How Much Did Bill Gates Pay For DOS? The Story Behind Microsoft’s Deal That Shaped Personal Computing

Microsoft’s acquisition of DOS in the early 1980s for a reported $50000 was one of the most important deals in tech history. This bargain purchase laid the foundation for Microsoft’s future dominance of the personal computing market.

A Fateful Licensing Deal

In 1980, IBM approached Microsoft about supplying an operating system for its upcoming personal computer, the IBM PC At the time, Microsoft was a small company focused on programming languages. It did not have an operating system to offer IBM

A small company called Seattle Computer Products sold Microsoft a license to use an existing operating system called QDOS, which stands for “Quick and Dirty Operating System.” Microsoft paid a reported $25,000 to $50,000 for non-exclusive rights to QDOS. Because of this deal, Microsoft could give IBM an operating system for its PC project.

Microsoft made some modifications to QDOS, renamed it to 86-DOS and later MS-DOS, and licensed it to IBM. MS-DOS first appeared on the IBM PC when it launched in 1981

This fateful licensing deal helped launch Microsoft’s operating systems business. It also made MS-DOS and Microsoft even more important in the early days of the personal computer market.

How Much Did Microsoft Really Pay?

The exact amount Microsoft originally paid for rights to QDOS is still uncertain.

The most commonly cited figure is $50,000. This is based on a variety of reports over the years, including comments from Seattle Computer Products’ co-founder Paul Allen.

However, some accounts suggest Microsoft paid $25,000 initially for non-exclusive rights to QDOS, then later paid an additional $50,000 for exclusive lifetime rights.

Either way, the total amount was likely in the range of $25,000 to $50,000. While not a huge sum even then, it proved to be an incredibly savvy investment by Microsoft.

The Importance of the DOS Deal

Microsoft’s acquisition of DOS for a relatively tiny sum was one of the most brilliant deals in tech history for several reasons:

  • It enabled Microsoft to lock in the operating system for the seminal IBM PC: This gave Microsoft control of the operating system software for the most important personal computer of the era.

  • It ensured DOS would become the standard PC operating system: As clones of the IBM PC proliferated, MS-DOS became entrenched as the dominant OS.

  • It gave Microsoft leverage over the PC market: Microsoft licensed DOS to other PC manufacturers, establishing its pivotal role.

  • It launched Microsoft’s ascendance in operating systems: Building on its success with MS-DOS, Microsoft later launched Windows and other OS products.

  • It fueled Microsoft’s rise as a tech titan: The revenues and dominance Microsoft gained in operating systems formed the foundation of its broader success.

Microsoft’s Master Stroke

Looking back, Bill Gates’ decision to acquire control of DOS was a masterstroke that profoundly shaped personal computing.

Microsoft’s deal for DOS cost less than $100,000, a trivial sum even then. But this small deal enabled Microsoft to control the operating system for the first mass market personal computer and its clones.

This victory in the operating system arena fueled Microsoft’s broader ascent as a tech powerhouse in the 1980s and 1990s. It also established the foundations of the Windows dynasty that still dominates the desktop computing world today.

While the exact numbers remain murky, Microsoft’s shrewd acquisition of DOS for a tiny price irrevocably changed the company’s destiny. It allowed a fledgling Microsoft to ride the personal computing wave as it reshaped society and launched the modern technology age.

How Much Did Bill Gates Pay For Dos

Is there more to this story than what we now remember?

In 1995, a TV documentary was released as a tribute to Gary’s life, who passed on July 11, 1994. In it, there are direct accounts of people who knew him personally and have their own take on the events of that day:

  • Gary was, indeed, flying one of his private planes, but not because he disregarded the importance of the meeting. He was attending another important meeting with one of his employees, Tom Rolander. They then returned to Gary’s house and were, in fact, present when IBM arrived but their non-disclosure terms seemed so unacceptable, they refused to sign it.
  • Gary’s friends and co-workers say he was someone with an incredibly open-minded work ethic. He was way ahead of his time in that matter and his ethics resembled more the one of the open-source community today, rather than one of a competitive businessman.

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What Can We Learn From Gary’s Incredible (But Sad) Story

Deep down, probably many of us are scared to think we could make a similar mistake out of laziness or negligence. But hearing the way his co-workers talk about him can give us a completely different perspective.

At the time of these events, Microsoft was only a small startup company. It makes sense to think that someone so early in his career would see a deal with IBM as a huge opportunity, especially someone concerned more by the financial success of the company than driven by a desire to innovate.

On the other hand, Gary was already highly respected for his numerous contributions (besides CPM, he’s also responsible for developing the BIOS system and the CD-ROM technology containing the first-ever digital encyclopedia). Is it possible he chose to act according to his stellar work ethic by treating each opportunity equally?

Maybe Gary’s eagerness to openly share his knowledge and excitement about his inventions is sadly what made his downfall. Or maybe his mistake came in sharing his work with the wrong people.

Gary died at the age of 52, plagued by incessant judgments on his way of handling the IBM deal, driving him to depression and alcoholism.

The year prior to his death, he wrote a book called “Computer Connections” in which he apparently exposes his version of the story. Unfortunately, he passed away before it could go to print. The manuscript now belongs to his children who chose not to publish the book, apart from the first few chapters.

Did Bill Gates Invent DOS?


Did Bill Gates develop MS-DOS?

MS-DOS (Microsoft Disk Operating System) was developed by Microsoft, which was co-founded by Bill Gates and Paul Allen, in the early 1980s. The company licensed the operating system to IBM, which used it as the primary operating system for its first personal computer (PC), the IBM PC.

Who invented the DOS operating system?

Tim Paterson
86-DOS was created by Tim Paterson at Seattle Computer Products (SCP) and was originally called QDOS, an acronym of Quick and Dirty OS. After leaving SCP for Microsoft in 1981, Paterson worked on the PC-DOS version of 86-DOS for IBM’s PC.

What was the IBM deal with Bill Gates?

The agreement was to create an OS that would be known as IBM PC-DOS. However, what makes this deal truly extraordinary was Gates’s foresight. Bill Gates astutely negotiated with IBM to retain the rights to license the OS to other manufacturers. IBM, perhaps underestimating the significance of this stipulation, agreed.

How much of Microsoft did Bill Gates own?

Gates’ ownership in Microsoft dropped from 45% during the company’s IPO in 1986 to only 1.34%, representing 102.99 million shares as per the last ownership disclosure in October 2019. Since stepping down in 2020, he has stopped publicly reporting his ownership of Microsoft.

Did Bill Gates buy MS-DOS?

Exactly 36 years ago today, Microsoft Cofounder Bill Gates made one of the important purchases in the software giant’s storied history. On July 27, 1981, Gates fully licensed the “quick and dirty operating system” (QDOS) from a company called Seattle Computer Systems, according to The Register. That OS would later become known as MS-DOS.

How much money did Bill Gates give out?

Having given away $62,000 — each penny of the spread was worth $31,000 — Dobkin and his contingent left the room to let Microsoft’s side confer. When they returned, Gaudette declared that Bill Gates had given definite orders: no more than $1.28.

Did Bill Gates sell his operating system to IBM?

Bill Gates at Microsoft, however, did sell an operating system to IBM—and reaped then-unimaginable rewards. A cloud of speculation has hung over that part of the story as well. The big question: Was the operating system Gates sold to IBM his to sell? Or was a key part of it stolen from Kildall? Microsoft has stated that its hands were clean.

Why did Bill Gates buy 86-DOS?

IBM approached a young Bill Gates for help. Gates shared plenty of ideas with IBM and even told them he’d write an operating system for them. Instead of writing one, Gates reached out to Paterson and purchased 86-DOS from him, allegedly for $50,000.

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