Gary Kildall, Bill Gates and the "Gentleman's Agreement"

In fact, there was an unwritten agreement between Gates and Kildall that Microsoft would stay out of the operating system end of the business, and Kildall would not get into microcomputer languages, according to industry sources.Hard Drive: Bill Gates and the Making of the Microsoft Empire

In 1980, the microcomputer software industry was tiny compared to today’s $824 billion global software market size - it was almost certainly under $100 million 1. When it comes to application software, VisiCorp’s Visicalc led the new spreadsheet market and MicroPro’s WordStar was the most popular word-processing program. On the systems software side, the market was split between Microsoft and Digital Research Inc (DRI): the former focused on programming languages, and the latter on operating systems, including CP/M which became the standard for 8-bit business computers.

For a while, or at least until Microsoft released MS-DOS, there was a belief that the leaders of the two companies, Bill Gates and Gary Kildall, had agreed not to compete with each other. It was hearsay and nobody was actually able to point to a source for the claim - people were just passing rumors around:

David Kaplan, the author of the engaging Silicon Boys, says there seemed to be a gentleman’s agreement that neither would get involved in the other’s business. “DRI would stay away from languages, and Microsoft would leave operating systems alone.”They Made America: From the Steam Engine to the Search Engine: Two Centuries of Innovators - Harold Evans, Gail Buckland, David Lefer

Was there anything more than gossip behind the agreement between Kildall and Gates?

Synergism and Talks about Merger

The entire concept of dividing the system software market into programming languages and operating systems sounds odd nowadays. In the early era of personal computers, disk drives were rare, and many machines booted straight into a BASIC interpreter stored in ROM. The language functioned somewhat like a command…