After Hours

Ten catastrophes: All-time worst tech industry executive decisions

John Opel, IBM: Not buying Microsoft during the PC-DOS/MS-DOS negotiations / Gary Kildall, Digital Research, not licensing CP/M to IBM

Information Technology, software and computer companies are certainly not without their share of poor executive decisions and mismanagement.  While dozens of notable examples could have made our list, these were by far the top top 10 worst in the history of the technology industry, causing many billions of dollars of lost revenue or resulted in the downfall of entire companies.

 
In the late 1970's, a small team within IBM began development of its legendary 5150 PC, which recently had its 30th anniversary. But to run this PC, IBM needed an operating system.
 
At the time, there was only one serious contender, Digital Research's CP/M, which ran on a number of early personal computers including the Apple ][, The Osborne and the Kaypro, all of which had substantial market share in a small but quickly growing industry.
 
In 1980, Under the direction of CEO John Opel, IBM attempted to contact Digital Research's founder and CEO, Gary Kildall, to license CP/M for use on the 5150 and other future PCs, but when negotiations failed, IBM went looking for another suitor.
 
Bill Gates, Steve Ballmer and Paul Allen at Microsoft, seeing an opportunity in the making, approached a tiny software company, Seattle Computer Products, which had an x86-compatible OS which used a similar command interpreter to CP/M called 86-DOS. Microsoft purchased the OS and perpetual usage rights, which they then re-christened as "DOS", for a mere $75,000.
 
After negotiating an almost unheard of non-exclusive licensing agreement with IBM, the company would be established as the leader in personal computer software for decades to come. 
 
Microsoft's MS-DOS would go on to sell tens of millions of licenses, and the software business for Windows and related follow-on products that Microsoft would generate which would build upon it would turn the company into an industry giant.
 
Digital Research could very well have had the same licensing deal and IBM could have imposed stricter licensing terms on MS-DOS, or could have purchased either of the two companies outright, giving the company an exclusive. But it was not to be. 
 
Digital Research's CP/M became an also-ran and the company eventually attempted to produce it's own DOS clone, DR-DOS, which although having a number of technical improvements over Microsoft's OS, was a dud. It was eventually sold to Novell, then Caldera and then later on became the property of SCO.
 
Eventually, the highly competitive MS-DOS based PC clone business made Digital Research's CP/M irrelevant and also would eventually force IBM to exit their own PC business in the late 1990s and early 2000's.  
 

52 comments
itadmin
itadmin

It's so nice to know I'm not the only one to have made bad decisions. However, I suspect mine had a much bigger influence on my income and affected less people than those chronicled in this article. What happened to the income of these CEOs while they were riding their companies into the ground?

lars.staurset
lars.staurset

...the history of technology started in 1980 and is identical to the history of personal computing in the US?

stevechri
stevechri

No mention of Ken Olson (Digital Equipment Corp.'s) CEO who decided there was no market for small computers instead focusing the company on mid-range and mainframe class systems in the early-to-mid 80s? Had he decided otherwise, everyone might be running with VAX-inside instead of Intel-inside.

neldeeb
neldeeb

A very sad and classic example of when too much politics/too many scandals bring a company down. Sad for Palm though. Was a very smart company and mobile platform.

neldeeb
neldeeb

HP was pretty greegy and did not do a good evaluation of the market when they priced their wonderful tablet near the Apple iPad. That was unrealistic. When HP reduced the price (of course unreasonably), Touchpad became the number one best-seller in the tablet market, to be discontinued?! Bad Bad pricing strategy from the start until now! Pitty and sad. Palm had the best mobile platform for searching, productivity, and browsing. SAD!

neldeeb
neldeeb

And is definitely still very successful. Maybe not as much as it used to be, but imagine if the dummies at micros... were running it. Mr. Yang was really smart to refuse micros...'s offer. The life of corporations is stages, some are up and some are down. Look at Apple.

scallau
scallau

Well you forget to mention Microsoft Windows ME, the worst virus never designed as an O.S... ;-) Sergi

neldeeb
neldeeb

Steve Jobs' story. The most honerable story, not only in the technology field, but certainly in the history of business as we humans know it :)

neldeeb
neldeeb

Since when were micros... OSs not slow and guggy?!! Apple never needed a Vista to attract users to it's systems. It's innovations that were blantly stolen by micros... Since the early eighties were enough to eventualy lead to what we see nowadays. It would surely have come much earlier if it weren't for Apple's high-pricing and controling/restrictive attitude.

neldeeb
neldeeb

DISAGREE OF COURSE. maybe in retrospect it was a bad decision for IBM not to buy MS-DOS or PC-DOS, but at the time this was a great decision and the ONLY decision any respectable company would take, with regards to buying those two primitive systems/jokes. The only reason for the success of the company having them later was NOT their technical merits, but Microsoft's marketing ploys and it's stealing the innovative "Windows" concept/system from APPLE.

pbasehore
pbasehore

You forgot Atari turning down Steve Job's new computer system...

p.gygi
p.gygi

IBM declining purchase of Haloid Corporation (that became Xerox) ranks up near the top in lack of foresight...

seanferd
seanferd

I don't know how selling to MS can be a good decision for Yahoo - that is suicide. only one company has ever escaped after being engulfed by MS. Would it have been a good monetary decision for Yahoo shareholders? Maybe, but that isn't a tech issue, and the shareholders are free to go elsewhere. Look at the list of other bad decisions, and see how many of them are caused by the idiocy of the "growth by acquisition" mindset. This destroys jobs, destroys companies (sometimes both), and usually does no good, and the consumer is left with fewer choices among poorer products and services.

Gisabun
Gisabun

Eric Schmidt.... Just for being an idiot. His companies [past and present] buys other companies only to drop their products. Look at Google recently. Dropped over 10 products - some were from purchases.

doug
doug

There is so much wrong with that simplistic analysis it's difficult to know where to start. MicroSoft wasn't some unknown software company. Gates had borrowed several hundred thousand dollars from his parents to buy a used VAX, and they had figured out how to write hardware emulators on it to develop boot OS's for mini-computers at a fraction of the cost for a hardware manufacturer to develop one. Microsoft did a lot of business with Japanese manufacturers. Gates had also gone to Harvard, his parents knew people. IBM decided to deal with Microsoft because Microsoft moved in that world. Gary Kildall was a great programmer and became a multi-millionaire thru his business savvy, but he was no where near that level. And no one knew the IBM PC was going to be so successful. Everyone was testing the market, and not making much. The fact of the matter is, Joe Blow consumer didn't know anything about mainframe manufacturers. The surprising success of the IBM PC was due entirely to the IBM Selectric, which every office in the world knew about. If someone went to their boss and said they wanted to buy a DEC Rainbow, hell, the boss wouldn't know anything about DEC. But if he goes to the boss and says "I'd like to add an IBM PC to the 20 IBM Selectrics we're ordering", that's almost a slam dunk. And everyone talks about how IBM should have grabbed the PC market. Well, what happened to all the other companies, like Compaq, who did go after that market? IBM had like 60,000 employees in the 80's, Compaq during it's heyday had a few thousand. Right now IBM makes a mint selling mainframes, if it had gone after the PC market it would probably belong to a Chinese company now.

telcodrone
telcodrone

AT&T's decision to spinoff Lucent. AT&T lost Bells Labs in this one. CEO Henry Schacht was quickly replaced by Rich McGinn

davidibaldwin
davidibaldwin

CP/M didn't really run on the Apple ][, it ran on a plugin card you could buy for the machine.

gill-t
gill-t

A catastrophe by IBM trying to reclaim the PC market that arguably started the process whereby it eventually gave up with the PC altogether

Mr. Fix
Mr. Fix

Why didn't IBM acquire Microsoft? They lacked lateral vision. I was working for IBM when they, very reluctantly, agreed to venture into the personal computer arena. The project was assigned its own business unit precisely because IBM had no real faith in it, fully expecting they would have to spin it off. After all, Henry Ford didn't make his fortune marketing a flying car, right? With no serious R&D appropriated, only off-the-shelf parts and 3rd-party software were allowed. Acquiring Microsoft was a ludicrous notion. Locked into their vertical "mainframe" mentality, no one at the helm envisioned that this could ever develop into a serious industry that, as it turned out, actually relegated the mainframe to a mere supporting role.

LTC RET
LTC RET

I agree that slide shows are passe and should be replaced by a video, PowerPoint, or PDF as Bob B recommends.

maj37
maj37

Apotheker came from SAP and it appears he is trying to turn HP into another SAP, not that SAP is anything to aspire to.

rastr
rastr

I often scan a page, see it's a slide show, and quit- it's just not worth the extra time.

janet
janet

Netflix will end up making the list eventually.

rlcohen
rlcohen

There should be an entire section devoted to Novell's all-time worst tech industry executive decisions!

don
don

You forgot about one of the worst mergers of all time. The year before the merger Sperry had revenue of $5.2 Billion and Burroughs had revenue of $4.8 Billion. The year after the merger their combined revenue was only $4.2 Billion. That's a bad merger when you lose 58% of your revenue in the first 12 months!

NickNielsen
NickNielsen moderator

Particularly since the law allows them to take their stock options at the highest price available during their tenure (in these cases, usually day one). You certainly don't expect them to have sacrificed anything, do you?

hippiekarl
hippiekarl

started closer to the time of the invention of such hall-of-fame tech marvels as the 'sharp stick', the 'wheel', and the 'inclined plane'; the operative word in this article's title is 'industry'. The tech 'industry' (as we know it) kind of DID begin around the time you suggest, especially the consumer end of it. Prior to that time, a 'high-tech gadget' was something like a Minox camera or a Texas Instruments (or fledgeling HP) 'scientific' calculator. In even earlier times, tech innovations such as the sextant, the guilliotine, the catapult et al were not indicative of a 'tech industry' such as exists today. Technology: as old as imagination; 'tech industry' (as in, "Mom, I want to pursue a career in hi-tech!") might predate 1980, but not by much, historically speaking. I'd call Archimedes' workshop/lab a 'high-tech facility' of its day, but I'd not infer that it was part of a tech 'industry'....

hippiekarl
hippiekarl

It reads like you're pitching a TV mini-series ("Tonight, Steve Jobs gets caught in a deadly game of cat and mouse....."). Please elaborate; your comment seems laudatory, but out of place.

don
don

I think it's funny how people point to Microsoft and say they stole the GUI from Apple. Apple lost their lawsuit against Microsoft. Part of the reason was because Apple could not prove they created the interface. They actually licensed it from Xerox. The courts also stated that the Windows interface did not violate the Xerox copyrights.

garyfizer
garyfizer

Tech isn't the only industry failed by this mentality. As my personal experiences of the tanning industry for one show. Renault and Nissan bought out GST Autoleather in Md. Then closed it to consolidate operations in Mexico. They lost a lot of talent, threw-way or trashed good equipment and moved into the middle of a drug war in Nuavo Laredo, Mexico. The Idea was to save the company but now GST and Seton are only paper companies with no one from the old companies still employed.

maj37
maj37

Another missing/incorrect piece of that story is that IBM didn't actually go to Microsoft and ask for an OS, they asked for and got a BASIC language compiler and mentioned during those discussions that they also were looking for an OS. Gates then talked to the folks with the OS and bought half interest, showed it to IBM and they liked it so he then went and bought outright. The rest as they say is history.

boomchuck1
boomchuck1

You mean like the IBM/Lenovo Thinkpad?

NickNielsen
NickNielsen moderator

Both were a series of decisions (and non-decisions) culminating in failure. The PS/2 and the MicroChannel Architecture were an attempt by IBM to undo their open licensing of the x86 architecture and regain control of the PC market. As with all such attempts, it was the equivalent of closing the barn door after the stock was in the pasture, and was doomed to failure. OS/2 fell prey to the same IBM groupthink that hobbled the development of the 5150: PCs are just a fad and will never replace big iron, therefore we don't need to pay much attention to them. This same mindset helped create the business conditions that ultimately resulted in the spin-off of their PC division to Lenovo.

maj37
maj37

Ha. I don't think so. The majority of large companies still do most of their business critical processing on Mainframes.

boomchuck1
boomchuck1

I was working as a COBOL programmer when I began to develop PC databases and networks. My supervisor told me that I really needed to focus on the mainframe end of the business because these PCs were never going to amount to anything. I'm glad I ignored her advice. But it just shows you that IBM's lack of vision was shared by many others in the computer oriented world.

AnsuGisalas
AnsuGisalas

All I remember is the difficult choice between the IBMs and the IBM-compatibles. It looked like a serious effort from the user side. Your information helps explain how quickly it changed after that, when competition became more real. If they had wanted to, I guess they would have owned the market for a lot longer.

maj37
maj37

Our bandwidth usage is monitored fairly closely so I almost never watch videos at work. If they switch to videos I won't ever see another one, but then maybe that is a good thing.

ScarF
ScarF

This is what he knows. He doesn't know to sell manufactured goods, but BS on paper. So, he eliminates everything he doesn't understand and keeps only what his clients don't understand: the huge services contracts covering systems implementation such as SAP. Eventually, HP will become only another name for EDS.

hippiekarl
hippiekarl

...scan the page; it's an obnoxious slideshow. To avoid them, just stop getting "PhotoGallery at TechRepublic". Plenty-cool space photos is about the only slideshow topic I'll wade through 10-30 screens to see/read.

maj37
maj37

If I had to bet I would bet the author has never heard of Sperry, Burroughs, or their merger.

charleswdavis6670
charleswdavis6670

If they hadn't merged, the revenue drop would have been even greater. Many folks felt that they (rightfully so) should deal with the more successful. As two of the "seven" dwarfs, they were doomed either way.

lars.staurset
lars.staurset

...but mainframes and fridge-sized "minicomputers" were widespread, and even microprocessors were indutrialized before 1980. If we limit the discussion to tech industry "as we know it", we'll probably find that, by definition, it started in our/my/your lifetime. Putting personal perspectives aside and looking backwards in time, we can list several industries that precede modern computing and pushed the limits of technology: arms, aircraft, cars, fertilizers, light bulbs, railways, spinning machines, printing, various forms of energy production, just to mention a few.

AnsuGisalas
AnsuGisalas

I assume it's a conflation of horrific-onerous-deplorable.

don
don

No they don't. Our company supports 50 of the US Fortune 100 companies and very few have mainframes at the center of their computing strategy. The exception is oil companies that still use them to crunch geological data. For most companies their ERP system is their most critical system. That is usually SAP running on Windows or UNIX hosts (I don't consider most UNIX hosts to be mainframes). The second most critical application at most companies is their email system. For the vast majority of companies that is Microsoft Exchange which of course only runs on Windows servers.

don
don

That merger took place in 1986, several years after the Osborne and original IBM PC decisions. Maybe it's because most people don't know that Unisys once had about a 12 percent share of all computing revenue (hardware, software, and services). That's a larger percentage than Apple has today.

don
don

The reason they lost 58% of their revenue was because of the bad decisions made after the merger. They eliminated the competitive product lines and retained the obsolete high margin product lines. They actually thought that if they didn't innovate that their customers would continue to buy the same expensive stuff. Guess what, other companies didn't stop innovating.

mystictj
mystictj

Dont forget the banking sector. They use mainframes for processing. Fiserv(ITI) Uses Unisys and IBMs mostly.

don
don

I actually worked in the engineering group in Sperry during the merger. We had several products that would have increased revenue. Burroughs immediately killed those projects after the merger. One in particular would have brought in many new customers. If the merger hadn't taken place, Sperry alone would have had more revenue than the two combined.

maj37
maj37

I though that merger was much further back. I suspect anthemwebs@ may be right they would have lost revenue anyway.