For a long time, it looked like IBVM could do no wrong especially because people neglected that IBM had this small company in Washington state called Microsoft develop their Disc Operating System (DOS) which caused IBM to lose their personal computing dominance to the point they no longer make computers for the PC market since the clones using DOS were able to replicate IBM’s operating system at a lower cost.
Before clones were able to fully be compatible with IBM, IBM dominated the business end of the computer market with their famed 8088 CPU. Yet, the home market is something that IBM wanted to compete with the Apple II and Commodore 64. So in 1984, IBM released the PC Jr, nicknamed Peanuts. It wasn’t 100% compatible with the PC, but it did boast better graphics and sound than the original PC.
People assumed that since IBM dominated the business end of the computer market, Apple and Commodore were going to be destroyed. It was the fastest home computer and offered a wireless keyboard. When it was first released in late 1983, people predicted including IBM officials, that it would sell like hotcakes. Within 18 months, Peanuts was dead.
What went wrong? Besides the fact that the keyboard was a flop, what killed Peanuts was price. It was $1269 in 1984 dollars (about $3200 today) without a monitor, which was more than the Apple IIc and a whole lot more than a Commodore 64. It also hurt that since it wasn’t fully compatible, that Lotus 1-2-3 might not have been able to operate on the PC Jr. Another negative point is that there was no expansion in memory for the PC Jr, which was a big deal when computers were in the 64k to 128k world.
The only way that IBM could sell any PC Jrs was to lower the cost, which hurt the bottom line and forced them to kill off Peanuts in 1985. It was IBM’s biggest defeat in the computer market and the problem is that it didn’t understand the home market, which at the time, totally distinctive from the business end and mainframe market.