Microsoft-Paul Allen

[Jim Manley]

Just to be clear, it wasn't that the CGA hadn't been designed and put
into production by the launch of the PC, the demand for the CGA was
simply overwhelming compared with the much lower demand and relatively
greater supply of the MDA.  Plus, IBM had no experience selling into
retail, let alone non-business consumer channels, which had come to
expect "high-resolution" color graphics built into a system (e.g., on
the Apple ][ motherboard).  There were all sorts of distribution
mismatches for the PC where various package combinations were offered
through various channels that had no relation to reality, demand-wise.
They offered employee discounts thinking that the PC would need to be
promoted from as many directions as possible, not realizing what kind
of tiger they had by the tail.  Its suppliers suddenly had to start a
world-wide scramble just to meet the sudden increased demand for
resistors, let alone color graphics video ICs.

IBM wasn't even aware of the penetration of dial-up among consumers
and very small businesses, or they would have initially offered
modems, at least as options, if not in package combos.  Retailers who
understood the consumer and very small business markets quickly began
offering modems in response to the vacuum that IBM had created.
Another sign that IBM wasn't confident about the longevity of the PC
is that they outsourced the development of its OS to Microsoft,
believing that Microsoft owned CP/M because of an Apple ][ compatible
product described in the next paragraph.

A small business to IBM was much larger than the sizes of businesses
that Apple was typically serving at that time.  Many are unaware that
the largest fraction of CP/M licenses ever sold were for the Microsoft
Softcard for the Apple ][ (about 300,000 sold, all told), not S-100
systems (somewhere around 150,000 systems built by hobbyists, or sold
by small manufacturers).  The Softcard was a Z-80 based single-board
computer that plugged into an Apple ][ slot, equipped with its own
80x24 character x line black-and-white video output, RAM, etc., and
that shared Apple ][  electrical power and floppy disk drives.  The
Softcard was Microsoft's first really successful product, responsible
for its first tens of millions of dollars in revenue and profits.

The Softcard was developed by Seattle Computer Products, the same
two-man company in a Seattle garage that later sold its prototype
8086/8088 OS to Microsoft for $50,000.  Microsoft turned around within
a day and sold it to IBM via a _non-exclusive_ license (a critical
factor that allowed them to field MS-DOS, their self-branded version
of IBM's PC-DOS), for $3 million _plus_ about $50 per computer sold
with PC-DOS.  That model, updated for Windows, is the cash cow that's
still printing profits for Microsoft to this day.