This episode looks at the rise of the IBM PC, and also Compaq’s successful attempt to reverse-engineer its underlying technology, which led to many competitors producing IBM-clones that undercut IBM’s own offering. While IBM was one of the key companies that fostered the growth of the PC industry and initially dominated it, by 1990 it had lost its lead.

Microsoft had originally profited from the initial success of the IBM PC. It did even better with the proliferation of clones as IBM’s own market share shrunk, so Microsoft saw no business sense in following IBM’s lead. Microsoft saw more potential in developing Windows, a project they pursued parallel to their cooperating with IBM on OS/2, and Windows 3.0 proved to be a great success (along with MS-DOS) bundled with new PCs. This led to the split between the two titans, with Microsoft setting the standard for PCs, while IBM concentrated on its mainframe and services businesses.