History of the Microprocessor and the Personal Computer, Part   4 By Graham Singer on October 8, 2014 .

1984 - 1996: Consolidation of Power

The Mighty Wintel Empire

The environment in the decades before the microprocessor revolution were convivial and fraternal regarding the sharing of ideas and inventions. Between the low expectations of the companies involved and the need for early allies to create a broad base of support for the budding industry, the early days of the PC saw a spirit of cooperation that has so completely eroded it is hard to believe it ever existed.

As the integrated circuit industry became more lucrative, former colleagues that had started out in a close knit community created an industrial diaspora as ideas and applications (and the lure of wealth) began to exceed the existing company's ability to bring them to fruition. Small companies that started out with camaraderie and enthusiasm soon became the monoliths that had prompted many to leave their previous jobs.

Intel could trace its existence to the breakup of Shockley Electronics and Fairchild Semiconductor, the departure of Federico Faggin and Ralph Ungermann to start Zilog, as well as David Stamm and Raphael Klein who left to found Daisy Systems and Xicor Incorporated, respectively.

Intel's Andy Grove was determined not to see his company gutted as Fairchild was. Lawsuits became object lessons to those employed at Intel, as a means of protecting its IP (which Fairchild had failed miserably at) and a method of tying up a competitor's financial resources while delaying its time to market for products.

Jerry Sanders led AMD for over thirty years and earned a reputation as a charismatic, outspoken CEO (Robert Cardin)

Intel's relationship with AMD became openly hostile in September 1984 when the press asked Jerry Sanders how AMD got its Intel-licensed EEPROMs to market faster than Intel had itself. Sanders began a lengthy tirade on Intel's lack of manufacturing ability.

Litigation started in 1987 with AMD claiming there to have been a breach of contract. Intel responded with a countersuit for copyright infringement (Intel's 287 FPU), followed by an antitrust suit from AMD and then a second copyright suit by Intel over AMD's AM486 IP.

Both sides won their respective suits and some sense of order had been restored by 1995. AMD received $10 million and the rights to build the 386 in 1993 as well as $18 million with the rights build the 486 and outsource up to 20% of its x86 production, while Intel received $58 million from AMD for patent infringements.

More importantly for Intel, it stalled AMD's growth during a boom period of microprocessor growth and personal computing in particular. At a time when AMD was looking to take the next step to higher echelons of semiconductor companies -- albeit still relying heavily on licensed production -- the company's expansion was severely curtailed. Worse was to follow for AMD as the original license agreement signed with Intel was due to expire on December 31, 1996.

Intel negotiated a much tougher agreement just before the old one expired. In exchange for the continued use of existing Intel IP, AMD would have no access to Intel's microcode after the 486 architecture and future AMD processors after the 586-class could not be compatible with Intel sockets. This effectively meant that AMD was now racing against Intel's R&D timetable not just to produce its own processor architecture but also supporting chipsets and mainboards. Offering a cheaper alternative to an Intel CPU for what was otherwise an Intel-based system would no longer be enough.

The early years of the microprocessor industry, as with previous IC manufacture, were based on a vertically integrated model with the company both designing and manufacturing chips. The mid-80s ushered in the rise of the fabless semiconductor company who'd produce the design but outsource production to either an independent company who only fabricated chips (the pure-play foundry model pioneered by TSMC), or a design house with manufacturing ability who could produce chips for other companies if the IP was licensed and there was no conflict of interest.

While the computer hardware business was being molded through vicious legal strategy, the battle for supremacy in the software market was no less intense. The success of the IBM PC and clones spawned three software empires almost overnight: Microsoft, Lotus, and Aston-Tate.

The early huge success of VisiCalc had turned the two halves of the business into fierce opponents in the courtroom, a battle sparked primarily by the generous 37.5% royalty payment for retail and 50% for OEM copies that publisher Personal Software (later named VisiCorp) owed developer Software Arts. During the turmoil, Mitch Kapor, lead developer of two versatile add-ons for VisiCalc, VisiPlot and VisiTrend, sold his interest in the code to VisiCorp and set up Lotus Software. Banking on both IBM and Microsoft's DOS succeeding in the market, Kapor and programmer Jonathan Sachs developed Lotus 1-2-3.

Bill Gates and Mitch Kapor, founder of Lotus Software (Cringley.com)

Lotus 1-2-3's IBM compatibility proved an outstanding success, becoming a compelling reason to purchase the IBM PC just as VisiCalc had with the Apple II. The spreadsheet program's success was in part due to coding specifically for the PC's Intel architecture.

Lotus 1-2-3 Release 3.0 for MS-DOS. (Wikipedia)

What Lotus was to PC spreadsheet programs, Ashton-Tate would duplicate with dBase, its database software. Vastly successful at first, later versions would be successively less influential and the company's slide from prominence was accelerated by the death of founder George Tate, which saw

the marketing-orientated Ed Esber become CEO. With the company's fortunes tied to a single product, Ashton-Tate purchased IP in the form of the Frameworks office suite from Forefront Corporation along with the MultiMate word processor program, but corporate disorganization geared on reaction rather than action doomed the company.

Lotus' fortunes waned as Microsoft inexorably claimed market after market. A classic example would seem to be the case of Aldus' PageMaker desktop publishing program which was developed for integrating Apple's LaserWriter printer with the Macintosh computer. The success of the program led Aldus to develop a word processing program under the name Project Flintstone since early versions of PageMaker had no direct text input. Upon finding out the Flintstone was a year away from completion, Bill Gates demonstrated Microsoft's competitor Word for Windows to Aldus founder Paul Brainerd claiming that it would ship in six to nine months when in reality it was two years away from being published. Project Flintsone was summarily shelved.

Though it certainly aided in the company's rise, Bill Gates' Microsoft survived not due to sleight of hand, but because it effectively separated management and administration from those producing the product. It had set clearly defined short, medium and long-term strategic goals, the longest being a reflection of Bill Gates' personality: to be number one.

Microsoft had grown at a prodigious rate thanks to IBM, but by the late 80s it was becoming apparent that while IBM was under attack from a slew of more agile competitors, all of them relied on Microsoft's OS and supporting applications. The expansion of the computing market and its associated software from business platform to personal computing coincided with the growth of the Internet and its accessibility.

THE INTERNET AND THE WORLD WIDE WEB

The system evolved from small, mostly closed and incompatible networks that were restricted to academics and developers. The adoption of common standards (notably TCP/IP and HTTP) and encouraging the commercialization of the Internet was up until that point largely government-funded. With the subsequent expansion of the net from research, data and time sharing into a reflection of what the average consumer wants (email, online shopping, and interaction with a larger community), web browsers became big business.

Of the first wave of browsers, the NCSA's Mosaic was the most successful and was licensed to many companies. Mosaic developer Marc Andreessen went on to found Netscape Communications, and Netscape Navigator rapidly became the overwhelming browser choice of consumers with over 80% market share within the first year of introduction.

Microsoft's answer was to license a version of Mosaic from Spyglass to produce Internet Explorer but uptake was slow until the company made the decision to bundle IE with the Windows 95 operating system as a free application, instantly increasing its visibility and cutting royalties to Spyglass to just the base license fee.

Microsoft would later pay Spyglass $8 million to avert legal action. However, it wound up facing long running anti-trust proceedings brought by the European Union and U.S. Department of Justice anyway for including IE with Windows, for making it difficult to use a third-party browser with Windows and for making threats to withdraw Compaq's Windows licensing after Compaq's decision to bundle Netscape Navigator with its systems.

The decision to bundle IE with Windows enabled Microsoft to eclipse Netscape's market share in three years. By 2002 IE usage had peaked at nearly 96% and would remain the industry leader for another decade until a fundamental shift in the perception of personal computing would alter the balance of power.

Internet Explorer historical usage data (Wikipedia)

That shift was a result of making the personal computer more personal as people discovered that computing was less a static workstation than it was a constant companion. If not for work, then mobile computers could certainly be used for entertainment, fashion accessory, and in some cases psychological need.

Mobile personal computing began at the low end of the spectrum with calculators, while "portable" more accurately meant "luggable" given the bulk of early components such as CRT screens and floppy disc drives as well as the general standard for miniaturization of the time. The first wave of true laptop designs were very expensive business status symbols conforming to an Intel processor powered system with a half-clamshell non-backlit LCD screen usually capable of displaying four to eight lines of text, although the Hewlett-Packard HP-110 also included a 480x120 pixel graphics mode (480x200 with the HP-110 Plus), while the GriD Compass 1101 managed 320x240 for its $8,000 to $10,000 price tag.

The PS/2 was IBM's attempt to recapture control of the PC market by introducing an advanced yet proprietary architecture. Manufacturers stuck to "Wintel" solutions but many PS/2 innovations went on to

become standards.

Compaq's DeskPro 386 and ALR's Access both debuted in September 1987, a full seven months before IBM's PS/2 underlined IBM's fading status. With Microsoft publicly chafing at an industry clinging to 16-bit (and in some cases 8-bit) compatibility, the OEMs that usurped IBM's position had quickly found their place as a "market leader" was largely illusionary. Intel's "Red X" marketing campaign in October 1989 made a concerted effort to force the industry into 32-bit computing, bypassing system builders and appealing to the buying public.

Large full-page advertisements featuring the numbers 286 with a large red "X" sprayed over the top of them began a strategy to get consumers to identify their computing needs by the manufacturer of the processor.

Early Intel Inside Ad 386sx (Flickr user intelphotos)

The 386 had required four and a half years to achieve a 25% market share while the 486 achieved the same in one year less, with the impending Pentium likely to better that by a considerable margin (it would achieve the feat in 18 months).

The Pentium era would see Intel distance itself from competitors and elevating its brand to consumers directly by adopting a copyrightable model name. The company would capitalize and expand on Red X marketing with their long running "Intel Inside" campaign that made Intel's brand the common identifier when the consumer was faced with a variety of system vendors. The program included TV advertising with its soon to be well-known five-note jingle as well as subsidized advertising for vendors who highlighted Intel's brand during the advertisement.

Early Intel Inside ad "Spot Intel" (Flickr user intelphotos)

Within three years, 1200 companies joined the campaign and the combined exposure elevated Intel's sales 63% in the first full year of operation. Less publicized would be the company's move into component manufacturing when it committed to building its own motherboards, driving hundreds of board manufacturers from the market while raising quality assurance levels with the OEMs who sourced the components.

Such was the program's success that the OEM became a secondary consideration after choice of processor for many shoppers -- a complete reversal in five years, assuming many consumers prior to 1989 actually had any preference in CPU manufacturer. AMD in particular from this point forward would be battling against the Intel brand as much as Intel technology, but they would be far from the only companies under threat.

By the late 1980s, personal computing was seeing the full effects of the economies of scale. CPUs and chipsets consolidated the function of many individual integrated circuits into fewer and more cost effective parts while processors exhibited enough speed that a range of capable CPUs was available via binning and speed reduction for low-power mobile and low-cost products.

The limiting factor in growth became the ability to manufacture the chips fast enough to satisfy demand. Sales of personal computers grew in excess of 10% a year on the back of home productivity applications and the developing 3D graphics market , which had begun blooming with the arrival of the 3dfx Voodoo Graphics board and major games such as Valve's Half-Life in 1998.

The direct model of shaping the internet and those who use it would in the future become more indirect as personal computing moved into the new millennium.