Microsoft did not reverse-engineer IBM's 'DOS'. IBM never had a DOS
(well, not the way you're thinking of it). IBM was looking for a OS to run on
their PC's. They went to Digital Research to get their CP/M operating system.
There is much speculation as to what was so important to Gary Kildall of
Digital Research that he needed to miss his appointment with the IBM reps.
The most popular rumor is that the weather was so good that he went flying in
his private plane. Regardless, IBM was royally pissed about being stood up,
so they marched over to this little company in Seattle named Micro-Soft which
was (in)famous for their BASIC interpreter for the Altair.
The problem was that Micro-Soft did not have a Operating System, but Bill
wasn't about to let that stop him. He told IBM that he would have one when
they needed it. Tim Patterson, of Seattle Computing Products, in what he would
later call the "biggest mistake of [his] life", had bought a CP/M manual and
used it as a guide to write his own operating system for the i86 called
"Quick and Dirty Operating System", or QDOS. Micro-Soft bought the
non-exclusive rights* to QDOS, and renamed it Micro-Soft Disk Operating
System, or MS-DOS.
IBM had been putting up with a Justice Department investigation for
monopolistic practices for a while. Some at the company reportedly would
carry around two briefcases, one for regular IBM business, the other for
the antitrust case. IBM was, therefore, very image conscious. They did not
want to look heavy handed and give the Justice Department more ammunition.
Consequently, when Bill Gates asked for the right to re-license MS-DOS to other
companies, they agreed. After all, they were only making these stupid boxes
because Apple was selling them like hot cakes. Becides, Apple didn't need an OS, and wasn't using Intel chips, so who on earth would Micro-Soft sell it to other than IBM?
As it turns out, the only thing which IBM actually used in their "Personal
Computer" that couldn't be bought out of a Mouser catalog was their BIOS. The
PC took off because it had the letters 'I', 'B' and 'M' stamped on the front
of it, but nothing in the box was from IBM other than the aforementioned BIOS. Compaq, about this time,
was thinking that a clone of the IBM PC would really be a good bet, so
they set about reverse-engineering the BIOS. It worked, Compaq was able to
market a "100% IBM Compatible" microcomputer, and began moving them as fast
as the fabs could spit them out. Other companies saw this, and everyone jumped
into the clone game. Many companies, like Gateway and Dell, were started to
build clones, and Microsoft and Intel became very, very rich.
The rest is history.
* Seattle Computer Products retained the right to sell QDOS if they bundled it with hardware, so for a long time, you could buy QDOS from them packaged with useless bits of random hardware.
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