The Man Who Could Have Been Richer Than Bill Gates

Wednesday, May 27th, 2009

Gary Kildall was the man who could have been richer than Bill Gates, because he wrote the precursor to MS-DOS, a little operating system called CP/M, the control program for microprocessors:

By the late 1970s, CP/M was running on over 500,000 computers. It powered most of the computers of the time with the exception of the Apple which used not-Intel chips and had it’s own operating system. This included Xerox, Kaypro, Kentucky Fried Computers, Commodore, Morrow.

Intel could have bought CP/M for $20,000 but turned it down.

Along with his wife, Dorothy, Kildall started Intergalactic Digital Research, Inc.. Intergalactic was later dropped. They operated DRI out of an old Victorian home in Pacific Grove, California. Dorothy ran the business and Gary wrote the code.

At the time they started there was barely a market, but soon they were selling thousands and making millions.

Gary Kildall liked the money and soon loaded up on the toys he could now afford — airplanes, speedboats, motorcycles, a stretch limo, a Corvette, A Rolls Royce, Formula One race cars, 2 Lamborghini Countaches, and a Ford pick-up.

In 1980, IBM was secretly developing its own personal computer. IBM did not believe the market was going to be that big so they decided to build it out of off-the-shelf parts and license an existing operating system. CP/M was the market standard, so it was the obvious choice.

For some reason, IBM mistakenly thought that CP/M was owned by Microsoft. Microsoft was then just a small company, but the biggest provider of computer languages for microcomputers. Microsoft didn’t sell operating systems.

When IBM called, Bill Gates told them that CP/M wasn’t his and directed them to Gary Kildall. At one time Microsoft and Gary Kildall talked about merging their businessses, but never did. They tried to stay out of each other’s specialty.

The next day, the suits from IBM arrived in Pacific Grove for a meeting.

When they arrived, Gary Kildall wasn’t there.

The legend goes that “Gary went flying”- too busy to talk to one of the biggest companies on earth.

The truth was that he had an appointment with one of his biggest customers and had flown that morning to see them. He didn’t think the meeting with IBM was going to be that big of a deal so he left his wife, Dorothy, to speak to them, but he returned before the meeting was over.

Before the meeting started, IBM handed Dorothy their standard one-sided nondisclosure agreement. The one-sided document stated that the meeting taking place had never taken place and if it was proven that it had taken place anything IBM told DRI was confidential and anything DRI told IBM was not. Dorothy refused to sign it and called her lawyer. While waiting for the lawyer, Gary showed up.

Gary didn’t see the nondisclosure agreement as a big dealï: “so what if a big plodding company like IBM wanted to get into microcomputers” he thought. He would get a couple of hundred thousand dollars of business and that would be it. So Gary signed the form.

The deal killer with IBM was that they wanted to buy CP/M for a flat $200,000 plus a $10 royalty and they wanted to change the name to PC-DOS.

Gary thought-”why should he do that” He was earning millions, CP/M had strong brand name recognition and almost every PC except Apple was already using his operating system. Why would he want to give that up? Gary Kildall said, NO.

IBM went back to Bill Gates to see if he could get Kildall to change his mind. But, Bill Gates game plan shifted. He had given Gary Kildall first shot. He wasn’t going to give him a second. Kildall was a better programmer. Gates was a better businessman and saw the opportunity a lot clearer than Gary Kildall did.

Bill Gates greatest skill is to give people what they want. Bill Gates didn’t have an operating system to sell but told IBM he did. Paul Allen, Microsoft’s co-founder knew of where he could get an operating system just across town.

Tim Paterson owner of Seattle Computer Products had written Q-DOS a close imitation of CP/M. Allen bought it from him for $50,000. He never mentioned that he was going to resell it to IBM.

Microsoft renamed it MS-DOS, then a made a deal with IBM. IBM would pay them royalties for each copy and Microsoft would retain the ownership rights to the operating system. This meant they could license MS-DOS to anyone they wanted.

IBM PCs became the industry standard. But, they priced their machines too high which opened the door for IBM compatible computers or clones and Microsoft sold the operating system to every single one of them.

Kildall became bitter — even though he managed to sell his company to Novell for $120 million in 1991 — and he died a few years later, from a bloodclot inside his skull — which he acquired late one night at a biker bar.

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