The IBM PC

Like many other companies at the time, IBM had been selling computers only to businesses. The closest thing to a PC in its lineup was the USD 9,000, 50-pound IBM Portable Computer. Yet William Lowe, the director of the IBM General Systems Division lab in Boca Raton, Florida, saw the potential for rapid growth for computers as consumer tools, especially as power increased and prices came down.

In 1980, he pitched to IBM CEO Frank Cary the idea of a computer for small businesses and consumers that would sell for USD 1,500. Cary gave Lowe a month to develop a prototype and a year to get a product out the door. That challenge would ultimately bring the power of 1960s mainframes to small businesses and households, and would dramatically extend the market for computers everywhere.

Lowe was promoted shortly after his meeting with Cary, and development of the project, code-named Chess, fell to Don Estridge. Due to the short timeline and the unprecedented nature of the request, Estridge got permission to run a skunkworks entirely outside of IBM’s standard procedures. Bill Sydnes was in charge of hardware. Jack Sams took on software. Dave Bradley wrote the interface code. Mark Dean and Dennis Moeller created the ISA bus that allowed the disk drives and printer to communicate with the PC. H. L. “Sparky” Sparks handled marketing.

The team made a number of controversial decisions that would ultimately contribute to the IBM PC’s success. One was concerning the composition of the PC itself. About half of the system — the expansion bus, display, monitors, floppy interface and keyboard — would be lifted from the IBM System/23 Datamaster. Then there was the issue of the microprocessor and operating system. Before the IBM PC, the company had designed and made nearly everything it sold.

But the team decided the only way to hit their deadline and a USD 1,500 price tag would be to use off-the-shelf parts. They chose Intel’s 8088 chip, which ran at up to 5 megahertz — a subsequent version ran at 16 MHz — and could address 1 megabyte of memory. Microsoft provided the OS, which would later become known as MS-DOS. Epson provided the dot-matrix printer.

Most surprising, the team embraced an open architecture and even published a technical reference of the circuit designs and source codes to help companies develop software and peripherals. It took 40 days to design the motherboard and four months to create a working prototype. In April of 1981, the manufacturing team took over.

According to James Cortada, author of IBM: The Rise and Fall and Reinvention of a Global Icon, “The normal process to get a new product to market took four or five years, but the incipient PC market was moving too quickly for that.”

There was little time to experiment, or even to run tests on components. They used functioning and pre-tested sub-assemblies, put them together and tested the final product.

Reaching a nascent consumer market required establishing new sales channels. Retailers such as Sears, Roebuck & Company and ComputerLand signed up to sell the machines. The PC would also be sold through IBM Product Centers and a separate sales unit within the Data Processing Division.

On August 12, 1981, Estridge unveiled the IBM PC at New York’s Waldorf Hotel. Priced at USD 1,565, it had 16 kilobytes of RAM and no disk drive, and it came with two programs — VisiCalc, for producing spreadsheets, and EasyWriter, for word processing. To add a display, two diskette drives, and a printer cost nearly USD 3,000 more.

IBM also needed a more approachable style of marketing if it wanted to reach its new potential buyer. The advertising agency Lord, Geller, Federico, Einstein came up with a campaign starring the Charlie Chaplin character “the Little Tramp.” Tom Mabley, the agency’s creative director, said the tramp was “a simple, friendly person who should represent Everyman”.

The campaign theme was “Keeping Up With Modern Times,” depicting the tramp as a manager or small-business owner overwhelmed by the demands of an assembly line or conveyor belt. With the arrival of the PC, the frantic music in the ad switches over to a waltz, and order is restored. The campaign was so successful that the tramp was also requisitioned to help launch the IBM PCjr. In those ads, the PCjr is cast quite literally as a new family member, and arrives in a baby stroller.

By the end of 1982, a new retailer was signing up every week; at the peak, machines were selling at a rate of one every minute of every business day. Newsweek called the product “IBM’s roaring success.” Time magazine replaced its traditional “Man of the Year” and named the PC its “Machine of the Year,” and The New York Times wrote, “The speed and extent to which IBM has been successful has surprised many people, including IBM itself.”

One of the team’s most surprising development decisions proved to be one of the most influential and enduring. Basing the PC on open systems turned it into a de facto industry standard and a playground for developers. Within a year of launch, more than 750 software packages were available for the IBM PC. Hardware manufacturers also got in line. Dozens were selling memory expansion cards within a year. A few companies took advantage of the specifications published by IBM and reverse-engineered the system boot code to create their own computers and peripherals, which were labeled “IBM compatible.”