In 1980, IBM decided to branch out from its existing line of minicomputers and mainframes, and create a microcomputer (or "personal computer), despite the fact that managment did not believe that such a venture would be profitable. Three CPUs were considered for this new PC. Two were 16 bit processors - the Intel 8086 and Motorola MC68000 - and the other, the Intel 8088, was an 8 bit chip. The 8088 was selected after the other two were deemed too powerful (and therefore, too expensive).

IBM first asked Digital Research to write the operating system for the PC. When they declined, IBM approached the creators of BASIC, Microsoft. Since Microsoft couldn't write the operating system themselves, Bill Gates bought the rights to QDOS ("Quick and Dirty Operating System") from Seattle Computer Products in what would go down in history as one of the most one-sided business deals ever struck. QDOS became PC-DOS, which later developed in MS-DOS.

The PC was not a very powerful or innovative machine. However, it had the marketing power of IBM backing it. The PC became an established standard, making IBM one of the biggest players in the business computer market.