With virtually no competition, CP/M earned Digital Research $85cents of profit on every dollar of revenue that came in. Officials at Digital Research’s bank once called to double-check some figures because they didn’t think it was possible for every company to have such high profit margins.
By mid-1980s, Kildall and Digital Research were both on the road to oblivion and today Kildall ranks as a mere footnote in computer history. The reason lies with a few crucial miscalculations he made in 1980, part of a cautionary tale about how imitation often trumps innovation.
One of the first computer entrepreneurs to hitch his wagon to CP/M’s rising start in the late 1970’s was a precocious young programmer named Bill Gates.
In 1979, when Gates was just 24y/o, he was running a software company called Micro-Soft. The company had secured an early, profitable niche in the personal computer industry by creating popular versions of BASIC and other programming languages that communicate between a computer’s hardware and its operating system software.
Gates and his partner, a high school friend named Paul Allen, didn’t stumble into the software industry the way Kildall had with Digital Research. Since their teenage years, Gates and Allen had been looking for ways to turn their passion for code-writing into cash. They originally wrote the Microsoft version of BASIC in 1976 because they saw a chance to get into the ground floor with one of the earliest makers of homebuilt personal computer kits.
After that, Gates often sought licensing deals that would pair Microsoft’s BASIC with Kildall’s CP/M, to the hope that Microsoft BASIC could ride CP/M’s coattails and become an industry standard of its own.