A Timelapse of the Tech Sector (Part 1 Continued: The Personal Computer Revolution)
The PC revolution could have easily become an Apple standard or a Commodore standard instead of an IBM standard.
Catch up if you missed the beginning of Part 1!
The Personal Computer Revolution (1970s to 1990s)
The Altair, developed by a mostly-forgotten company named MITS, was the personal computer that broke open the market. It was released in 1975 and sold to “hobbyists” (a.k.a. nerds) by the thousands. But it did not have an operating system. This is where Bill Gates arrived on the scene: with the help of Paul Allen, he founded Microsoft in 1975, and wrote an operating system for the Altair that made it easier for other people to use the computer.1 Major computer companies of the time saw it as a toy.2
Meanwhile, Steve Jobs and Steve Wozniak, the Apple co-founders, began producing their own Apple II computers in 1977.3 These were designed to be useful to a wider range of people, and quickly became a best-seller after the first reliable spreadsheet program was introduced in 1979. Personal computers found their way into business use.
Apple was quickly overtaken by Commodore, a company that had switched from typewriters and calculators to personal computers. And, for a few years, it looked like the company would overwhelm the market with its affordable computers. Commodore produced a series of famously powerful computers that were also extremely cheap. In 1983, Commodore had about 50% market share in personal computers.
Dozens of other companies began selling their own personal computers, each with a different hardware design, and each with a different set of software. Many of them were vertically integrated, making both the software and the hardware, and they tightly controlled every part of their computer’s production. This includes companies that almost no one remembers, such as Wang Laboratories, and names that would seem out of place today, such as Texas Instruments, Xerox, Radio Shack, and Atari. There were also countless tiny computer companies founded by the hobbyists of the 1970s.
All of them were wiped out by IBM’s decision to build a personal computer.
In the personal computer market, IBM did something that no other computer company was doing. IBM, realizing that it was late to the party, desperately outsourced almost all of the components for its personal computer. Instead of using its traditional vertically integrated approach, it built the first IBM personal computer almost entirely out of parts that it could buy off the shelf. Microsoft’s PC-DOS was licensed to be the operating system for IBM’s first PC, with the condition that Microsoft could license its operating systems to other computer manufacturers. (The decision to go with Microsoft, rather than an IBM operating system, may have been influenced by the anti-trust suit against IBM’s mainframe business.) An Intel microprocessor was chosen to power the computer.
The outsourcing made an IBM PC cheaper and faster to produce, but it also made the design easy to reverse-engineer for compatible copies. The IBM PC was introduced in 1981. By 1983, the first IBM PC “clone” was already on sale.
Compaq, a company founded by a team of defectors from Texas Instruments, created the first legal IBM PC clone. It was not a direct competitor to the IBM PC. Like DEC in the Mainframe Era (which by now had become a giant of the minicomputer market), Compaq was a startup that chose to sidestep IBM’s main influence. The first Compaq PC-compatible computer was much smaller, and it was designed to be carried. At 30 pounds, it was not like a modern laptop, but it was a significant improvement over IBM’s desktop models.4 Compaq’s $111 million in sales set a record for the best first year of any American company ever.
Other PC clones quickly followed, including Dell and HP, and almost all of them used the same components as IBM. By 1990, the IBM PC and PC clones had a market share of about 84% in the PC market. The layers of the industry adopted their standards.
At the bottom layer of computer hardware for personal computers, Intel had about 80% market share for processors in 1990. This rose to about 85% by the year 2000. AMD filled in the rest.
The top layer of computer hardware for personal computers was dominated by the PC standard. It went from about 84% market share in 1990 to more than 97% by 2000. Apple filled in the rest.
At the bottom layer of computer software, Microsoft matched the PC growth. In 1990, it had an 80% market share for operating systems. By 2000, this had grown to more than 97%.5
The top layer of computer software transformed in ways that are not part of this story. The short version is that Microsoft, with its Microsoft Office products, also came to be a significant player in this part of the industry.
There was a difference between PC market share and IBM’s contribution to personal computers. The competing standards for computer hardware were resolved by IBM’s decision to enter the PC market. But IBM did not lead the market. Computers became generic boxes that all used Microsoft’s operating system (first DOS; then Windows). Microsoft became the platform that linked computer companies with computer users.
In response, the industry consolidated. In 1998, DEC was swallowed by Compaq. Compaq, which found itself in financial trouble, was finally sold to HP in 2002. In 2005, IBM sold its PC division to Lenovo, a Chinese company. Meanwhile, Dell, with a low-cost, direct-to-consumer sales model, steadily rose to the top of the PC market. Today, those three companies, Lenovo, HP, and Dell, make up more than 60% of the PC market (Lenovo, as IBM’s legacy, is the largest), with Apple in a distant 4th place, at about 9%. Apple remains the only vertically integrated personal computer manufacturer. Everyone else is still an IBM clone.
End of Part 1
The PC revolution could have easily become an Apple standard or a Commodore standard instead of an IBM standard. And it took a decade (the 80s) for the IBM standard to be confirmed — a long time to avoid an investment in a new industry with lots of potential. But after that standard was set, the next decade (the 90s) was pretty good too. Not many people who invested in the 90s felt bad about missing the 80s.
Part 1 really is the story of IBM. Competing with IBM was most effective by avoiding IBM. IBM was examined by antitrust authorities in the same way that many tech companies have also been threatened in recent years. And IBM had real market power: It chose many the standards that all personal computers (other than Apple) still use today. But, after the Internet, the market moved on.
A good resource on Microsoft’s early years is the book Hard Drive, a biography about Bill Gates by James Wallace & Jim Erickson. It ends abruptly in 1992, so it does not include some of the more intriguing events that come later, but it’s a fascinating profile of (at the time) the world’s most eligible bachelor.
Jeremy Reimer’s 10-part report for Ars Technica includes a much more detailed summary of how the personal computer market developed. This is the source for most of my personal computer market share data.
Steve Jobs by Walter Isaacson provides the definitive story on Apple’s rise.
Other companies developed portable computers before Compaq (known as “luggables”), but Compaq was the first to successfully copy the IBM standards.
Almost all IBM clones used Microsoft’s operating system.



It’s interesting how one decision by IBM basically shaped the whole PC world we still use today