microsoft either pay royalties or simply stop selling Windows. By then, Microsoft had grown into the leading U.S. maker of PC software, and by the end of the decade more than 2 million copies of Windows 3.0 had been sold. In 1989, PC sales throughout the world exceeded 100 million, and the number of U.S. computer users reached 50 million. The increased speed offered by Intel's 386 and 486 microprocessors helped to fuel the PC's growth, as did the decision by firms like Packard Bell to market PCs via discount chains, electronics centers, and other mass retail outlets.

Revenues exceeded $1 billion at Microsoft for the first time in 1990. Tension between Microsoft and IBM worsened, resulting in a price war between Microsoft's DOS 5.0 and IBM's competitor to DOS, OS/2. In 1991, in what was viewed by many analysts as a plan to wrest market share back from Microsoft, IBM and Apple forged an alliance to develop a new operating system that would not only make computers easier to use, but also facilitate compatibility between IBM and Apple machines. By then, roughly 90 percent of worldwide PCs used the MS-DOS platform, and Apple had broadened its litigation against Microsoft. In 1992, Microsoft won the case against Apple after a judge decided that the appearance of the Macintosh operating system was not protected by Apple's copyrights. Therefore, Microsoft's Windows platform, though very similar to Macintosh in appearance, was not in violation of copyright law. Apple unsuccessfully appealed the decision. Meanwhile, another PC upstart, Dell Computer Corp., had made the Fortune 500 list, just eight years after its inception. By the end of 1993, Dell had become the world's fifth-largest PC maker with sales of more than $2 billion. The worldwide PC industry continued to grow at a rapid pace, and PCs themselves continued to increase in speed and capacity.